T K Kurien has hit the ground running at Wipro, but he still has a long way to go.
It’s not often that a CEO compares his company to a “caterpillar that has been satisfied with a leaf” for far too long. T K Kurien, the new chief executive officer of Wipro Technologies, doesn’t mind such plain speaking.
Kurien has enough reasons for trying to fast-track the caterpillar’s transformation to a butterfly. Wipro has been unable to take advantage of a recovery in demand for outsourcing services in recent quarters. And, experts say it’s because of the company’s limited exposure to the fast-growing finance and healthcare sectors. While bigger rivals — Tata Consultancy Services (TCS) and Infosys Technologies have — posted strong growth in business volumes from these sectors, Wipro depended on the telecom sector, which grew at a slower pace, to drive its recovery.
Wipro’s bid to attract top clients has, thus, taken some hard knocks of late, compared to what its peers have achieved. For instance, the top client contribution to Wipro’s revenue went down marginally to 2.5 per cent in the fourth quarter of 2009-10, from 2.7 per cent in the first quarter. The share of the top-five clients also went down to 10.5 per cent from 11.3 per cent in the corresponding period the previous year.
Compare this with TCS, which improved its overall top client contribution to 8.2 per cent from 5.7 per cent. The picture becomes brighter in the case of top-five clients – to 21.8 per cent from 19.4 per cent in the comparable period. Infosys, too, has a similar story.
Kurien, who took over last month after Wipro snapped its three-year experiment with a co-CEO model, acknowledges the challenges that India’s third-largest software services company faces. In an interview with Business Standard, Kurien agrees that he is excited about the future, but it’s also a “scary thought”.
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“I must say I have not done anything like this before. We have an employee base of over 100,000. Managing such a large number of people can scare you. But, I look at it as a huge opportunity,” he says.
While he has been responsible for turning around Wipro’s business process outsourcing (BPO) unit (over the 2004-2008 period), its telecom business unit and the consulting arm of the company, Kurien is not resting on his past laurels. “With the size of Wipro and the presence, it is a massive opportunity. You have to decide where you want to play and where you don’t want to play. I think it’s the second part that is much more difficult than the first one,” he says.
He is also quick to say that he will not share the company’s strategy on where it does not want to play. But, the immediate priority is to focus more on “customer intimacy, mining the existing client base and be part of the segments that have hyper growth potential”.
Kurien says that while going for new customers may be a great idea, serving the existing client base better is equally important. “Wipro has a great relationship with clients. But, we need to grow and expand this,” he adds.
The first thing Kurien has done is going in for a major organisational shake-up to more effectively address demand for outsourcing services. The company said it was realigning its operations into six business units. This would be a move to a bolder, simpler and more agile organisational structure, in line with a change in business environment. The changes will be effective from April 1.
But how will the current restructuring help the company grow? Kurien believes, first, the restructuring will take care of internal inconsistencies. Second, the company will now have a much more tightly-managed marketing team and a focused solutions-management unit.
“Our service lines have to transform themselves from execution engines to delivering value to customers. By collapsing some of the verticals, we are now in a better position to add value. Also, the new sales focus will mean that customers will have a single team to talk to. In Wipro’s old format, any additional project to an existing client would have been handled by two sets of team,” he explains.
Other than the six verticals, Wipro has also added new horizontal offering across the verticals. These will include data analytic, media and connected infrastructure.
Wipro has also changed its go-to-market approach, which is now based on the market maturity and economies of scale. In the US and the European Union, the sales teams would be aligned to strategy business unit/service line. This would simplify the structure and provide a single-point interface to clients. Client engagement managers across the globe, including APAC, will be fully aligned to strategic business units.
Further, to have a consistent sales and account management process, sales CRM and sales competencies, there will be one person accountable for defining the sales operations globally.
Similarly, emerging markets will be managed under a country-focused structure. This will include Latin America, Canada, France, Germany & Asia Pacific (including Japan and China).
Kurien is also aware that in order to maintain Wipro’s position in the pecking order (Cognizant is closing in fast), he will have to focus on verticals the company has been slow in. “I do not think Wipro’s strategy went wrong. I think the issue was that we primarily missed the growth curve, as we were not present in certain areas that witnessed hyper growth.”
So does this mean Wipro will also gear its presence in the financial sector by getting a products portfolio? “No, we will not get into products. It’s not in our DNA. But the restructuring will focus on the banking and financial services sector. We are going out aggressively to get a larger pie of this volume growth,” he adds.
Market analysts are of the opinion that while Kurien might be right in assessing the symptoms that plague Wipro, it still remains to be seen how well he can execute his strategy.
“Kurien has already said that the effect of the restructuring will be seen only after three quarters. If you add this to the past eight quarters of underperformance, it will be three years. The other problem is, while Kurien has turned around businesses in the past, these units were small compared to what he has now. Also, the industry has changed significantly. If he tries to do something that is disruptive, Wipro will have to let go of margin growth,” adds another analyst.
Analysts are also of the view that, in the short term, Wipro will lose out to Cognizant. “Will Wipro lose out in the pecking order? The answer is yes. But from an investor point of view, I am more concerned about whether Wipro can track the growth rate that its peers like TCS and Infosys have managed. And, the answer is, again, yes. Wipro should be a 2012-13 surprise story,” he says.
A section of analysts is convinced that Wipro will be back and Kurien is the much-required change. “TCS underwent a similar restructuring. They also had to streamline the sales and marketing team. So, the model that Wipro is trying is a tried and tested one. It has worked for TCS and the company’s performance has been good,” says an analyst with a leading US-based market research firm.
When asked whether this constant comparison with peers (especially Cognizant) bothers him, Kurien says it does bothers him because he has to face analysts every quarter.
“But then, I am comfortable where I am, because I am creating a business that will deliver value. I am not going to be a commodity player. The next couple of years will see Wipro as a true value player, integrating technology with enterprise application,” he says.
The market and Chairman Azim Premji are eagerly waiting for Kurien to walk his talk — fast.