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I have a strong instinct, but most of the time it will be backed by some solid work: Shiv Nadar, Founder and chairman, HCL Technologies
This June, HCL Technologies completed a $1.8 billion deal to purchase several intellectual properties (IPs) from IBM Corp that made up seven software products. A large team of ‘IBMers’ also moved to HCL Technologies to become ‘HCL-ites’. The deal marked a milestone in HCL’s history and reflects the ‘instinct’ that Chairman Shiv Nadar followed when he turned entrepreneur in the 1970s, riding the wave of advancements made in microprocessor technologies.
The deal with IBM is estimated to add $650 million in annual revenues to HCL Technologies, India’s third-biggest software services provider that earned close to $2.5 billion in revenues in the quarter ended September 30.
“I have a strong instinct, but most of the time it will be backed by some solid work,” says Nadar, 74, during an interview in his 14th-floor office at the HCL Group’s corporate headquarters in Noida. In the '70s, when he was working at a company called DCM, he saw the advent of microprocessors. “A few of my colleagues and I could see that this was it. If we quit now and get started, there is a realistic chance of us making it.”
Eight of them left. In 1976, Nadar and his co-founders started Hindustan Computers Limited, which two years later introduced a desktop computer based on a microprocessor from a company called Rockwell. The computer, HCL 8C, became quite popular.
“In those days, we would make business plans on the announced architecture itself,” Nadar recalls. Such architecture could see some changes and modifications before a commercial version was released. “To make it really work, every R&D engineer that we hired was from the IITs, mostly from Madras and Kanpur, but also a few from Bombay and Kharagpur.”
Nadar says theirs was the only company in India that was designing such computers at the time. The government company ECIL was doing some work in the area, as well as DCM, “but we left them all behind”, he says. “That was the level of competitiveness that was built in the company. I don’t think our companies today are capable of taking courageous decisions like we did at that time.”
For example, he recalls, HCL would go to IIM to recruit engineers graduating with management diplomas. One year in the late '70s, HCL went to IIM Calcutta and the entire graduating batch turned up for interviews, such was the chutzpah of the company; Nadar & Co hired about a hundred of them. Today, hiring a hundred IIM graduates with engineering degrees would be very tough, he says “because how do you get them, they won’t come to you”. “Back then, I was 31 and an MBA graduate was 24, so almost our age group.”
The recruitment process did not really include interviews, Nadar recalls. Since the freshers had to learn how to sell in order to bring in revenues, the HCL team would make up role-play charts and tell the aspirant, “Now, you are the salesman, sell to me.”
Nadar went on to build multiple businesses, including HCL Infosystems and HCL Comnet but, by far, the most successful is HCL Technologies, which was previously an R&D unit that was spun off into the technology services provider in 1991. HCL Technologies was listed on the Bombay Stock Exchange in 1999 and has today made Nadar one of India’s wealthiest; his $14.14 billion in annual earnings has put him at No 6 rank on the 2019 Forbes India Rich List.
Nadar was also enterprising in striking strong relationships with multinational companies that helped his group. Two examples are a venture with Perot Systems in 1996 that ended in 2003, and another called HCL-HP with Hewlett Packard, which ended, after six years, in 2014.
Today, Nadar thinks the IT industry can make the switch to digital technologies, at a time when the traditional IT outsourcing business is stagnating, despite contributing two-thirds or more of the industry’s revenues. In case of HCL Technologies, he believes the switch has already taken place. “A lot of work we do with our clients is about digital technologies.” While the switch in the industry happened faster than expected, HCL has kept up and has moved earlier than anticipated, says Nadar. “HCL is a paranoid company and if you’ve read the book Only the Paranoid Survive, we are a typical example of that,” he adds.
The company has invested $4 billion in buying IPs and is still debt free. “We believe in IP because that’s what we came from. We understand technologies,” he explains.
The VidyaGyan school in Bulandshahr, UP: Last year, 2.5 lakh children competed to be among the 300 admitted to the two VidyaGyan schools Image: Sajjad Hussain / AFP / Getty Images
Among these is the $1.8 billion deal with IBM that has seen 3,000 R&D and frontline employees move from IBM to HCL. “They wrote source code. We didn’t want to be left looking at whether something wasn’t working.”
On his decision-making style with such large transactions, Nadar says: “I don’t just decide. First it has to be proposed by the CEO and his team. Once I take a decision, everyone else falls in line. The CFO has to fall in line.”
Anil Chanana, the CFO who retired last year, would say that he may not agree with Nadar but that he would go along with his instincts. With the IBM deal, the first payment had to be made on June 30; Chanana took the precaution of remitting it a day earlier.
Nadar adds: “Just because the amount becomes larger, the decision criteria doesn’t change. We are cutting the cloth according to the needs.”
Nadar’s success has also been because of his ability to find and nurture exceptional leaders. Vineet Nayar, who joined the group in 1985 as a management trainee, is perhaps the best example. “Like what I have seen in America, I don’t let age come in the way of anything. And it was the same with Vineet, and we became very good friends,” Nadar says.
