Double the fun! HCL’s stock valuation doubled in a just a little over 12 months. They’ve been on a tear, improving every month, with revenue per employee skyrocketing and the corresponding profitability rising. Sure, HCL has shifted some positions in its leadership team. But what really caused the investing community to value HCL at twice the price as before is HCL’s successful shift to transaction-based pricing.
The strategy behind the leadership shifts was to ensure future growth. Former CEO Vineet Nayer became Vice Chairman a year ago, and Anant Gupta moved from President/COO to President/CEO. Gupta has been with HCL for 19 years and built its infrastructure business — which is now the dominant marketplace for HCL.
HCL’s growth strategy is taking hold, and it successfully transitioned its infrastructure offerings from an FTE-based pricing model to per/service transactional pricing.
Previously I blogged about payment companies outperforming their BPO brethren: it was because they implemented platforms for transaction pricing. As I explained then, there are few examples of transitioning successfully to transaction pricing models outside the payments space. It’s almost as rare as catching lightning in a bottle.
Spectacular and Rare
But HCL is one of those rare instances and succeeded in the infrastructure space.
Where success happens in rolling out and implementing transaction pricing, a service provider can reap tremendous benefits because it captures productivity gains from automating. When a provider can scale this strategy, as HCL is doing, the financial and competitive benefits are spectacular.