India’s Edge Isn’t Just Talent – It’s the Will to Build ft. Ajai Chowdhry | Legends and Legacies

Sidhant: Hello, Ajay, and hello everyone. Welcome to another exciting episode of Zinnov Podcast Business Resilience Series. I am Sathan, president at Zinnov, and your host for today. I’m truly honored in having Ajay joining us today. Ajay needs no introduction. Ajay is a pioneering entrepreneur. He’s a partner at GDI, he’s one of the initial co-founders of HCL going back to 1976.

He has been instrumental in shaping not just the Indian technology services space, but also more recently, the electronics landscape, the manufacturing semiconductor landscape. And he is also at the forefront of creating government policy to enable and foster the technology ecosystem in India. And so I’m really looking forward to understanding a lot from him in terms of tech services and also the new technology ecosystem in India.

So Ajay, it’s a privilege to have you here. Thank you, and I’ll start with some of my initial questions and look forward to getting your candid responses. So the first thing, Ajay, that comes to mind, and like I said, we’ve been doing this for many years, about two decades, working closely with the tech services community. One of the first things that comes to my mind when I think of HCL is Leadership Factory. And if I look at just the current industry, you have Sandeep Ra, ex-HCL, president and CEO of Persistent, CEO of Scion, 27 years in HCL. Ri Krishna, current CEO of HEA, former X-HCL. We have many more. We have San Kush.

Stephen CP, Ani was early career at HCL as memory. If you look at some of the board members, Rohit Kaur Ali, I can go a long list. What is the secret sauce to create these kinds of leaders?

Ajai: You see from the beginning when we started HCL, I recall that, literally, year one we went to IIM Calcutta. We gave a talk on what we were looking for, and that’s when we were at zero revenue. When we talked to them and said, look, this is what we want to do. We want to take the microprocessor and change the world. We want to set up this design and manufacturing company, which will be called HCL. A lot of the kids there were very excited, but after the presentation, they walked up to us and said, you know, you are just starting out and we really don’t know whether you will survive.

You know, those days there was nothing called startups. It was a very strange animal that was in front of them. But one answer that we gave changed everything, and we said, look, we are not offering you a job. What we are offering you is adventure. Now, that is the story of HCL. We, from the beginning, have been very unconventional. As a result of that, we have produced many, many entrepreneurs. Why does it happen that we choose the right people? How we select people is the actual secret sauce behind it. Right from the beginning, we used to have this concept where we used McClellan’s theory from Harvard where we would select people who had more need for achievement, and these tests that we conducted on hiring people were focused on taking people who had the need for achievement.

Sidhant: Interesting, Ajay. And I had a related question. You mentioned a few things. You said hiring people with very high caliber, used the word entrepreneurship, which I mean some kind of autonomy, and that is what allowed maybe a company like HCL to grow at such high rates and continue to do so for a very, very long time. Give us a simple contrast on where do you think things have changed a little bit in the sense that right now we are seeing this entire industry almost at a look growing at much lower pace, in terms of technology. Again, whenever we say Gen AI, the tone from most services companies about Gen AI wrappers, right?

There’s nothing core per se that we are trying to build. Where do you think it has changed? Is it in the leadership, is it in the way we hire, because you said IIM. I don’t think most companies are going there to at least hire the core workforce. So where is in your mind, what is happening here?

Ajai: Well, actually, AI has been around for more than 50 years. It’s nothing new. It’s only when OpenAI came up with the ChatGPT in 2022, that things started to change. And the pace of change has been phenomenal. I have not seen this kind of pace of change in technology. On average, you see a new announcement every four or five days. That doesn’t mean that our industries cannot adopt or adapt to this change. They have the capability for many, many years. Many times we have seen ups and downs in the industry, and the industry has always responded to it in the right manner. Many years ago, there was this whole issue of visas and H1-B and all of that, and the industry came up with this whole offshoring idea. Mm-hmm. And then suddenly offshoring became the biggest piece. At one stage, onshoring was the big piece. Offshoring was smaller. Today offshoring is pretty much 95 to 98%. Three or four percent is onshore. But the new change that’s occurred in the last few years has been nearshore. The demand came from customers and the industry adopted, and they set up facilities in Poland and all other kinds of places where the nearshore requirement came up. Industry has been just, no, it’s not an Indian industry anymore. It’s a global industry. From in here, all the companies are global, so they have understood the requirements of customers, they’ve understood the changes that customers want, they have understood the pace of changes. So I think the industry responded brilliantly over the last 15-20 years of the change that’s occurred from year 2000 to the internet bubble to what you’re seeing today, the emergence of Gen AI.

