Navigating Turmoil in the Global Technology-services Sector
For Girish Paranjpe, co-CEO of India’s Wipro Technologies, the best response to economic crisis was reinvestment: in people, green technology, and expansion.
Wipro Technologies, one of India’s largest and fastest-growing providers of information technology and engineering services, consulting, and business process outsourcing, has become a global market leader. But it didn’t start out that way. Wipro was founded in 1947 as a producer of hydrogenated cooking oils, laundry soap, and tin containers. In the 1970s, the company set up a division to manufacture hydraulic and pneumatic cylinders. In 1977, when the Indian government forced IBM out of the country, Wipro — then led by Chairman Azim H. Premji, who was also the founder’s son — became one of India’s first local computer makers. Later, as it moved from computer making to its current status as an outsourcing company, Wipro grew dramatically. Its revenues, which were under US$1 billion in 2002, reached $6 billion in fiscal year 2009 with profits of $1.2 billion, and its workforce is now made up of more than 100,000 people worldwide.
In April 2008, Premji appointed two of the company’s longtime senior executives, Girish Paranjpe and Suresh Vaswani, to share the chief executive role for the businesses globally. Five months later, the collapse of Lehman Brothers and the crisis in the global financial system shook Wipro to the core. (At the time, the company’s global growth included projects it was working on for Lehman in New York, London, and Tokyo.) At a recent meeting with s+b in New York, Paranjpe reflected on that period and the opportunities the turmoil brought: opportunities for greater efficiency, enhanced employee skills, revenue growth, and innovation.
S+B: Much of Wipro’s past business growth has been driven by the growth ambitions of its customers. How is Wipro repositioning itself as clients become more focused on containing and cutting costs?
PARANJPE: Before the financial crisis, clients were raising their budgets 8 to 10 percent every year. Our only question to clients was, “What else can we do for you?” Until the events of September 2008, we were probably having our strongest quarter ever.
The financial meltdown hit us very suddenly. For three quarters in a row, we had reductions in business. At one point we had almost 12,000 to 13,000 people on the bench. We had no idea how long this whole downturn was going to last and how strong the recovery would be when it came, or even whether it would come.
But despite all kinds of pressures to cut costs, we didn’t lay people off. Instead, we developed a retraining strategy to bring people up to speed on newer technologies. Before then, we had felt investing in the continuous training of our workforce was important; now we instituted a program to push people to upgrade themselves technologically by one level every year. We ran this program for more than 2,000 people on the bench. Each month, they had two weeks off; the other two weeks they went through formal training to upgrade their skills. This was not just training; people had to pass an exam to go to the next level.
The program is still in place today. People who come into our organization in their early 20s move through various technical levels for the next eight years. If they are coders, they may learn project management and architecture skills. After those eight years, they may either go into a specialist team or become project managers.
S+B: How did the tougher economic environment affect the long-term demand for Wipro’s services?
PARANJPE: Our clients have a better sense of their needs. They see more value in what they’re getting from us, and they trust us more. Since the financial meltdown, we are more aware of our strengths and what we need to develop. We are having much deeper conversations about our outcomes and our clients’ desires rather than focusing only on renegotiating the price of our services. The question now is how can we help them achieve a better outcome and enable them to be more competitive.
We do an annual customer satisfaction survey of between 2,000 and 3,000 client managers and executives. This is done by a third party on our behalf, and respondents can choose to fill it out anonymously. One of the key highlights of the survey that came back a month ago was that the level of trust has actually gone up. We believe this is because our clients see us supporting them in times of adversity without cutting back on our service levels or backing away from our commitments. Clients are also more willing to sign multiyear, full-scope engagements. In some ways, this is good for us because it makes us more accountable, and it helps us become more efficiency oriented.
Growth issues have come back into focus not only for us, but for our clients. They all realize that they have to come up with a value proposition for the emerging markets, because at least for the next few years, that’s where most of their growth will come from. We have a lot of credibility in India, because this is our home territory. For example, consider the growth that is taking place in wireless communications. Fifteen years ago in India, telecom penetration was 3.6 million phone connections. This year, we are pushing 500 million, and all that growth is based on wireless connectivity extending into rural India.
We are designing new products for this market. As you go into the hinterland, there is a need for more rugged products that can withstand the heat, dust, and power fluctuations. A typical signal relay base station in India also needs to be half the weight and volume of products designed for developed countries. And the price point has to be lower. So we are talking about designs for base stations with less weight, less volume, and at one-fifth the price. We have a mandate for a client right now to engineer one of these products from the ground up; we have 18 months to build and design this new product.
S+B: Four years ago Wipro set a goal to become carbon neutral by 2014. In what ways has that led to business process or product innovation?
PARANJPE: It has definitely exposed process improvement ideas we would not have thought of otherwise. One study revealed that our weekend power consumption was almost 80 percent of our weekday power consumption. It turned out that the bulk of that power consumption was coming out of labs we run for clients, where there is heavy-duty equipment that needs to be run 24 hours a day, with air-conditioning that needs to be on 24 hours, too. It took us a year, but we figured out how to create a smart meter to shut the equipment off to reduce weekend energy use from 80 percent to 50 percent without affecting the quality of the service to the client. This has also created a whole new line of business for us, because we are starting to provide power consumption monitoring services for our clients. Just as we streamline your IT infrastructure, we can do the same for your energy infrastructure.
