‘$30/40 million deals are our sweet spot'

K. VENKATASUBRAMANIAN | Updated on September 11, 2011

Mr Rajan Kohli, CMO, IT Business, Wipro

Top-tier IT company Wipro has had a turbulent time, as it grapples with slower growth when compared to its peers. Talking to Business Line, Rajan Kohli CMO, IT Business, Wipro, discusses the way forward and how the company is positioned to tackle the current difficult macro-environment. Excerpts:

The macro-environment in the US and Europe is challenging, though it may not be as bad as 2008. Are your clients cutting IT spends, asking for pricing reductions and slowing decisions?

Not yet. Customers are concerned, especially the BFSI customers, but we have not yet seen them reduce budgets. They are in a period of deciding the future course of action. But the reaction to this (recent happenings in US, Eurozone) may not be to cut costs. Customers would focus on tackling the situation by focussing more on risk mitigation, better streamlining of processes and so on. In CY11, we are not seeing any immediate impact. But budgets for CY12 would get finalised only by October or November, so we are waiting and watching.

Over the past several quarters, Wipro has had anaemic volume growth and has lagged behind peers in terms of revenue growth. Was it a conscious strategy to be selective?

We are definitely doing two things from a focus point of view. One, we are focussing on specific set of customers and targeting key accounts more. Even in choosing prospective clients, we are careful about whom we are going after. The type of services and contracts are also changing. So, over the last 2-3 years, we have not done any staff augmentation type of projects, we have increased focus on fixed-price contracts. We are strategically looking at higher value and higher outcome based business, even if that compromises on our topline growth. But that is not to say we will not chase volumes, we will , but not at the cost of quality of revenues. Has the earlier episode in 2008, when one of your key clients asked for govt bailout made you more cautious?

We are definitely doing a lot of risk mitigation now. So when this news of US debt rating downgrade came out, our internal risk cell did a complete ground-up analysis to arrive at the value at risk, to understand the risk associated with each of our accounts.

Large clients of IT services companies are engaging in the process of vendor-rationalisation. Has Wipro been a net gainer as a result?

It actually depends from customer to customer. In some of the accounts, historically outsourcing was done to largely to MNC software majors. Many of these contracts are coming for renewal. In those cases, we are actually gaining as customers are deliberately going to look for other options and are breaking down these projects into smaller ones. Even if we get part of the contract, it is going to be a net-net benefit.

Customers don't choose by name or size. They do it based on performance and capabilities.

Wipro has historically been more focussed on manufacturing and telecom and less on BFSI. But your vertical-mix is changing rapidly in favour of BFSI. Will the other segments catch up?

Even over the last 3-5 years, our BFSI segment has grown at par with all our competitors. So the focus on this vertical has been there for a long period of time. Over the last 8 years, it has doubled to contribute to 26 percent of our overall revenues. We expect the momentum in the vertical to sustain. The problems in telecom are more macro-industrial and cyclical. The IT spending within telecom industry has been shrinking. Also some companies that were there five years ago do not even exist now! So, telecom, media etc. have not had the same kind of growth and in the short term, we think it will remain that way. But in the medium to long-term, because of increased thrust by companies on leveraging mobile technologies, we expect it to pick up. In manufacturing, we see growth from the automotive segment also in the industrial process space. Hi-tech is a mixed bag. But overall, manufacturing, especially in the US, is picking up.

In terms of your service-mix, your application development and maintenance as a proportion of revenues has been lower. Does it make you less immune to discretionary spends on other key services?

Our services, other than ADM, are bigger than others. Like BPO, IMS and analytics etc are larger, that makes us quite immune. Having said that, we are also very much a part of discretionary spends of clients in areas such as IMS.

There has been a slowing of large transformational deals. Will that continue?

Most of the large deals seen in the market are not transformational in nature. They are several-years' application maintenance contracts and ones which have a large asset component in them. Many a time $30-40 million deals are the ones that are transformational, which is our sweet spot in terms of size. We are selective on the type of large deals that we will do.

Some of your peers (such as Cognizant) are snapping at your heels. How are you positioning yourself to deal with this?

We want a bigger share of the accounts that we play in. The focus is on getting more and more from our existing clients. You can't chase volume, you have to chase value and volumes will come with value.

Is the management restructuring complete?

The management re-structuring is complete. Now, if some people still leave here and there and new people takeover, it cannot be called restructuring. The new business unit heads have taken charge and we have already seen some large deal wins in the previous quarter. I am sure we will begin to see the effect on revenues in the coming quarters.

Published on September 11, 2011

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