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Wipro (WPRO)
Technology
Notes from discussions with the Joint CEO. We spoke to Girish Paranjape, Wipro’s
joint CEO, to get his thoughts on the company’s revenue underperformance versus peers
and steps to address the challenge. He cited two key reasons for underperformance –
(1) Wipro was late in anticipating the strength and sustainable nature of demand
recovery and hence, lagged peers in grabbing demand, and (2) client mix issues. He
expects revenue underperformance to narrow going forward.
Excessive caution underpins underperformance versus peers
Wipro’s joint CEO attributed the company’s revenue underperformance versus peers (TCS, Infosys,
and CTS) over the past few quarters to the following factors:
Undue caution in reading the strength and nature of demand recovery. Macro
uncertainties and the short-term nature of projects at the beginning of demand recovery
(Sep/Oct 2009) kept Wipro skeptical about the strength as well as sustainable nature of
demand recovery, especially on the discretionary side. Girish indicated that Wipro underappreciated
the flow-through downstream business potential from the short-term tactical
projects and hence did not take some of these projects on – a mistake, in hindsight, as the
competitors who took up these projects are now reaping volume surge benefits.
Under-prepared fulfillment engine. A direct result of the poor reading of demand strength
was Wipro’s relative under-preparedness on the supply side – bench, lateral strength, etc.
Moreover, by the time the company decided to correct course on these aspects, attrition had
spiked up across the industry, making things more challenging.
Client mix. Wipro also attributes its underperformance to its relatively weaker client portfolio
mix, from a growth perspective. The initial phase of growth was nearly completely driven by
large BFS clients, and M&A opportunities, areas where Wipro’s weaker client mix led to revenue
underperformance.
Focused on course correction
Even as the company sees a couple of weak spots in its top-10 portfolio (telecom OEMs) relative to
peers, it expects demand environment to remain strong with more discretionary project starts in
1HCY11E. The company, in Azim Premji’s words echoed by Girish, is ‘putting all its muscle’ to
bridge revenue underperformance. With a more positive approach to micro demand strength,
better prepared supply side, and more focused client-facing teams, Wipro expects to compete on
an even keel and grab its fair share (if not more) of demand in CY2011E. The company also
expects its substantial investments in Consulting to start paying dividends in the near future.
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