Business Today

'No more drastic changes, we need speed now'

twitter-logoGoutam Das and twitter-logoJosey Puliyenthuruthel         Print Edition: Feb 19, 2012

By the end of 2009, as the developed world came out of a recession and large corporations started loosening their purse strings, all the India-based IT service firms were ready for growth. All but Wipro. The Bangalore-based company did not see the tide turning and ceded ground to rivals such as Cognizant.

Slowly, but surely, Wipro chaired by Azim Premji is pulling itself back into the race. In an interview with Goutam Das and Josey Puliyenthuruthel in his wood-and-glass office at the Wipro headquarters in Bangalore, Premji talks about the fightback, how his company needs to make incremental changes next, how he sees Wipro in the future, and the role of his son Rishad. Edited excerpts:


Can you contextualise the change at Wipro?

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We made some major changes in April vis-à-vis reorienting the organisation with focus on the customer. It was really a one-shot deal, which was very large and bold. It took us time to settle in, but less time than would have been conventional. We didn't lose any significant top leadership. I think we managed the change successfully. The organisation is settling in; focus on the customer has significantly increased; our customer ratings have gone up significantly. We are being much more proactive in terms of the large deals; we are adding more domain skills in terms of identifying solutions. Now, we have really started focusing on operations. We want to squeeze out the real factory concept in delivery and build strong efficiencies, strong standardisations. It is differentiation in the front end and standardisation in the back end, so that people have time to focus on their jobs and not spend time firefighting all the time. Or try to build expertise in 20 different places when they could build it in one place. So I think things are moving well, which is also reflected in analyst calls on us. People are getting back confidence. I am very satisfied with the progress we are making. I think we have got a new energy in the organisation.

We are far more agile now. And we are making yes-no calls. It is 'say and do' at the same time, and not just 'say and don't do'. I think we are building a much stronger execution culture, with weekly calls, fortnightly calls, monthly calls. It is not that we are not delegating; it is just that we want to get the routine of execution. And you don't get the routine of execution until you measure all the time. That's all good from a customer's point of view. Our attrition rates have come down; they will come down significantly this quarter also. We are already seeing the trends. Part of it is reflection of the market situation - there is insecurity in the market. People have over hired over the past nine months anticipating much larger growth for next year. That would not be the reality now with further slowdown coming in. We could get more employee stability.

In terms of the transformation, what you are talking about is fairly fundamental, in terms of a DNA change. Where are you on the journey and what is its logical conclusion?
There is no logical conclusion. It is always changing. Customer requirements are always changing, the world is always changing and the competition is always changing. We are moving well and we have enough agility to reposition ourselves as demands change. But the whole thing is focused on customer centricity: how you service a customer better, and build lasting partnerships with the customer, and be the preferred source for the customer. The whole thing is focused on how you give customers satisfaction. The second major area of focus is employees. How do you get more employee satisfaction? How do you want to make people build a career with you? Are they competitive in terms of their own standards?

Wipro wants to increase the sales and marketing spend by about two percentage points. The sales engine will become stronger in the entire system. Do you see that as a drastic change or a small directional one?
It is a bet of what your money priority is. You can put that two per cent into higher operating margins. We are just deciding that the growth is more important that getting that two per cent extra squeeze out in operating margins. It is a very clear commitment of the organisation - we are committing to growth. And we are willing to invest for growth, because growth does not come without investment.

Wipro was one of the earliest companies to see the 2009 slowdown coming and prepare for it. However, it could not predict the recovery and the pace of it. What exactly went wrong in market-watching?
I think we got too internally focused on trying to get costs out. We didn't spend enough time in the field to see that there was a resurgence coming back in the market. More important, we missed the transformation which took place in the way customers work. Previous to the slowdown, it was all reacting to request for proposals (RFPs). We did a good job responding to RFPs, running around the customer, giving a low price, working on cost takeouts. Where the model has changed is that customers are more focused on revenue now. They all want to grow the top line. They have become smart enough to be able to manage the cost now. The recession taught them to drive productivity, manage costs. Plus, the global delivery model has now become a non-differentiator.