The challenge that the industry faces today is a little different because of AI and automation. A lot of work that was done by services companies changes or it goes away. So therefore there has to be a replacement for that because if you don’t need coding anymore, you don’t need people sitting in call centers anymore. Chatbots are going to take over. All of that change is something that we have to now adopt to find new areas and new geographies to be able to overcome the reduction that is happening.

Sidhant: Let me take it one step further, right? So in the direction that you are almost alluding to. So there have been many business model, engagement model type of changes that have happened. Uh, at the same time, when you think about a technology services firm, somebody who specializes in technology, the kind of expectation a customer or a potential customer should have is that these are the folks who are at. Like really high degree of understanding of technology. Uh, at the same time, if you look at what is the general perception in the market, it is not necessarily at that space.

Right. And I’ll, I’ll just push you on one more point with an example. So if you look at a company called Palantir, so Palantir and Europe as a student of this industry for about 12, 15 years, like from 2002 to 2015, it was just a pure play tech services firm. It used to deploy people onsite, uh, do maybe hiring end. Software development for customers, and that’s it. That company today is valued at close to $300 billion. Even the largest IT services for Accenture is valued at $250 billion. Right. Only the last five years have they made this pivot on saying that, Hey, we have IP product. It will help you make things better. We have these things that will deploy. We’ll do it at scale, we’ll do it faster. We’ll make bespoke software almost at disposable speeds. Right. Why is this happening from a space which is not in India, right? We are the ones who are leading this. Space. We still don’t have companies who have solid IPs that they can lay claim on or use that as the big revenue generator. Why do you think that we are still lacking on the site?

Ajai: See, I’ve always believed that any organization has to be sales-led. I’ve written about it in my book, there’s a full chapter called Salesmanship. This is something that I tell all the startups that I actually work with. I tell them that if your CEO is not sales-oriented, you’ll never succeed.

That’s the big thing that is there. In a typical HCL-type company, HCL has always been sales-rep driven. We have absolutely marvelous salespeople leading the company, and this has been a tradition in our company. This is something that is adopted by all others today. Till about 10 years ago, people in other companies used to think that technology will sell. Sorry, technology alone doesn’t sell. Salesmen sell the technology. That’s the difference. So I think it all has to be deeply sales-led, and the confidence comes from having created salespeople as part of your team.

Sidhant: I think the reason you see me smiling is this is something that is very close to our heart as well, and one of the things that we have noticed, and the reason I brought up the HCL leadership factory upfront is that each of these HCL leaders are natively extremely good sales folks. Yes. And if I look at the industry right now, I would say that there is almost, uh, you know, a very significantly declining number of these really good salespeople that we see across the board.

And one of the questions I really wanted to ask you today was exactly this, right? So there was a time when almost everyone who had to grow up in the career was a really, really good high hustle salesperson. We have seen a significant drop in that kind of layer. Maybe the number of pure player, really good salespeople has dropped.

The consolidated sales folks have not increased that much. You know, the industry had it a little easier for, let’s say, a decade or so when there were a lot of incoming RFPs. Things were moving, okay. Uh, you didn’t need to really sell or was the model different, right? Because HCL had both product and, uh, you had hardware selling.

So people had won their skills there. They were product selling, then there were services. Where do you think it has maybe fallen back a little and what is your recommendation to the leadership of the services companies to grow more of this? High hustle sales team?

Ajai: You may be right there because when you’re doing so well and your margins are at 40, 50%, you become complacent. That era is over. And I think, uh, India always responds extremely well to crises. So this crisis is upon us today. So you agree that we are in a crisis on the services crisis? Definitely staring at us. Yeah. The reason is that automation and AI are serious headwinds through the services business. Very clear. I mean, that’s demonstrated in the number of editions of manpower that’s happening or reductions in manpower, that’s happened.