Roshni Nadar Malhotra, CEO and executive director of HCL Corporation and vice chairperson on the board, is leading efforts to make the company more inclusive Image: Amit Verma
The litmus test for Nayar came when one of the co-founders, who headed technology, fell seriously ill and had to be replaced. “No one expected me to pick Vineet,” who had never been overseas, never sold overseas and had never been involved in technology areas. He was from the HCL Comnet unit.
“I told him, ‘I’ve chosen you, I’ve been telling you well before, you never believed me but here it is, get started.’ He said, ‘Are you sure?’ I told him, ‘I’m sure, trust my judgement, you’re good.’ He became a fantastic leader taking the whole company higher.”
Nayar was made president of HCL Technologies in 2005 and served as its CEO from 2007 to 2013. He made mantras like ‘employee first’ famous at HCL Technologies and committed the company to chasing ‘Blue Ocean’ strategies of finding large, untapped opportunities and dominating them.
“Shiv has been successful in riding successive waves and re-creating himself and his companies. HCL started as a hardware company with its own proprietary hardware; it transformed itself into a personal computer company,” says Rishikesha Krishnan, a professor of corporate strategy at IIM Bangalore. “Later Shiv successfully shifted gear to software, and in that has been successful in keeping up with the times.”
Nadar is also one of India’s biggest philanthropists. By 2018, he had committed about $800 million of his personal wealth to philanthropy via the Shiv Nadar Foundation and the HCL Foundation.
“In philanthropy, he has done extremely well too,” says Krishnan. While the SSN (Sri Sivasubramaniya Nadar) institutions in Chennai, which offer engineering, management, research and advanced career education, have become colleges of repute, the VidyaGyan schools in the Uttar Pradesh cities of Sitapur and Bulandshahr have been admitting meritorious underprivileged children and offering them a world-class education for the past 10 years. Last year, 2.5 lakh children competed to be among the 300 that are admitted to these schools. Some its students, after graduating in India, are now beginning to find places in Ivy-league colleges in the US.
The work is very close to Nadar’s heart because “it’s not for profit anyway, and the expectation is that some of them will come back and serve the nation.”
Krishnan adds: “And the jewel in the crown is the Shiv Nadar University in Dadri, Uttar Pradesh, which has the potential to be among the top universities in the country.”
HCL today employs close to 1.5 lakh people and operates through a well-defined structure, a key component of Nadar’s vision. Everything the company has done has a structure, whether it be business, philanthropy or education, including the Kiran Nadar Museum of Art, located in Delhi and Noida, that houses the art collection of Nadar’s wife Kiran. “The structure carries them, no single individual should, that’s the strength,” Nadar says.
Building the organisation is what Nadar sees as his biggest achievement. “First thing is, you’ll have to learn to let go of the sense of power.” He points to his corporate communications executive, who is sitting in on the interview, and says: “She’s managed to get me in front of you, but I’m media shy. But she’s the executive, she knows what she’s doing.” Having hired people for various roles over the years, Nadar has the fortitude to stand back and trust their judgement.
The Nadar family owns 60 percent of HCL Technologies. Nadar believes this is important because, in India, diluted ownership leads to the company eventually losing its way. He also believes in focusing on his core work and not diversifying. “If you see Indian business families, they are all in multiple industries, they see an opportunity and they go there.” Nadar, too, could enter various verticals in a sector as wide as IT, but what stops him is “any time I let greed take over, it will destroy this company”.
Early in his entrepreneurial career, Nadar too had tried his hand at investing in some unrelated opportunities, but quickly learnt from his mistakes and returned his focus to technology services. “Whatever we do, we focus on that and we do it well. We work with the largest corporations of the world. We have very little work in India. Somehow, our way of working suits our goals. It’s a young workforce and it’s board-run. You’ll have to see it to believe how a board truly runs a company.”
When asked about the growing influence of large companies on society, Nadar chooses to focus on transparency and compliance. The board’s independence is extreme, he says. There is an audit committee that is empowered. Nadar himself doesn’t attend the audit committee meetings; his daughter and vice chairperson Roshni does, but can’t vote. Only the independent members can vote. “The chairman of the audit committee is more powerful than me, because he can say no to business proposals when it goes through the audit committee,” says Nadar.
Diversity is another area Nadar continues to focus on, and it is also something that Roshni is personally involved in. About 40 percent of the company’s workforce comprises women, but Nadar is forthright in pointing out that the proportion falls off as one goes higher up in the organisation. “We are losing all that talent because all our structures are built for men. How do you change that? You’ll have to imagine that there are only women and then build structures. My daughter is leading that effort.”
This instinct for what needs to change is one of Nadar’s big strengths. And Krishnan echoes the view: “Nadar has the unique ability of building organisations and institutions that adapt to the changing world.”
By 2018, he had committed about $800 million of his personal wealth to philanthropy via the Shiv Nadar Foundation and the HCL Foundation.