smii project - hclt.pptx
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HCL Technologies Limited
Strategy Management II
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This industry has grown from USD 4 billion in revenues in1998 to a USD 52 billion giant today, employing over 2
million people, and has had an unparalleled impact on the
Indian economy. - NASSCOM
Indian IT:Current State
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Since FY1998 IT-ITES sector has increased its contribution to Indias GDP from 1.2% to 7.5% in FY2012.
IT-ITES industry is primarily dominated due to its Export capabilities, and constitutes about 77% of totalindustry revenue.
The industrys share of total Indian exports increase from less than 4% in FY1998 to about 25% inFY2002.
It has led to massive employment generation and expected to add 230,000 jobs in FY2012, thusproviding direct employment to about 2.8 million (70% of this workforce is in the age group of 26 to 35
years)
The industry is also front-runner in diversity at the workplace (over 30% of employees are women,maximum in any industry).
Generating immense savings for customers (savings from global sourcing for customers amounted toan estimated USD 20 billion to USD 25 billion in 2008 alone)
Focus is on quality (65% of CMM, Level 5 firms are based in India).
Health Indicator
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Major Players
24.9% market share)
(18.3% market share)
(15.7% market share)
(13.8% market share)
(10.5% market share)
-- Source: Gartner
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IT-ITES grew by 19% in FY2011 (USD 76 billion)
Export revenue generated USD 59 billion and contributed 26% its share in Indian
exports
Market Size & Growth
Sub-prime banking crisis
Other low cost alternative destinations e.g. China, Malaysia and PhilippinesGlobal Forces
90% concentrated in Metropolitan cities
Labor unrest in Maruti Plant and recent violence in Assam
Social Forces
Ever increasing relevance, along with its diminishing cost
Buyers Focus shift on as a service vs. staff augmentation/T&MTechnological Factors
Impact on Tax relation policies by US and UK govts to curb offshoring in wake
of economic downturnHigh rejection of H1/L1 Visas in recent past
Political / Legal /
Regulatory
Economic Factors
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5 Force Model
Domestic market leader has share less than 25% of market share .Overall 80% IT Exportsdepend on US and UK so price war is evident
Presence of global MNCs e.g. Accenture, EDS, IBM in India
IndustryRivalry
(High)
Cloud computing and Social Media changing way of IT procedures
Focus on total product experience for customers on mobile devices and OSSubstitutes
(High)
Setting up of infrastructure and engage in lateral recruitment to compete at this levelis tough.
Buyer demand is US and UK likely to low due to recession
NewEntrants
(Low)
Less product oriented so majorly revenue generated from repeated business
US and UK customers use leverage and demand price reduction to put pressure onmargins
Buyer (High)
Top 20% of the buyers account for 40% of the revenue of sellers and hence carry a large
revenue on price.Graduate employees readily available in Indian market with lower cost
Supplier
(Low)
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HCL Technologies
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HCL Technologies Limited Professionals : 90000+ Equity : $ 6.2 Billion Services : Technology (IT) services and Domain : software services,
infrastructure, processoutsourcing.
Sister concerns :HCL Technologies & HCL Infosystems Established : 12th Nov, 1991. Operation on : 26 countries. Services : IT and engineering services , financial
services, manufacturing, healthcare,media & entertainment, public servicesand energy &utilities.
Company Background& History
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Resources &Competitive Position
Revenue Growth Indian IT &
HCLRevenue
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Revenue
EBIT Grown 3.1 times from
2007-08 to 2011-12Profit Margins
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Sustainability andpredictable cost
From existing customers: cross-sell, BAIT, Cloud computing, BPO and RIM
From new customers: vendor consolidation, new verticals, newgeographies, and new propositions
Competition
EFCS, Value Centricity and Trust, Transparency and Flexibility
TechnologicalInnovation and
Planning
Quality group, Tools group, Chief Delivery Organization (CDO)
C S Factors
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Compliance&
Regulatory
Regulatory compliance framework, checklists
Specialized legal groups
Businesscontinuation
and
InformationSecurity
Comprehensive Business continuity program
Disaster Recovery programs
Information security team
ExchangeRate
Hedging
Increased focus on Europe, Asia pacific and Rest of the world
C S Factors
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Major Indian IT companies e.g. TCS, Infosys, Wipro, CTS, IBM
Impact of disruptive technologies, legacy systems are going out and systems
migrating to cloud based solutionsMany MNCs has setup their offices in India to gain low cost advantage
Competitors
Positive attitude of customers due to English speaking people in country incomparison to other South East Asian countries, China or Middle East
Quality servicesComplementors
Operations span across 31 countries.Quality driven services to G1000 companies
Economic outlook in US and UK lead to focus on other geographiesCustomers
Gap between skills required and current skilled graduates available.
