HCL: Turning policy learning into future lessons

Exit Vineet Nayar. Enter Anant Gupta. Despite net margins, challenges galore for HCL, which saw a change of guard recently. With impressive growth over last quarter, cost efficiency and response to changing market dynamics would be the strategic pain points for the new CEO-designate Anant Gupta, believe industry analysts.

For technology major's gratifying success could be attributed to its blitzkrieg. Despite slowdown in the Europe and US markets, it managed to renew contracts on time. Thanks to its aggressive focus on business consolidation and considerable reduction in operating cost in key markets.

While Anant Gupta was elevated as the CEO of HCL Technologies. Vineet Nayar will continue as the Vice Chairman and Joint Managing Director of the company till July 2013 and as Vice Chairman thereafter.

Prior to elevation, Anant Gupta said that they have acquired nearly 25 new customers and also won an outsourcing contract worth close to $500 million. With a leadership position in cloud orchestration, the company's endeavour to execute deals signed since 2008 has gone well. But without Nayar will it sustain the profit trajectory?

Speaking to CIOL, a Bangalore-based senior analyst, who didn't want to be named, said that unlike Airtel, the change of guard in HCL, despite net margins, is not a healthy indication. "It contradicts the approach taken by Nayar. Company's ‘Employee First' dictum proved well for the organization," he said. Gupta's elevation, he feels, needs some explanation.

The possibility of Nayar's moving out on his own after selling his entire stake in HCL, was a speculation, the analyst added. "There is a possibility that Nayar might start his own venture that supplements or supports HCL, but shunting him out of leadership in such a fashion, is not a positive assessment," he stressed.

Coeus Age founder and principal consultant Kapil Dev Singh said that with business rationality, HCL considerably wanted to consolidate its entire operations. "Bringing cost-efficient person to the fore reflects the need of the organization to consolidate its gains," he said.

The company, Singh said, is moving through optimal efficiency that gives it an edge in terms of pricing and profitability. "HCL wanted to bring the next line of leadership into pure play in order to protract its net margins," he said. Singh believes that, earlier the business was not integrated and Nayar was brought in to develop it.

The consultant is optimistic that the company would sustain the curve and bring tangible benefits. "HCL over a period of few years has developed into a well engrossed organization. Now it wants to leverage expertise of cost-focused Gupta,'' he added. Singh believes that there might be various aspects to Nayar's renouncement that could possibly include internal politics.