Tuesday, 16 December 2008

HCL is out to 'eat your lunch'

(By Richard Holway) As readers know, the HCL acquisition of Axon has been completed (see UKHotViews 12th dec 08 - Market bids farewell to Axon) and in today’s FT Vineet Nayar of HCL Technologies ‘warns’ that HCL will use Axon deal to target Europe IT. Basically Nayar is targeting all those European IT services companies that make a living from the implementation of SAP systems – he singles out Deloitte, Logica and Capgemini. He’s ‘guaranteeing” users a 20% reduction in costs. Nayar says “The first thing is identification of unhappy customers elsewhere and make them happy customers”. Isn’t that sweet? If only life was that simple.

Nayar says that HCL will keep Axon “separate from the rest of the business with a separate identity and culture”. Although that is extremely wise, it will be very difficult to achieve HCL’s profit ambitions as well as keeping Axon’s quirkiness. I’ve written many times of how founder Mark Hunter had built a very ‘different’, unconventional place to work. Very different from the more proper and strict disciplined HCL.

Axon was not only a big leap for HCL but also the biggest Indian IT services foray todate. How it works out will watched with great interest by both ‘sides’ – the other Indian IT services players as acquirers and the UK IT services sector as potential targets (if only I could put that sentence the other way around)

My sense is that the task will be more difficult than expected. Although the downturn will help by mitigating against mass defections.

Footnote - The graphic used above is what you get if you Google Image 'Vineet Nayar and HCL'. It's the intro slide in a presentation he made recently. I thought it was rather appropriate to this post!


Diviya said...

Hi, I track Indian IT Services providers at a brokerage in Mumbai (on the dark side, as Anthony would call it).I am rather curious to know the reasons behind your comments that Axon was a 'different' and 'unconventional' workplace. Would love to hear your views on what you think of Axon as a company and as a workplace.

Anthony Miller said...

Hi, Diviya. We will comment much more on this acquisition as the story progresses. Our thoughts about Axon being a 'different' and 'unconventional' workplace reflect our many meetings with founder Mark Hunter who, most would agree, was an 'unconventional' CEO who projected a far more laid-back persona than many CEOs we have met. This clearly worked for Axon, which we have always held in high regard as the jewel in the SAP services crown among UK independent consultancies. But the real point is that IT services companies are 'defined' mainly by their services lines, processes and culture. Acquiring IT services companies is tricky enough when these are 'aligned' for both parties. We feel this alignment is not very strong for HCL and Axon and so there is much more work management on both sides need to do to make the marriage successful and fruitful.