HCL: How the Indian outsourcer is giving itself a business makeover

New Directions in Delhi...

New Directions in Delhi...

Pressure on the traditional outsourcing model is causing one of India's biggest services companies to rethink its priorities. Jo Best reports.

Vineet Nayar is not a man afraid of making a song and dance about his company and staff.

At the company's Directions event in Delhi the CEO of HCL, a $5bn business and India's fourth largest services company, takes to the stage in front of his employees - showing off a few moves to some high-energy pop.

As the music thumps and spotlights flash around him, Nayar invites his staff to join him in the dance. Many do, some even running to dance alongside their boss.

Dance over, the employees resume their seats and the Directions event continues. It's a town hall style get-together where employees air grievances and share suggestions on what the company should do next and how it could improve.

Like many Indian services companies, HCL finds itself at a point of transition as the conventional outsourcing model comes under pressure from several quarters.

Nayar addresses the 1,000 or so staff at the event, part evangelist, part motivational speaker, alternately prophesying doom for HCL if it fails in its plan to metamorphose from an IT firm to a business services company and high-fiving his workers, telling them they "rock" and asking them to turn to the person seated next to them, shake their hand and say "good job partner".

Vineet Nayar at HCL's Directions event

HCL CEO Vineet Nayar mixes with staff at the company's Directions event
(Photo credit: HCL)

What the company is going to do, according to Nayar, is give itself a makeover: rather than just providing IT services that focus on cutting costs, HCLites - as they are known - are being asked to provide services that underpin a customers' processes or a makeover of their own - be it targeting a different consumer segment, going after an emerging market or digitising a piece of the business that has so far remained offline.

After all, Nayar tells his staff, a customer would rather...

...give $10m more to a supplier if the vendor can deliver something that transforms their business, than sign up with another rival supplier who offers a $10m saving but nothing more.

The trend away from providing old-school outsourcing - purely focused on cutting costs or jobs - to providing services that support business processes is in favour among India's outsourcers. It's a shift in part inspired by new outsourcing upstarts such as China, and their growing ability to offer commodity services at costs that can rival or beat India's.

"The first threat is China and the reason I say that is, I travel in China - those guys work 18 hours a day, they work for half the salary and they work very hard," Nayar tells his employees, adding: "Would they take the low-end work away from you? The answer is yes."

While China is not about to displace India, HCL is nonetheless setting its sights on more complex, business-focused contracts.

Vineet Nayar at HCL's Directions event

HCL CEO Vineet Nayar onstage at the company's Directions event where employees can air grievances and make suggestions
(Photo credit: HCL)

HCL has been targeting higher-end services already for a couple of years, acquiring the SAP consultancy Axon in 2008 - the same year it opened what it calls a value portal: an online suggestion box where employees can post ideas for extra services that could be offered to customers to either cut costs or boost efficiency.

Over that period, staff have submitted 5,000 or so ideas, which were examined by the company and the most appealing then taken and presented to customers. About 1,000 are now either implemented or in the process of being rolled out at HCL's customers, including one which saved a company $120,000 a year by streamlining HR processes.

Despite its two-year history of the process, the transition from tech provider to services provider is not complete, as Nayar acknowledges, telling the Directions event: "We still see ourselves as an IT company" and adding attitudes have not shifted as much as he would like.

But just how do you go about changing an entire company's mindset? Awareness is...

...key, Nayar tells journalists after the Directions event. "When you're running a company with 70,000 people, you have to make them aware of where you're going," adding that over the coming months staff will find out more about the direction the company is taking, and "find opportunities within the customer base where they can experiment with that".

Where experiments work, the lessons will be shared with the rest of HCL, encouraging a cycle that the company hopes will help it shed that IT image.

At Directions, staff are encouraged to share experiences of all stripes - and share they do. One worker takes the mic to tell his CEO that the company works too much in silos and that more consolidation is needed. Nayar agrees, complementing him: "You were inspired to stand up. The more people do this, the more company will change."

Not all workers receive such a response. When another stands up to complain about not working in the area of business he wants to, saying he wants to be moved to another unit, Nayar tells him bluntly he has to prove himself worthy - impress with the projects he's working on - before the company will think about moving him.

Yet another stands up to ask the boss to define the top problems facing HCL. Nayar's response is that the company finds winning contracts "too easy". Rather than landing deals through the promise of innovation, they're hooking new clients simply because "our competitors are not delivering huge amounts of value".

This idea of innovation and its redemptive power is Nayar's touchstone for the future of the company. Under his stewardship, HCL now spends six per cent of its revenue on R&D - and he leaves his workers with Apple as their aspirational model.

Having built something of a reputation for innovation, Apple is now known for its legions of devoted followers who will gladly queue for the next piece of kit.

"First you have to be loved for innovation. Once you've done that, nobody can catch you," he tells them.

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