Wipro ED says 'headwinds we see are primarily from India; business in Q2 will still be tough'

In spite of coming out with a muted guidance, Wipro is optimistic that the next year will be better for the company. In an interview to Business Line, the company’s Executive Director and CEO for IT Business, Mr T.K. Kurien outlined his plans for the future.

Another tough quarter for Wipro. What do you make of the results?

Look at it this way: there is a peak of hope and then you go through the trough of depression. Then you come back out of that into a stable state and that’s where we are now. I think overall from a market perspective, it is a question of how do you perform? In that market if you look at what we have done in the last quarter, we have had headwinds in certain industry segments such as investment banking. Going forward we have guided from 0.3 per cent – 2.3 per cent. The headwinds that we will see there are primarily from India. India has de-grown for us significantly. India in Q2 will still be tough. But we hope that in Q3 there will be a change. In the long-term we are optimistic. I am not talking about long-term merely. Perform in the short-term to survive for the long-term is my motto.

So why are some IT companies doing well and some aren’t?

If you look at the IT sector, it depends on the portfolio that you play in. If you have the right and a strong portfolio, you can ride through tough times. While some parts of IT businesses are getting commoditised, value is where we see a huge growth opportunity. It is not the industries which are important but what customers sitting in these industries do are important.

What are the things that you have identified to adapt to this changing environment?

Going back in the past won't work. You can't change that. But you can learn and do better in the future.

I think it is a question of focus. So, then the question arises, where do you focus? It is a value-versus-volume play. On the one hand you have volumes, which is getting highly commoditised. The only way you can succeed is a huge amount of productivity enhancement from existing levels. The critical element is to build a market and go after it. On the other hand, you have to build value in parallel. If the value is not built, it will come to bite you one day. You have to play in both axes – volume and value.

How has restructuring panned out. It hasn't paid dividends yet, has it?

This is not a short-term game. You cannot change culture in a day. It is a long-term thing. So, what you can do is create organisational agility. If you have an agile organisation, you can react to the market better and that is fundamentally what we did. Are we there yet? Far from it. But am I seeing change. So, the will to compete is extremely high and it is across the board.

Analysts are saying that lack of progress in restructuring could be one of the reasons why guidance and revenues are seeing some sort of a mismatch?

I don't think so. Analysts go by what they see in the past. That is why Warren Buffet is a great investor as he spots trends early and invests on a long-term basis. He sees trends five year out, which lot of us do not.

With the changed environment, what are IT clients telling you as well as the Indian IT sector now?

Get relevant. For years we were on a staff augmentation work. So, we marketed it well and called it all kinds of different things. I think that has changed. Customers are demanding value and if you can't be at the front-end of that value, you will never win. That's our long-term strategy. Our onsite-offshore ratio is changing, our investment in sales and marketing is changing and it is primarily because of that. But the Indian IT story is not over yet. There are still opportunities.

We are also told that CIOs are making less decisions than before.

The balance has moved out of the CIO into business owners. This has accelerated during the past six months.

Why is that?

Two reasons: Customers are saying that it is too important a decision to be left to the CIO alone. Hence business heads are getting more involved even though they do not understand technology significantly but are more concerned with business. This is accelerating cost pressures.

Will there be a change in the way the Indian IT sector does business. By next year, will you see a change in the pecking order?

Yes of course. They have to. As far as pecking order is concerned, depends on what you are going to acquire. If somebody does an acquisition now, it is the first sign of failure.

But some of your peers are looking at acquisitions.

When one company take over another, there is an issue of culture. Some of my Indian peers are looking at acquisitions and if they are making an acquisition now, there will be chaos. Integration is a huge issue. When one service company takes over another, there are cultural issues and if you can't find commonality in culture, it won't work. It will look great in paper but it will be chaotic.

You mean this is not a right time?

Unless you buy IP assets. It's like MacDonalds merging with Burger King and ending up as MacKings. It will never work.

But you have made a lot of acquisitions yourself…

There are some that have worked very well and some have been complete disaster. But I think for an acquisition, you have to be ready to make one and not for sexiness alone.

So what does a company do if it has billions of dollars of cash?

Keep it. You don’t know when you need it. It is the Steve Jobs approach. If the investors see growth, they will be content with the returns. Jobs never issued a divided for years. From that perspective, an acquisition has to be well thought out and it is like marrying somebody. It is not like a Las Vegas wedding.

How much cash do you have? And will you not make an acquisition yourself?

We have $1.3 billion net and $2.3 billion gross. For IP assets and specific geographies such as parts of Europe or Latin America, we will make one. We see opportunities but you got to look for it.



(This article was published on July 24, 2012)
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