How can India capitalise on the 'China Plus One' strategy? HCL co-founder Ajai Chowdhry weighs in

Ajai Chowdhry, Co-founder, HCL
 
Ajai Chowdhry sold computers in India at a time when they were “18 times more expensive than an ambassador car”, as he puts it. He co-founded IT major HCL in the 1970s, when there were barely 100-odd computers in use in the country, and most people had not even seen a computer or even known what it could do for them. In conversation with Forbes India about his biography Just Aspire, on the podcast From the Bookshelves, he reflects on lessons from his long and successful career. He also lays out his vision for India being a product nation, why it's important to not just make, but also design in India, and what he thinks is the way forward for India over the next 10 to 20 years. Edited excerpts:  
 

Q. You sold your first six computers to IIT-Madras. Could you take us back to the first-ever computers that HCL made, and how that set the tone for what the company would become in the future?  
The initial product that we created was a scientific engineering product. And we felt that if we went to research institutions, engineering colleges and IITs etc, we would be able to appeal to the professors or researchers, that please trust a bunch of engineers who have created this product. Actually, the product was not yet ready. What we did was to create a beautiful-looking brochure which described the product and we went out in the market with great sales capability. That's been the strength of HCL, literally from day one, and one of my co-founders, Arjun Malhotra, said he’ll get the first deal. So he went to his own alma mater, IIT-Kharagpur, and got an order. Based on telling them that, ‘Look, this product will come out. If you want to see it, come see it in our labs in Delhi. We can’t yet bring it here because it’s still in a very early stage, but trust us, we are a bunch of young engineers. We’ve come out of DCM and know what we are doing.’ Somehow or the other, we managed to convince them. That set the trend for us to get more business from different IITs and engineering colleges.   
 
I was in Madras then and I went to IIT-Madras, talked to six different departments, and managed to convince them that they should also buy this product based on this order as a reference from IIT-Kharagpur. They said they will give us the business, but ‘make sure that you deliver on time because our funds will go away if you don’t deliver’. Fortunately, end of March, we managed to get the product ready on time. I went to the airport, picked up the six computers, personally delivered them in my beat-up old Fiat and met the commitment to the customer. So if we had not achieved that, HCL wouldn’t exist.   
 
Q. When you started selling computers in the 70s and early 80s, they must have been really expensive, right? How did you go about creating a domestic market for computers in India?  
There were just hundred computers in the country when HCL started, and most people had never seen a computer or did not know what it could do for them. So initially we started with the small and medium enterprises, and we went to them and said that we could help them reduce the cost of operations of their company. We taught all our salespeople how to create the return on investment for this expensive computer. Those days, our computer prices were 18 times the price of an ambassador car. It was very expensive. What we did was we removed the myths from the people's minds; myths like, it’s difficult to operate. We put out a full-page ad that said even a typist can operate a computer. Then, we put out ads to say that if you buy this computer, you will recover the cost of it in a very quick time, like 18 months to 24 months. And the third thing that we did was tie up with IDBI Bank, and for manufacturing companies, we offered them EMI for the first time in the country. There was no concept of EMI those days.   
 
So with these kind of strategies, we were able to overcome initial objections of customers like price is too high, it’s difficult to operate, and all those issues. We just opened up the market like that, and when you open up the market, you become the market leader. 

Also read: Why India will replace China as the world's growth engine this decade
 
Q. HCL was a distributor of various high-tech products, from Apple iPods to the Nokia phones. Are there observations about the manufacturing and distribution ecosystem in India and about consumer behavior that are still relevant today?  
When we started the Nokia distribution in the country, we were limited by certain methods that Nokia was using globally. One of the strategies they had was to sell their phone through operators like Airtel, etc. Now, when you are selling through operators, you have no real control on where the product is going. It is totally dependent on how the growth of the Airtels etc is taking place.   
 
So we took a different approach in India along with the Nokia India people, who are very open and solid marketing people. Together, we created a strategy to reach every part of the country. But before that, we had to ensure that the environment was right. So, we created the Indian Cellular [and Electronics] Association, we were founding members. And through that association, we went and convinced the government that the current methodology of creating telecom market in India is not correct. One of the things that used to happen those days was that a calling party had to pay for the call. So we went and got those changes done, and we ensured that the environment was suitable for the product.  
 
The next thing that we did was to convince Nokia to create a price point for India, which was different. Because India is not a high price point country. The third big thing that we did was to create a major distribution network, which was based on how a Hindustan Unilever operates in this country. How do they sell soaps? So we figured out if we make product available and accessible, and priced correctly, we would be able to improve sales.   
 
