HCL has stepped on the accelerator. Big 3 better watch out!

Ever since the Satyam episode broke out, everyone was in dilemma about the overall rankings. The top 3 rankings in the Indian IT space are in tact. TCS, Infosys and Wipro are the big league players.

The next spot usually belonged to Satyam. Since there are concerns about Satyam’s valuation, HCL has emerged as the 4th largest IT player in India. But would they remain there for very long? Given the pace at which they are going, I doubt it.

shed everybody on the defensive and IT majors were no exception. IT companies were rich with cash and there were many bargains across the globe. No one really dared to use up the cash. HCL made a very bold motive to acquire Axon to gain key SAP expertise.

HCL has $500 mn in cash. But, it is funding the acquisition through debt. Its logic is simple. Cash in India is earning a 11% interest. Nothing can beat that so you won’t use it. HCL is a AAA rated company and can get capital for an interest rate of under 7%. Why would you not use it? I agree. Raising cash in a difficult environment is difficult. But, if you are a AAA rated company then you are a VIP for the banks who have seen worse things happen to them.

Intriguing thing to look for is HCL is not targeting the Big 3 of India. It is going after Accenture and IBM. Can you believe that? That sure came as a surprise for me, but if you connect the dots it all makes sense. I really like HCL’s ambitions. Not only its ambitions but its business too. With the Axon bid, HCL knew very well what they are paying for. It is bundling its SAP services with remote infrastructure management services and making a lot of money.

It is not all services which HCL is targeting. Vineet Nayar makes a very valid point. HCL is not trying to solve technology problems. Instead they are solving business problems with the help of technology. Not many would realize that but that is a paradigm shift. Especially for services driven Indian IT sector.

I have nothing but praise so far for HCL. Let me end with 3 of their revenue sharing programs which solve a business problem :

1. HCL has collaborated with Boeing for its largest aircraft called the Dreamliner or 787. HCL participated in 36 components in risk-reward program. Some will be paid immediately and some will be paid after the aircraft is successful.
2. HCL took a Cisco product called Cisco Works, fixed the bugs and made it marketable. The revenues for that product increased after HCL too over.
3. In another revenue sharing deal HCL took a security product of Computer Associates added some features and made it profitable.

HCL will not remain at number 4 for very long. It is moving up the ladder pretty fast.

PS : It is unfair to say that HCL has moved up because of Satyam’s fall. HCL rise was inevitable.