The customer always comes first. Except when it comes to HCL, the $6 billion Indian outsourcing -- make that co-sourcing -- giant led by CEO Vineet Nayar, who literally wrote the book on a philosophy known as 'employees first, customer second.' In this latest installment of our CEO Interview Series, Nayar spoke with IDG Enterprise Chief Content Officer John Gallant about how that philosophy is fueling HCL's rapid growth and why more CIOs ought to consider adopting it. Nayar also discussed how HCL has set its sights beyond competing with other Indian outsourcers like Infosys and Wipro and is squarely targeting what he believes are the many unhappy customers of services giants like IBM, Accenture and CSC. The outspoken Nayar took shots at the 'fear psychosis' created by services firms in trying to peddle their offerings and used a barnyard epithet to describe public cloud computing, which he claims isn't ready for prime time. He also outlined HCL's aggressive plans for hiring locally in the U.S. and Europe, and defended the company's use of the controversial H-1B visa program. In addition, Nayar talked about the new goals for IT departments in 2012 and beyond, and explained why treating mobile as a technology 'misses the point.'
Let's start with an overview of the current services and capabilities provided by the company's two units, HCL Technologies and HCL Infosystems. How do they come together and what's the set of capabilities you bring to market?
HCL Technologies is a $4 billion global services company in the business of infrastructure outsourcing, application development and outsourcing, research and development, enterprise application services and business process outsourcing. HCL Technologies is spread over 22 countries and only focused on global customers. Infosystems is only focused on Indian customers and is in the business of systems integration.
Market research firm IDC described HCL as having the most cohesive and articulate vision in the IT services sector. What is that vision and how does it influence all that you do?
At HCL Technologies, we believe that our vision should be on two axes: an axis of what we do and an axis of how we do it. A complete vision is only formed when you have a unique identity on both those vectors. Let me begin by explaining how we are different in how we do things. As was true with the Japanese automakers, who took on U.S. automakers by innovating in how they manufactured cars, rather than what cars they manufactured, in the IT services space there was a gap in creating culture as a competitive differentiator. We came up with this philosophy we call "employee first, customer second," with the premise that the employees are the true value creators and the true differentiators that customers are looking for from any company. Therefore, the core business of managers and management in any IT services company should actually be to infuse, encourage and enable employees to create higher value for its customers, and that could really create a competitive culture which is its unique differentiation. That philosophy was the first competitive differentiator we started creating in 2005.
The second [part of the vision] is in how we look at the industry. We truly believe that in the ongoing, low-growth, recessionary environment, there are three critical strategies the customer would need. The first is that he would need a very strong vision of the digital corporation. You can call it multi-channel commerce, you can call it digital presence, e-commerce, whatever you may call it, but he needs a very strong digital presence. The second thing he needs is he needs a very strong middle office organization which is [focused on] the regulatory needs across the company. He needs better analytics, better control, better information, better integration of all his applications. And the third, and the most important, is that he needs to fund all that by reducing his run-the-business costs by 20 to 30 percent. So there are three parts the CIO needs to focus on. Change the business, the front end, converting to multi-channel commerce, digitalization of the organization. The second is to hold the middle and ensure he invests enough in compliance and regulatory needs, which are increasing, by consolidating applications. And the third is to find the funding to do the above two by markedly reducing redundant business costs. HCL's vision is about how we can help you reduce 20 to 30 percent of your redundant business cost and redeploy that in making you more competitive in the new emerging digital world, and hence help you change how you service customers. That combination of how we deliver services to our customers and what we do for our customers is the reason we've been rated as number one in customer satisfaction by Forrester [Research].
Let's explore the competitive landscape. I think people view HCL as competing with companies like Infosys and Tata, but you see your competition more along the lines of IBM, Accenture, Capgemini. Who are the competitors and how do you approach the market differently?
HCL's philosophy on competition is more like the thinking around Blue Ocean [Strategy]. We truly believe that discrete outsourcing, which most of the Indian IT providers provide, is a very crowded market and differentiation is very difficult to achieve. But in the total IT outsourcing market, which is dominated by the EDS, Accenture, IBM, CSCs of the world, there is a huge discontent within the customer community on the way the services are being delivered, the lack of transparency and flexibility in the contracts. So we are sharply focused on the global IT outsourcing, dissatisfied market, which is coming up for renewal, and said that we will build our business case on transitioning from existing contracts with IBM, Accenture, EDS, CSC, Capgemini, and give the customer the cost advantage, the flexibility advantage, the transparency advantage, which he or she is really needing. We find our [market] to be the dissatisfied customer of the large global players. That's the reason we have been so successful in transitioning some of the biggest names in the world very successfully from some of the major vendors. Having said that, we are not naïve to say that we compete with IBM or with HP. We have carved out a segment, which is the dissatisfied customers of these companies, and we compete in that segment, rather than saying that I compete with IBM and Accenture. We are, let's say, a $4-5 billion company, where Accenture is a $25 billion company, so it's wrong to use the word competition. We have defined our own Blue Ocean market and that market is the dissatisfied customer of the global five major companies.