No end to HCL and Infosys war of words over British co Axon

There seems to be no let-up in the war of words between two of India's biggest software companies that was triggered by the bidding battle for British company Axon four years ago. 

HCL Technologies and   Infosys are now seeing a fresh bout over the Bangalore-based company's long-awaited acquisition of Lodestone in September. And to boot, the protagonists on both sides are Steves - Steve Pratt of Infosys and Steve Cardell of HCL Technologies. 
Infosys, which backed off from a bidding war with its Noida-based rival earlier, is now saying Axon was not such a great deal after all. Pratt, the global head of consulting at Infosys, told ET that he is "glad the deal (with Axon) didn't go through". 

After criticism lasting years from analysts about its aversion to risk, Infosys announced that it was buying Lodestone, a Switzerland-based consulting company, for Rs 1,900 crore. Even before the deal became public, HCL's Cardell weighed in, remarking that Lodestone was like Axon, with the catch that it was behind the times. "It (Lodestone) is like an Axon about seven-eight years ago," he told ET in July when murmurs first began about Infosys' interest in Lodestone. 

India's second- and fourth-largest IT services companies have been growing in contrasting manners over the last few years. HCL Technologies' revenue has expanded nearly 90 per cent during the period while for Infosys it is just 50 per cent. Even their commentaries now reflect the difference, with HCL easily the more bullish. 

Axon, which it bought for Rs 3,800 crore, has been an important factor in its rapid rise. 

"HCL Technologies was missing the ERP ( enterprise resource planning) piece at the time and it needed to fill this gap badly to become a full-service player. Axon helped it become a billion-dollar player in ERP and it filled a gap created by Satyam," Sandeep Muthangi of brokerage firmIIFL, referring to the implosion of what was then India's fourth-largest software exporter. Cardell said Lodestone was weighed and found unattractive. 

"HCL did look at Lodestone in the past. The company has been on sale for quite a while." But Pratt counters, saying that Lodestone is a 'high quality' company. 

"Lodestone has people in Brazil, Singapore and China where Infosys Consulting was not present. So, it's a very good fit for Infosys." 

"We don't really compete with HCL Axon in the market. Ours is a business transformation-led company and theirs is a more technology-led company," said Pratt, a former partner at consultancy Deloitte. 

Infosys will keep Lodestone as a separate subsidiary for a year and then look to integrate it with its consulting business, he said. 

"We'll first incubate, coordinate and then integrate Lodestone. The compensation levels and human resources structures are very different in consulting. 

We'll follow the same strategy for Lodestone," said Pratt, who established the consulting practice for Infosys in 2004. Consulting and system integration contribute $2 billion a year for Infosys and employ about 30,000 people. 

"The billing rates in some practices in Infosys Consulting are as high as $230 per hour per employee. It's very high-end consulting that we do unlike many others."