If you see us, IBM, or Accenture, and if you compare service-to-service lines, global delivery is almost comparable with them and us. If you say 70 per cent headcount in emerging countries, they are probably currently at 45-50 per cent headcount in emerging countries. But if you separate out the consultancy business, separate out the high-end domain business, which they do, the ratios would be broadly within five to ten per cent comparable. So cost is no longer a differentiator. The differentiator is how variable a business model you can offer them in terms of the way you pay - pay per outcome, do you build variability in platforms like cloud, are you leading edge in new technologies like mobility, analytics, cloud? Are you able to understand the needs of the consumer and configure a solution which gives him some transformation value? His discretionary budgets are probably reduced. But his transformation budgets, primarily if they are liked to variability, are getting support from top management. We missed that transition. We missed getting our act together, though we saw it a long time back - getting that integrated customer engagement model of a customer engagement manager for large customers. As a result, large customers were just not growing. Now, we have five customers more than a $100 million. Seven months ago, we had one customer more than a $100 million. Today, we even have one customer more than $200 million.

When it comes to transformational deals, do you swing the deal because these decisions are taken outside the CIO's office?
Vertical heads, SBU heads, the CEO does it. I don't. I build relationships at the top management level. My meetings are limited to CEOs, not below them now. However, the operating CEO plays a very critical part - in this case, Kurien. Because when the orders are large and complex, I think the other side wants to touch and feel. I don't try to swing a deal because once you are sucked into it, you are on the road 200 days a year.
 
How often do you travel these days?
I am down to about 60-65 nights a year from the 100 I did earlier.
 
Are you happy with T.K. Kurien's work so far?
Absolutely.

Can you put Kurien's management style versus that of other CEOs in context? You can sense the high level of energy and confidence in T.K....
In fairness to our previous two CEOs, they were more reflective, more management by consensus. There were more studies by task forces. But the whole cycle of decision-making got delayed. We lost time. T.K. is willing to make the big swings. We don't have the luxury of over debate and incremental changes. Now we can afford to do incremental changes because we have got the momentum going. We don't have to do any drastic changes now. We require some amount of stability with our employees also. But we will be fine tuning as we go along.

What is your view about the leadership pipeline? Some people have left the organisation over the past year. Has that hurt the firm in any way?
I think the leadership pipeline is strong. Some of the exits have given younger people the chance to assume positions of higher leadership. Would we like to make it stronger? Yes. We are selectively recruiting from outside - areas where they bring in special skills, experience, or track record - because we need speed now. And we can't learn it by trial and error. That is working out well without causing too much disruption. Fortunately for us, unlike some of our other colleagues, we are less 'monkish' - we have always inducted a certain percentage of our senior management from outside just to keep the culture more porous.

What is Rishad's career roadmap in Wipro?
Let him show results. He is doing well with us. But he is like any other senior management member. There is no partiality. He is more privileged from the point of view of ownership. But we are distinct in terms of ownership and management. He will not succeed Kurien as CEO.

Will you be open to an external candidate for the CEO role in the future?
We like to take internal candidates. The risk factor with an external candidate is too high. It was okay doing it in Vivek Paul's time - we were $300 million. Now we are an organisation of $7.5 billion and 125,000 employees. It is too risky.

We wanted to understand the GE influence on Wipro. Vivek Paul, T.K. and Rishad all have a background in GE. Does the company have an influence on the overall structure, its leadership model, the business model of Wipro?
We are a partner of 20 years with GE in Wipro GE Healthcare Systems, the joint venture we have with them. It is a disciplined company, very strong in execution, very strong in execution rhythm, very fundamental in strategy. But it is more coincidental that Vivek came from there - he came from there because he was in Wipro GE and he was talent we knew. Kurien was in GE for a short while. He has had a much longer tenure in Wipro, and before that he was in TVS. Rishad was in GE for four years. But he got there on merit in a finance manager's programme. Whatever lessons we have learnt from GE, we have used well. We have learnt lessons from HP as well, from Microsoft, and lots of other companies. GE gets prominence because you associate some of our hiring with GE.

The joint venture is one of the most successful in India...
It is the most successful, not one of them. It is the most successful joint venture anywhere in the world. GE is not a company with a culture of joint ventures, whatever they may say at the top. They want to own everything and drive everything. But we have contributed. In the smaller markets, the rural markets, we are really emphasising Wipro GE now. Here, we have a strong presence because of our IT business. It is something like 300 places of service in India.