That's how we cracked that whole market by behaving pretty much like how Unilever operates and sells soaps. We made sure that we had close to 90 large redistribution points and from those redistribution points we had more than 100,000 retail points, where the product was available. And then Nokia did phenomenal amount of marketing and promotion which was tuned to India.  
 
Q. India has become a leader in IT services, but can India become a product nation as well?  
Ten years ago, when I used to walk into a drawing room, everybody used to ask why don't they have a Google in this country? Why don't we have a Microsoft in this country? Why don't we have products? A very good organisation got created in Bengaluru called iSpirt and they then started working on helping people create Indian software products. And in the last 10 years, you've seen the growth of the Indian software product ecosystem. Today, you have companies like Zoho, which is a billion-dollar company global and operating out of India. So there are software product companies that have happened.   
 
My view is that we cannot afford to not have a hardware product nation. Software and hardware are two sides of the same coin, and the market for hardware globally is huge, and the Indian demand in the next five-seven years is going to be $300-$400 billion.   
 
I've been socialising this with the government, requesting them to look at this area very seriously because now semiconductor plants are going to come up in the next three to four years. Who's going to be the customer of those semiconductor products? There are no Indian brands existing there. All Indian brands have vanished in the last a 10 to 15 years. So we need to create products in India. We need to create Indian brands, and we need to be able to design products in India and be a global powerhouse in product. China does that beautifully. If you go to China and you want a product, like a refrigerator or air conditioner or a computer or a phone, there are so many design companies. You go to them, they design the product for you. You go to a manufacturing company and get it manufactured, bring it back to your country, put a logo on it and sell it.   
 
Q. In fact, given that companies have started looking for alternatives beyond China, do you think that's something India can capitalise on?  
Absolutely right. You hit the nail on the head because basically China is the hardware product nation in the world. If we can go and pick up 15-20 percent of that market, design products in India, add value, then Indian can become an alternative to China for the rest of the world. Because there is a serious trust deficit today with China and, therefore, I think that is going to help us dramatically.   
 
I have written a paper that I have submitted to the government, where I’ve said what is required to create India as a hardware product nation. And the Ministry of Electronics and Information Technology (MeitY) has now formulated a task force which I'm part of, and that task force will look at which products and what needs to be done to make this happen. So I think there's good movement on that area.  
 
Q. For many years now, the IT industry has been an aspiration for many people in the country. But right now it's been seeing a flood of layoffs. There has been a decline in job volumes. There have been delays in onboarding and many such other issues. Is this a temporary phase or does it point to more structural, systemic issues in Indian IT?  
I don't think there are any real structural issues with Indian IT. It will continue to grow. This is a very temporary phase. This is where if we spend time on creating the India as a hardware nation, we could benefit from our software knowledge. Today, a hardware product consists of 30 percent software. So if we can take our knowledge in software and combine it with our capability in hardware, I think we can create global products that would be unbeatable. It’s going to be a hard job for the next 10 years to create that, but just the way software products got created, I'm sure hardware products can also be created here.   
 
Q. Is there anything that we need to specifically keep in mind from an infrastructural standpoint or a systemic standpoint in order to make sure that this happens?  
Two areas. Number one, we need to improve our logistics quite dramatically. Because the electronics ecosystems need very fast movement of components and products. I'm quite energised by the fact that the government has come up with a logistics policy and the Prime Minister has introduced Gati Shakti. Those two changes will help us take care of the logistics piece in the next three to five years. The other important part is upgrading our academic curriculum to take care of product design and chip design. So that is one area that the government is now seriously looking at and that will be one of our recommendations for creating India as a product nation. There's not a single institute in the country that teaches you how to make a product, so that is very critical. We are experimenting with one particular institute in Delhi and they are now creating a curriculum for designing products and chips etc. Good news is that the AICTE (All India Council for Technical Education) has adopted a VLSI design course for B.Tech. So some of the institutes in the country will start teaching BTech people on VLSI design, but more needs to be done to take it forward to full product design. And our current need is to make sure that that happens.  
 
Q. Where do you see Indian IT in 10 or 20 years from now?  
IT is a very strange word. Today, it just specifies software. I think you should include hardware in it. Because they are so intermingled. As far as the software piece is concerned, I do not see any issues. We need to constantly upgrade our skills as we go forward. And as we keep on upgrading our skills, we will be able to handle it. The good part is that we, today, occupy such a large percentage of the outsourcing market in the world that people can't do without India. They don't have the scale or the capability or the skills to take care of it. One major reason is that we are a young country. All other countries are ageing. They don't even have enough people to do the current jobs that they have. And that is what we have to take as an advantage for the world.