S+B: How has the cost arbitrage value proposition for outsourcing evolved since Wipro got into this business?
PARANJPE: When we started, we were pioneers in doing the same work better and at lower cost than our clients could do themselves, but the reality is that everybody, including large global systems integrators, has followed our model. We don’t have a monopoly on hiring people in India. Anybody can do that. What differentiates us now is not the cost of people, but the processes and tools we design for them to use. Fifteen years ago all our clients wanted us to replicate their tools and processes in our premises in India, China, or wherever. A couple of years ago, we realized we have better tools and processes than many others. We began offering them a shared-services center so that they could get the benefit of the concentration of intellectual knowledge but did not have to pay for a dedicated facility. Plus, they only have to pay for what they use. This has dramatically changed our value proposition to clients and changed our competitive position.
S+B: How do you see China emerging as a new challenge in your industry?
PARANJPE: The reality is that 1.3 billion people amount to something. They have a tradition of engineering and applying themselves to problems. And the home market is sufficiently large for them to build scale. Currently, most of their IT industry is really concentrated on serving their home market; they’re also relatively big in Japan and in other parts of Asia near them. But I’m sure they’ll become major competitors.
At Wipro, we are setting up centers in China to serve global clients with Chinese operations and to cater to the local demand. Last year we set up a global services delivery center in Chengdu in southwest China. This center is targeted for customers in the U.S., Europe, and other markets outside India. We are also planning to expand our offices there, so that we can build scale to serve local Chinese clients as well.
S+B: Wipro is one of the very few companies with a shared CEO position. What was the rationale for setting it up that way?
PARANJPE: It had a lot to do with our breadth of services. For many of our competitors, software development is their core business. They tend to serve a more narrow set of clients in a more concentrated set of geographies than we do. Of course, a big part of our work is in software development as well, but we do a lot on the engineering side — helping our clients to develop new products — and we provide more business process outsourcing.
This diversity in our business portfolio was one reason we felt we needed more management bandwidth at the top. The other reason for having two CEOs is growth. If we were in a steady-state industry, we might have thought differently. We have been doing this for two and a half years now, and we think it has been working well.
S+B: How do you divide up responsibilities between yourself and Suresh Vaswani?
PARANJPE: We established our approach and agenda jointly from the beginning, and we didn’t jump into the arrangement. We took our time thinking about how it should work. We came up with the operating rules and mechanisms together, and we have stuck to those rules fairly religiously. And there is our relationship: There is no substitute for human chemistry. Because we have known each other for a long time, and our relationship is a good one, we can make this work. I don’t think it could work for everyone. Many companies choose this path for the wrong reasons, particularly when it is the result of a compromise in a merger or an acquisition.
Some decisions are jointly owned: strategy, all people issues, anything to do with the brand, and, of course, the financial outcomes. We are a listed company, and we go to the board together every quarter. In addition, we end up meeting either informally or formally at least once a month with the chairman.
We divided up other matters — those related to business units, services, and functions — so that each of us can focus on specific operational issues and client relationships. I am responsible for media, telecom, and finance. Suresh looks after utilities, energy, retail, manufacturing, health, and government businesses. He also runs business process outsourcing, testing, and infrastructure management, while I run the consulting and R&D businesses across all industry units.
It helps a lot to have two of us available to talk to line-of-business heads or to the CEOs of our clients. For example, I interact with telecom CEOs or CFOs, and Suresh talks to his counterparts in healthcare. Because we end up interfacing more continuously with the same set of clients, we have richer conversations with them, we know the issues in their industries better, and we are more aware of what our competitors are doing.
S+B: Are there challenges in having two of you speaking for the firm, especially with the media?
PARANJPE: Because we have always said that we have one view on strategy, human resources, and the brand, I think we have easily handled most of the media relations and other external communication. In the first few months, we did have to be much more on guard, to make sure that people didn’t misread what each of us said. Because we are individuals, we do say things in different ways. I think over the last two years we have become much more relaxed about what we say and how we say it, which makes it easier.
S+B: What do you think is the most significant trend in the global technology-services business?
PARANJPE: Our world is coalescing around the five to 10 big full-service players. At least five years ago we thought this would happen, which is why we have established capabilities in areas from consulting to systems integration, business process outsourcing, and product engineering. Asia is where most of the action is going to be, and we think we are uniquely positioned to be a partner of choice to the global clients that want to grow there.
- Vikas Sehgal is a partner with Booz & Company based in Chicago. Working with the global engineered products and services team, he specializes in emerging-markets strategy, product strategy, engineering globalization, and policy formulation.
- Ann Graham is the editorial director of Human Potential Accounting Ltd., a U.K.-based consulting firm, and its online library and network, HubCap Digital. She is a former deputy editor of strategy+business.