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Changing of the guard at Wipro as CEO designate sets out strategic stall

Stuart Lauchlan Profile picture for user slauchlan January 18, 2016
Summary:
Wipro's new CEO is waiting in the wings and there's a fair bit of work to be done as the outsourcing giant turns in essentially flat numbers.

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TK Kurien

Wipro hasn't been as fortunate as we would have liked.

That was the headline message from new Wipro CEO-designate Abidali Neemuchwala, who steps up to the top job next month as he set out his stall with the Indian media yesterday.

He talks about Wipro’s ongoing, long-time transition, which he argues is now a few quarters away from completion, with plans for diversification in order to broaden the portfolio. He also argues:

Technology is coming back into IT. Wipro is very well positioned.

But all that is to come. For now, the firm just turned in some OK numbers, essentially flat, leaving it still trailing rivals Infosys and TCS.

Profit for the three months ended 31 December was 22.3 billion rupees ($329 million,) against 21.93 billion rupees a year earlier. Revenue was up 6.4% to 128.6 billion rupees.

As with Infosys and TCS, there’s much talk of the outsourcing giant’s digital direction of travel from outgoing CEO TK Kurien:

From establishing digital commerce platform to reimagining customer ongoing processes and enabling omni-channel sales service, we are delivering tremendous result for our customers.

Kurien points to seven digital deals in the past quarter as validation that the digital focus is paying off:

We are working with a leading South American bank on designing an entirely new banking concept and experience, targeting to create the next-generation banking experience for customers, who are usually not attracted to traditional banking offerings anymore.

For a major German telecommunication brand, we are creating future smart service experiences using artificial intelligence and other emerging technologies. We are also making significant progress around our focus program to train around 10,000 employees in digital technologies.

A key differentiator for Wipro is the HOLMES cognitive intelligence platform offering, argues Kurien. There are now 12 customers for this, five of which signed up in the last three months of 2015, whole others are now in production mode:

For instance, the Know Your Customer compliance engagement with one of the world's leading banks concluded successfully and is now moving into production.

On a less upbeat note, Kurien admits that the firm’s customer landscape has shifted and that leaves a lot to do:

If you look at the $100 million accounts, a year ago we had, in our top 11 accounts, we had four accounts from energy and utilities. That this quarter is down to one. So there has been a change in the portfolio itself because energy and utilities have really taken a hit. And then what has happened is that, if you look at the top five accounts, the top five accounts have grown by roughly about 9%. Now there's a lot of work to do.

Budgets are also coming under renewed pressure, he adds:

We typically see people taking costs out of the run budget, which typically means increased pressure on, not on ticket pricing, but on the overall deal values. That is something that I expect that we'll see during the year.

The budgets themselves are being reallocated to a couple of areas, If you look at broadly two areas, I would say security, we're seeing significant reallocation into, and we're also seeing significant reallocation into digital. Digital more in terms of front-to-back simplification, that's where the real focus is coming in. So both these areas I see opportunities.

The way ahead

Tapping into those opportunities is going to be Neemuchwala’s job and he clearly has some firm ideas of where to pitch Wipro’s strengths. That includes taking a look at the firm’s focus in vertical markets:

From a verticals perspective, when I look at it, we have a very strong vertical in energy and utilities. We have a very strong communications vertical. We do pretty well in our manufacturing and technology vertical. We have an opportunity to gain more clients and as a percentage of our total revenue in the banking, financial services and insurance vertical, and those are the areas I would obviously focus on.

Part of this re-examination will be driven by macro-economic forces, of course:

I think we don't like the growth numbers that we have right now and we definitely have the opportunity to execute on a better growth, including our environment. But there are areas which are our strengths. Energy and utilities is an area of great strength and we are also quite exposed to that area. And we've still not seen the bottom if we look at it from an oil prices perspective. So there is a level of uncertainty over there.

But I think we have multiple levers across our portfolio and the idea would be to diversify our portfolio so that, while there will be business cycles in verticals, in geographies, or in specific services, still we would be able to deliver growth. That will be my endeavor from a strategic perspective.

From a technology perspective, there are certain areas that have particular appeal, particularly the as-a-Service space reinvention of infrastructure management:

The fundamental nature of the infrastructure services business is changing. It is becoming more an as-a-Service utility-based business. Cloud is fundamentally transforming that entire business. What we would call a ‘software-defined-everything’ is coming into play. So there has been a shift in the market.

The good news is we are investing ahead in all of these areas. We are able to provide cloud service because we have had a data center and we have partnerships with all the major cloud providers. We have developed a very good offering and we have piloted on a couple of very large, significant customers who actually went live on Infrastructure-as-a-Service and in this holiday season a record volume of transactions were processed on that customer, completely on a utility basis.

But one thing that is needed is a more agile and simplified organization that can both respond faster to customer needs and react to shortening technology innovation cycles. This is underway, says Neemuchwala:

The whole idea of simplification is to be able to increase the velocity of our responsiveness to our customers and to our employees. I already see some green shoots in those areas where we have been able to respond faster to our customers' needs and be more agile as an organization.

The technology cycles, which used to run for about five to seven years in the past, are shrinking to four to two years I would say. Hence the ability to be nimble or almost like a start-up to be able to transform ourselves and help our customers transform at speed is key.

My take

Neemuchwala has a big job on his hands. Nine months since joining Wipro, he’s clearly spent his time well in terms of formulating some clear ideas on the organization, its strengths and weaknesses. That’s going to mean taking risks and moving the firm into new portfolio offerings, as well as increasing its skin in the as-a-Service game.

His biggest challenge though could come from the need to put some fire back in the belly of the firm. He’s talked about being a general who will lead from the front. In many respects he needs to imprint himself on the culture in the same way that Vishal Sikka has sought to do at Infosys. As an ‘outsider’, he’s got a head start here when it comes to doing things differently, but he needs to execute on this in the first months of his reign.

Disclosure - at time of writing, Infosys is a premier partner of diginomica.

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