For the first time in many quarters, Wipro has given a lower guidance for the coming (fourth) quarter as compared to the previous quarter. Giving a lower guidance indicates that bad days are ahead for the IT industry. In an interview with Bibhu Ranjan Mishra, the Joint CEOs of the Bangalore-headquartered company — Suresh Vaswani and Girish Paranjape — speaks about the difficult environment. Excerpts:
Please explain the lower guidance.
Vaswani: It’s lower guidance in the sense that it’s lower than the previous quarter (Q3). I cannot remember when this happened last time. But frankly speaking, it’s reflective of the current economic environment. It’s reflective of what we see today. If you really look at a full year perspective, the guidance we have given at a growth of 17-18 per cent year-on-year, is clearly an industry-leading performance.
Paranjape: I don’t think that in the 2009 budget, anyone will start spending out of the gate. They will wait and watch and see how the economy performs before they start spending big money.
This is the early part of January and many clients would have finalised their budgets. What message are you getting?
Paranjape: Yes, for many clients, January heralds the start of a new fiscal year. They have decided the budget for the new fiscal year. But the message we are getting is that they are unwilling to spend too much money in the early part of the new year. They are saying — let’s wait and watch and let’s wait till things settle down. So we know that there is more downside than upside in the coming quarter.
Are they saying they may go slow in their technology spending?
Paranjape: Most clients say they will review the budget on a quarterly basis and will only go for such projects what they feel are most essential. So the finalisation of the budget is limited to quarter to quarter, and even within the quarter, they are not willing to spend so much in the first few weeks.
You always maintain you have a healthy pipeline. Is it not indicative enough to say that things are going to be better in coming days?
Vaswani: Not really. Most of the guidance is given on how much you are going to deliver in this quarter. The deals that are booked in this quarter determines the next two or three quarters. It’s really based on what we see on the current deliveries. We have got some new customers, and some customers have ramped down.
Of course, one element while giving the guidance is how many we are going to finalise over the next two or three months and how many of that will give us billing in this quarter. Some customers have scaled down, but we have won many new deals. But new deals take time to bring revenue for the company.
Sectorwise, some stabilisation seems to be returning in the BFSI sector, while telecom continues to be the pain area...
Paranjape: I think, at the structural level, consolidation has happened in BFSI. Whatever consolidation had to happen has already happened. I don’t think there will be any more failure of banks. Now they are still trying to repair their balancesheet. They are saying that their first priority is to build up the reserve and capital.
In telecom space, lots of bad news coming in the telecom equipment vendor space. The equipment vendors generally have not been doing well for the last few years and now that it has come down further because of the liquidity crisis. There is always some risks of further consolidation hanging in this sector.
It seems you are chasing smaller deals rather than larger ones?
Vaswani: We are going for all kinds of deals whether small or large. Certainly, we are going for our existing customers and looking at every opportunities in the existing customers. We are also looking at newer transformation opportunities. So this only determines the futures.
What is the sort of growth will we be seeing from Wipro going forward?
Vaswani: Times are tough. Expecting 30-35 per cent growth what we have got earlier, is unrealistic. But times are not continuously going to be tough. I am sure that the market is going to recover at some point of time. So as far as we are concerned, as long as we are delivering industry leading performance and as long as we are building capabilities for the future, we are fine.
Has the Satyam incident forced industry to make more disclosures?
Paranjape: We have done that. This time we have not only given full details about where the money (cash) is, we have given details about our investment in mutual fund etc. We have also given mandate to the external auditors to directly go to the banks and mutual funds and confirm without our intervention. Anyway our auditors were always doing this in our case.
Are you approaching any of the clients of Satyam?
Paranjape: We have quite a few common clients with Satyam. But we are not soliciting any. But when clients get worried about their business continuity, we are saying that we will step in to make sure that the business does not get affected. Because it is our interest to not to earn bad name for the Indian industry. Last quarter, you had a drop in the number of employees.
Does it mean you may not look at freshers in future as there are enough experienced people available in the job market?
Paranjape: Certain jobs can be done only by freshers. So there is no point in hiring more experienced people for that. It is easy to manage freshers; they are more trainable. And even we sometimes get better calibre of people by recruiting freshers. So it makes more sense to hire freshers.