So I think, uh, this crisis will be very good for us. Okay. And we will bring out our best during a crisis. I mean, I always refer to COVID when we had zero PPEs and zero ventilators and zero vaccines. Mm-hmm. And in 12 months, we had everything. All of India came together, so I think all of the industry should come together into thinking differently.

Sidhant: You see, what has happened is that in the last 10 years, there’s been a huge preponderance of global companies into India. In addition to Indian companies, these global companies have taken some great people into their fold. So that challenge is there for Indian companies today. Now, should we fight them? Should we make them partners? Should we start supplying to them? It’s the decision that each company’s taking and struggling with. Should I compete with the GCC or should I complement a GCC or I set up a GCC company within my company and support them? So this is where the challenge is today to adapt to this changing situation.

There are 1700 GCCs today and more are coming, and thank God for the war, it’s over. Otherwise, all investors would’ve started to rethink India. So I think this situation has to be looked at very differently. This is a new challenge. The GCCs are a completely new challenge.

Ajai: That’s very fascinating that you call GCC a new challenge. Because if you look at Zinnov, we’ve been doing both parts for about 20 years. You’ve been always helping people to come and invest. Is that issue specifically with you?

Sidhant: Yeah, ‘cause it is something that you cannot ignore. Correct. So, in your mind, let’s maybe just spend a couple of minutes on the GCC topic itself.

Right. There are two ways that we are seeing the services companies trying to respond to this. One is by, say, trying to compete. So not when I say competitors, you know, having their own models like HCL as a model. Wipro recently has one, this, every company has some model, which is a flavor of BT Plus plus kind of an offer.

At the same time, what a company really is looking for is somebody who can help them set up, hire people, etc. Do you really think this, uh, helping companies set up GCCs is a place where service providers should even really, uh, you know, spend a lot of management bandwidth or is there more work to be had as a technology specialist and say that, “Hey, we specialize in this.”

Ajai: I don’t want to give you 50 data engineers in that GCC. I know what to do with my data engineers, and I will supply you the semi-finished product or, uh, work package per se, which is the direction the industry had always gone, right? We had always gone higher. Now suddenly, we seem to be going to a place where we are saying, “Hey, we will hire for you in India,” which is a recruitment business and not even a services business. So I want your, you know, candid take on that question.

Because it depends on company to company. It depends again on their reach, it depends upon their verticals, and it depends on their quality of leaders and sales. If they have the capability to lead and sell, why would they go to GCCs? They should have the confidence to be able to do it on their own. But if the company’s feeling, “Oh, maybe for the next three years I’ll do GCC plus,” that’s the way they’re thinking. So they’re thinking, “Okay, doesn’t matter. In the meantime, let me get some low-hanging fruit.”

So to me, it’s a very temporary strategy. A long-term strategy is to upgrade yourself to more and more consulting, achieve that high level of sales capability and stand on your own two feet and let the GCCs come. They are going to come and they’ll do no harm. Because the way I look at GCCs in a very positive way, when I look at my semiconductor area, I look at GCCs as a great training ground for new startups to come out from there.

Who will be tomorrow’s Qualcomm? So the fabulous companies are all going to get born out of GCCs because the GCCs are developing real products in these companies and Intel or, uh, Nvidia or any of these companies, they’re doing great work. See, earlier they used to do a part of the work. From what I understand, when I talked to the Intel and AMD guys, they see now they’re literally developing the work chip here.

That capability is not there in the country, that capability of great value to India. So we need to look at the positives of the GCCs and I look at it that way as well.

Sidhant: So Ajay, I think you’re segueing into a very, very contemporary and interesting portion, uh, that I also wanted to speak about, which is the whole make in India from a hardware and electronics standpoint, which you have been very close to in terms of evangelizing and even helping put together from a government of India perspective and creating some other policies and incentives.

Ajai: There’s no option. When COVID happened, we were deeply short of semiconductors in the country and a lot of our industries got stopped. You tell me any product that runs without a semiconductor, correct? Maybe a pencil. The rest of every product has got semiconductors and software. India being so damn good at software and having great design capabilities sitting inside India.

