In the first quarter of FY19, HCL Tech went past Wipro to become the third-largest IT services company in India after TCS and Infosys. The architect of this rare change in the industry's top order was C. Vijayakumar, who took over as CEO of HCL Tech in 2016, and his 'Mode 1-2-3' strategy, focused on three points - bolstering the traditional business, tapping the digital transformation market and creating a robust product portfolio. The strategy has helped HCL Tech add over $800 million incremental revenue each year over the past three years and made it one of the fastest-growing companies in the IT sector.
The man at the centre of it all, C. Vijayakumar, 53, takes great pride in the fact that he graduated from the same college as HCL Enterprise founder Shiv Nadar - P.S.G. College of Technology, Coimbatore. "He was a huge inspiration," says Vijayakumar, popularly known as 'CVK' among peers, adding, "I always looked up to him. It was a tremendous motivation to see him build a company and create a mark." This is perhaps also the reason for his over 25 years of association with HCL as part of a journey that led him to the top at HCL Technologies, a company with $10 billion consolidated annual revenue and 1.4 lakh employees.
But the journey has been anything but straight. In early career days, his fascination for Digital Signal Processing that had started during his college days made him join C-DoT, (Centre for Development of Telematics) in Bangalore as an R&D engineer. He spent a few years there as part of the team that focused on building indigenous satellite communication technology. His journey in HCL began in 1994 when he joined HCL Comnet (a subsidiary of HCL Enterprise which has now merged into HCL Tech) where his first job was at the National Stock Exchange (NSE) in Mumbai. His team helped set up NSE's satellite-based trading network, which became operational in November 1994. "That was one of my proudest career moments because, for the first time (in India), trading was happening through the satellite network. So, it was a very proud accomplishment for HCL," he recalls. Five years later, he was leading Comnet in the southern region.
The company, as it increased its aspirations and networking capabilities, ventured into global IT infrastructure management where Vijayakumar was given the role of building Remote Infrastructure Management practice. "We won a lot of IT services business for the company," says Vijayakumar.
Much like his predecessor Anant Gupta, Vijayakumar - who was till then president of infrastructure services, which contributed nearly 40 per cent to revenues - took over a newly created transitional role of Chief Operating Officer in July 2016. HCL Tech was nearly a $7 billion revenue company in FY17. The same year, the company unveiled its three-lane growth strategy - 'Mode 1-2-3 ' - for the next leg of growth. At its core was emphasis on transforming traditional services to digital; creating a completely new line of business, a product business; and strengthening core businesses such as IT infrastructure, engineering and application outsourcing. "Most Indian companies are largely focused on services whereas we have a services business and almost a billion dollar-plus product business. I think it's a different way of diversifying the portfolio," he says. About the competition in IT services, he says, "Honestly, we have never chased any particular service provider. We respect all of them and everybody has got good services, good products."
In December 2018, HCL announced a $1.8 billion acquisition of IBM's software products such as AppScan, BigFix, Unica, among others, to expand its Mode-3 (product) offerings. While the announcement failed to move the market and several analysts questioned the longevity of the products, Vijayakumar says it was one way of creating market access in products. He says these are mature products indeed but with immense scope for innovation. First, a lot of these mature products are migrating to SaaS (software as a service), so the scope to innovate, whether in end-point security or application security or marketing automation, is huge. "With our product engineering heritage, we thought we could innovate and bring the much-needed differentiation and gain access to a very large set of customers, which would give us market permission to play the product business," he says. In the second quarter of FY21, the product business registered year-on-year growth of 7.6 per cent in constant currency terms with close to $400 million in revenues, delivering a higher EBIT margin (of 28.7 per cent) than others. "It's delivering better than the business case, so we remain very excited about opportunities that the product business will bring for us in the future," says Vijayakumar. Apart from IBM, since 2017, the company has made several other acquisitions such as C3i Solutions ($60 mn), Actian Corporation ($330mn) and, more recently, DWS Ltd ($123mn), at a cost of over $700 million.
In the past three years, HCL Tech has grown its income and profit after tax at a compounded annual growth rate of 17.86 per cent and 9.28 per cent, respectively, with several top brokerages such as CLSA, Motilal Oswal and ICICI Securities maintaining a BUY on the stock. In October this year, the company raised its margin guidance for FY21 to 20-21 per cent and retained revenue growth guidance of 1.5-2.5 per cent in constant currency terms for the rest of the year, implying positive growth in FY21. This comes on the back of the management's optimism. "I see a lot of optimism, a lot of opportunities to grow for companies like us which have offerings in both traditional and transformative services. Companies which can execute well on this agenda are going to do very well," says Vijayakumar.
Based out of New Jersey, where he lives with his wife Vanitha and daughter Divya, Vijayakumar says though he has learnt a number of subjects such as astronomy, vedic astrology, yoga and meditation with intense involvement during different periods, he did not pursue any of these long enough to make them a hobby. However, he does enjoy reading on varied topics. A firm believer in hard work has no substitute, he says, "If you deliver any task given to you with passion, with an emphasis on delivering with perfection, that's what will drive you to do better; and that will get you recognised." That's also his team mantra.