That pioneer was Shiv Nadar, who in 1988 dared to sell high-end Unix-based minicomputers in the US, the equivalent of sending coal to Newcastle.
HCL—the startup he had co-founded in 1975 with a seed capital of ₹1.75 lakh (the total savings at the time of its six founders)—was not even a speck on the global IT firmament back then. India was still two decades away from being accepted as the IT services capital of the world.
Notwithstanding a bold new policy announced by the Rajiv Gandhi-led government in 1984, which enabled the import of technology for making personal computers in the country, the domestic PC market was minuscule in size, with any real progress hamstrung by opposition from powerful unions in sectors like banking.
Against all odds
But if anyone could defy the odds, it was Nadar, a man of enormous self-belief who had quit his well-paying job at DCM Data Products, to start HCL along with five other intrepid travellers like him. Together, the six co-founders embarked on the risky journey that entrepreneurship was in the 1980s, well before the dawn of private equity and venture capital in the country.
After capturing a significant slice of the small but growing Indian market for personal computers and having tested foreign waters with its subsidiary Far East Computers in Singapore, HCL now set its sights on the world’s toughest market to crack.
The market for PCs in the US of the 1980s was dominated by the likes of IBM, along with a whole host of clones. Smartly, HCL didn’t go after this crowded segment. Instead, it identified the minicomputers market, which had recently been cracked open by emerging giants like Digital Equipment Corporation and Hewlett Packard, among others.
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As it were, these were not easy products to make even then, and required a high degree of understanding of the underlying technology.
Even HCL’s initial investment in its US subsidiary—HCL America that would market the product to select US firms—was just $5 million (around ₹7.5 crore). Although a pittance today, it was a large sum for a company that had just crossed ₹100 crore in revenues in the previous year.
But what it lacked in money was more than made up for by the technical expertise it brought to the table. The computers it had been selling in the domestic market since 1981 came with an operating system that had been developed in-house by its own engineers.
Banking on innovation
HCL reckoned that the Magnum multiprocessor unit it had put together would find takers in the US because of its scalability and low price. It wasn’t a completely original idea.
Around the same time, US-based Sequent Computer Systems, set up by ex-Intel engineers, had launched a similar computer that would use multiple microprocessors to achieve a level of power and computing capacity that was hitherto available only in conventional minicomputers and mainframes.
The logic behind making minicomputers in India for sale in the US was the same that has driven the country’s $200-billion software exports success. India had abundant engineering skills available at a fraction of what it would cost in the US.
HCL had also launched a clever advertising campaign urging Indians stuck in mid-level positions in the US with little hope of advancement to come back and help build great products at home.
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But the real power came from the men who led the firm. Arjun Malhotra—whose grandmother’s barsati (a small rooftop room) in New Delhi’s Golf Links served as the startup’s first office—fronted the US expedition.
But the real power came from the men who led the firm. Arjun Malhotra—whose grandmother’s barsati (a small rooftop room) in New Delhi’s Golf Links served as the startup’s first office—fronted the US expedition.
A go-getter who loves team sports, Malhotra was a great motivator for the engineers tasked with executing the project. And then there was Nadar. The lion, who in his winter may have mellowed somewhat, was an imposing figure in those days.
A leader for all times
Having the appearance of a professor patiently explaining a problem to a student, behind Nadar’s wry humor and easy laugh, was a sharp and calculating brain that could reel off the CIF (cost, insurance and freight) breakdown of every single component including those not used by his company.
But in the end, HCL’s first US trip ended badly. The minicomputer idea bombed for many reasons. One view was that the computers HCL wanted to sell didn’t get environmental clearances in the US. It is also possible that they were just not good enough.
Whatever the reason, it didn’t matter since the experience was not wasted. The understanding of hardware would come in handy when the company pivoted to software services.
PS: In 1999, Sequent was acquired by IBM for $810 million. Its then barely known Indian rival, HCL Technologies, today has a market capitalization of nearly $47 billion.