Need to focus on basic education. (Shiv Nadar education institute)Suppliers
PARTS Analysis
Players
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PARTS Analysis Added Values
Dividend payment Net worth
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Mantra to maintain Profit Margins by delivering predictable services at predictable price
to large set of customersNo single business unit contributes 30% of revenue else restructure the organizationRules
Investments in Software engineering processes
Establishing onshore offices in foreign locations
Hedge foreign exchange currency
For the existing and new customers HCLT sees growing opportunities in
For existing customers: HCLT focuses in cross-sell, up-sell and new propositions such asbusiness-aligned IT, cloud computing, platform based BPO and Green IT.
For new customers: Focus is on vendor consolidation, new verticals, new geographiesand new propositions.
Tacit
Focus those customers aligned with its strategy
Allure of uncontested market Blue Ocean Strategy, where margins are very high
Avoid head on collision with high players like IBM, Accenture and EDS to maintain brand
image
Scope
PARTS Analysis
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Low Cost
Structure
Economies
of Scale
Learning /Experience
curve
Labor SavingOperation
Model
Skill Mix
Business Strategy
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SCOPE
IT-ITES domain (Technology partner with choice as stated in mission statement)
FocusLarge global accounts
Offering solution across multiple functions and assets
IT back operations e.g. BPO and Remote Infrastructure Management Services
ORGANIZATIONAL DESIGN
Custom Application Services 31.7% revenue (ADM, Support, reengineering, migration and IV&V)
Engineering and R&D Services 18.1 % revenue (Eng. services, H/W, Mechanical and S/W product engg)Enterprise Application Services 21.3% revenue (Consulting, hosting and BPO)
Enterprise Transformation Services (Middleware & SOA, BI, Business and Consulting)
Infrastructure Services Division 23.3% (End user computing, Data center & Mainframe services, Securityand Cloud computing, Integrated Operations Management)
Business Process Outsourcing (BPO)
OWNERSHIP
Ownership of all the verticals governed by respective SBUs
Corporate Strategy
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Collaborative
Strategies
ProductPartnership
Joint
Ventures
Merger &Acquisition
Strategic
Alliances
Other CorporateStrategies
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We will be the employer of choiceand the partner of choice by focusingon our stated values of EmployeesFirst, Trust, Transparency, Flexibilityand Value Centricity.
MissionStatement
To be the technology partner ofchoice for forward lookingcustomers by collaborativelytransforming technology into
business advantage.
VisionStatement
Balanced Score Card
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Category Objectives Measures Targets Initiatives
Financials Maximum returnon stock price
Sales Achieved growthof 34% in FY2012;plan to cross thatnext year
Diversification innew geographies
Maintain ProfitMargin
ROE 30% Low costleadership
Customer CustomerSatisfaction
CSAT score (7point scale) doneannually on the
Within scoringrange of 4.5 to 6.7
Gold andPlatinumaccounts
Business Strategic partnerwith bigger brands
Acquisition andpartnerships
To become $10billion by 2014
HCL Axon toupgrade SAPcapabilities
Learning &Growth Talent acquisitionand drive HR Scorecard Develop projectswith minimal cost CertificationsTech Trainings
Score cardperspectives
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Diversify and target domestic outsourced deals
Create new business model: - End-to-end service offerings
Specialized offerings for domestic market
Alternative value based pricing
DomesticOutsourcing
Focus on lower part of G1000 companies (Blue Ocean Strategy)
Remote Infrastructure ManagementOffensiveStrategy
Observations andRecommendations
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Spend on Data Centre Management and sourcing of RIM likely to remain healthy.
Investment in development of cloud competency is must to capitalize on firstmover advantage in future.
Opportunity to develop alliances with Big Players like Amazon / Microsoft forcloud implementation of packaged ERP solution offerings.
TechnologicalInnovation
Change in focus from short term goal of profit margin to long-term goalsStrategic
Investment
Total Solutioning (End-to-end solutions)
Focus on emerging sectors e.g. Health sector, Energy & Utilities
Focus on emerging economies e.g. BRIC
RebalanceCustomer profile
Observations andRecommendations
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Gartner Inc. (www.gartner.com)
HCL Technologies (www.hcltech.com) NASSCOM (www.nasscom.org)
Mckinsey & Company
NASSCOM Mckinsey Report 2005
ICICIDIRECT Wikipedia
Competitive Strategy Michael Porter
References
http://www.hcltech.com/http://www.hcltech.com/http://www.hcltech.com/http://www.nasscom.org/http://www.nasscom.org/http://www.hcltech.com/http://www.hcltech.com/http://www.hcltech.com/