Efforts for better price inching along: Wipro

Rupee may continue to challenge IT firms

That, and the likelihood that the rupee might continue to strengthen against the dollar, meant there were challenging times ahead, the Bangalore based software services firm' key executives said.

Wipro Limited, a diversified company with IT, consumer care and lighting businesses, makes most of its money from its global IT services business, Wipro Technologies.

"We are out there asking for higher prices," Wipro's vice chairman Vivek Paul said, "but the effort is inching forward."

Asking customers to pay more for similar work wasn't working either: "Like-to-like increase has been tough and there has been only a modest improvement."

New businesses were being tapped for higher prices and some practices, such as testing, yielded higher operating margins for being very offshorable but "not necessarily higher realisation" he said.

Suresh Senapathy, executive vice president - finance, said, the decline in realisation was primarily due to closure of some fixed price projects and shift in customer mix. And, the rupee was reckoned at 43.80 to a dollar for the March quarter as against 45.11 for the December 2004 quarter. The company had outstanding hedges of $503 million spread over the next four quarters, Senapathy said.

Operating margins for the March quarter were 25.3 per cent, a decrease sequentially of 0.8 percentage and an increase year on year of 1.6 percentage.

"We were able to broadly maintain profitability at gross margin levels, despite the lower price realisation and currency appreciation, through higher utilisation, increased proportion of offshore projects and operational improvements," he said.

That the company continued to "invest in the future" resulted in "an increase in the G&A (general and administrative) cost as a proportion of our revenues," he said. On the upside, said Sudip Banerjee, president, enterprise solutions, customers were seeking more "higher end work, involving development as against maintenance."

Application development and maintenance in verticals such as telecom and finance brings in the lion's share of revenues for the company.

Greater engagement of customers was also reflected by a 9 per cent increase in the contribution to revenues by the firm's top 10 clients and "double digit sequential growth in 22 of our top 50 clients," he said.

Technology infrastructure management and package implementation were other winners, though the latter dipped in sequential growth.

Consulting, which was repositioned across verticals rather than as "pure play", contributed five per cent to revenues of Wipro Technologies. As stand alone its contribution dipped to 1 per cent as against 2 per cent in the previous quarter.

Earlier, Azim Premji, chairman of Wipro said the firm would continue its strategic investment in business process outsourcing (BPO). The company obtained permission during the quarter to change the name of its BPO business, Wipro Spectramind Limited, to Wipro BPO Solutions Limited.

The BPO business will also be merged with Wipro Limited "in a bid to offer customers a more integrated service," Raman Roy, chief executive officer of the BPO business said.

That 38 per cent of the BPO business comes from existing clients of Wipro Technologies is a pointer to customers seeking multiple services and competencies, Roy said.

That the BPO business grew 3 per cent sequentially during the quarter as against 9 per cent the previous quarter was "anticipated", Roy said, "because of the transformation we are taking it through to greater integration with the company."

Spectramind, largely a call centre business, was also increasing the share of "non voice work in line with customer expectations" he said.