We have the largest designers of semiconductors in the world, sitting in India. We are just not using them. They’re being used by GCCs and by Indian software companies in a very big way for addressing global requirements, but we don’t do anything for ourselves. When we started to look at the whole idea of a semiconductor mission, I mean, I wrote about it 25 years ago that we must have our own fabs and I also wrote one line which is used everywhere saying, “The electronic import will be higher than the oil bill.” I wrote that 25 years ago, and it’s true. It is. If we are faced with that situation, is it, is there an option?

Sidhant: You look at the war that happened just now, was it a war between India and Pakistan?

Ajai: I think Pakistan was a proxy for China, and so it’s very critical that we start to create our own industry, our own products, design our own systems, and be self-sufficient beyond what we need to have, which is, you know, technology sovereignty.

And I think here semiconductors play a very major role. I think like seven years ago I read about this senator in America, his name was Ben Sassy, senator for intelligence, and he wrote a very beautiful line. He said, “The next wars will be fought with semiconductors.” And they were, I mean, the last five days have proven that that’s exactly what happened because technology.

And today, we have an outstanding team at Metis and that helps us because Trishna is superb, uh, actually is superb, and the team below is also very, very good. What I see is that this was needed and it is being done. We have a long way to go.

Sidhant: So Ajai, I wanted to pick you on the sales-led or the sales-first organization from an IT services context. And I could not agree with you more on that side. The more I speak to the leaders, I see this constant struggle to find the right leadership who is able to have this structured process plus the hustle to sell.

In your experience, and maybe if you were to advise some of them, is there a way to maybe create either an ecosystem or a way to train some of them to actually be really good salespeople? Because right now, somehow you are almost supposed to automatically graduate to become a salesperson. You do great delivery, then you become account manager, and then you become a salesperson.

In my mind, this process doesn’t work, right? It’s a hit and miss. Some person might be good, naturally they work, but more often than not, they’re almost set up to fail. We know how to train people on technology. Is there a way that, you know, this should happen as a process to train people to become good sellers or consultative sellers on technology?

Ajai: I think very critically, training of salespeople should be done before they become salespeople. If their delivery people select the right people from there who have the need for achievement. If they don’t have the need for achievement, it’s a waste of them. Test them for need for achievement. If they have need for achievement.

They start to become heads of delivery, then they become account managers, then they become sales managers. Before they become account managers, give them a solid three-month sales training. If you don’t do that, you are not gonna be successful. Yeah. See, what we used to do to test in HCL was that we would just take two salespeople, make one a seller, one a buyer, and have an actual conversation take place in a video where we would record this. So one becomes a salesman, the other becomes a buyer, and they’re all fighting with each other to be successful. And the better guy wins. You’ll be able to figure out whether they’ve achieved that capability or not. I mean, there’s a very simple model, I’m telling you, there are many other ways to test.

Sidhant: Got it. So that, and also the sales process, like you mentioned there.

Ajai: Yes. See, the biggest challenge with salespeople is they never follow processes. That’s almost, it’s supposed to be that we almost, right? Because they, well, “I know everything. I don’t need to put it in CRM.” Well, that doesn’t work. That heroism doesn’t work. It is process.

So what you’re saying is, one, you need discipline, you need process, and obviously you need to be equipped, well trained. And also motivated. You need to have that hunger in the first place of achievement.

You see, what we used to do in HCL was that we had a senior management training program, which when we would hire from an institute of management, we would give them an 18-month plan. In these 18 months, this is what you have to achieve. It was called a zero or one plan. So in 18 months, if you succeeded, you would go two levels up in the company or you would exit.

Sidhant: So Ajai, almost my last question to you, and I wish I had more time. My last question is everything that’s happening today, if today you were to start, uh, tech services firm, what areas would you look at? What type of people would you hire and what kind of mix of product versus services versus consulting revenue would you target in the next three years?

Ajai: I wouldn’t start a services company again. I was kind of expecting this answer because, you know, previously we discussed this. Right. I like your answer. I would not want you to change that. The next question I have is, do you actually see another $10 billion IT services company happening, or do you think that structurally the market has too many players and is not that easy?

It is a bit saturated. You’ll never get something or it’ll be in so long. Or it’ll be only through M&A. So what’s your take on that? I feel that a $10 billion company can majorly happen through M&A because for you to create it from scratch to $10 billion is not gonna be easy.