In terms of the corporate outlook, are you going to continue your strategy of having consumer products and infrastructure engineering under the same umbrella?
Yes, until we do a $15-20 billion acquisition in consumer products. Then it may be different (laughs). We are very committed to that business - emotionally committed - and they are also successful businesses. What we have been reasonably successful at is telling investors. They tend to be very specialised. IT and ITES investors get confused; they don't understand it. What we have convinced them is that they are all sitting on cash. Why are you over bothered? In hydraulics cylinders, we are the No 1 in the world today.

People are confused because there is no synergy with the IT business.
There are synergy in certain functional positions; synergy in the brand.

What are you going to do with the products part of the business, the hardware business? Is that strategic in the present scheme of things, particularly when hardware prices are falling every year?
Because we do system integration (SI) projects, it is strategic. Whether we need to manufacture a PC, that's not strategic. We can brand a PC. But it is important from the point of view of SI projects. We couldn't have won Telenor, Aircel, GMR Delhi Airport without a strong hardware backbone. What are we doing there? Part of the sales are bought by us and sold. Part of it is passed through; it gets billed directly to the customer. We show it as a separate segment so that we don't confuse operating margins. I think it is working well.

But you always have choices. Leadership bandwidth is going into something that is better deployed elsewhere. Even from that perspective, are IT hardware, hydraulics and consumer working well for you?

Our corporate top management is spending 80 per cent of its time on IT because of the size of the business. We are able to focus well. The leadership of our consumer, infrastructure engineering business is self-sufficient. And they are very strong.

Which businesses will you invest in with more than a billion dollars in cash?
We will invest in growing the IT business and the consumer business.

It's a little fuzzy. Eighty per cent of your money comes from IT. And one of them is very expensive to build.
But we are using the cash flow of the consumer business. Past five years, the business has been cash flow neutral. Money used in acquisitions - money we have spent is the money we have earned. The business has good cash flows.

If we were to paint the IT landscape in broad brushstrokes, TCS has been known for execution, Infosys for marketing and consulting, and Wipro for technology. Five to seven years from now, what would Wipro's naksha be like in terms of scale and scope?
Technology continues to be our strength. We should be able to leverage it better. I don't think we are doing as well in the technology business as we should be doing. We are putting a lot of horsepower behind it now. I think that is our unique differentiator in terms of strength, because of our history of starting off in R&D services, versus starting off with the CIO, which our competition did. I think five to seven years from today, we will obviously be larger, will be growing much ahead of the market - we would like to be growing the fastest. We would like to have much higher ratings with the customer; do much more transformational projects; have a stronger footprint in emerging countries. The fact is that the growth of IT in the Americas and Europe is going to get more and more saturated, and be down to the five to seven per cent growth rate. Emerging markets are where the talent is. You can't hire talent in Europe and America because it's so scarce.

I think consultancy will be a leading edge for our organisation. We are not as high-profile as Infosys, because Infosys went through their phase of Infosys Consulting, when they built their profile. But I believe the quality of work that we do is superior. This is a judgement I am making; not based on actual facts. Like the quality of work that Accenture does is superior to us, because they have got more depth of knowledge and more domain understanding. One has to acknowledge that. We are putting out best on some emerging technologies and you will see a lot of moves which are important in that -- whether it be mobility, cloud, analytics, or green IT. Our eco-energy business is an important differentiator. Now, we are starting to get expertise and scale.

You had once talked about Wipro being among the top five tech services providers in the world. That sounded an enormous stretch. Can you explain?
What we said is what we meant. We are going to drive that kind of growth. It is doable if you do some acquisitions to supplement your organic growth. We will articulate this clearly in the next four to six weeks. The whole planning process this year is a two- or three-hour discussion with each customer engagement manager. There are 66 of them. Seventy per cent of the plan is really working with the person at the grassroots level in the field.

What does the industry look like in 2012/13? Do you have any early visibility in your dialogue with customers?
It looks better than what the macroeconomics are. The reason is that the India story has got very high legitimacy now. We are giving value for money. The customer is willing to spend on technology. In terms of the CEO budget, technology is high on his priority. He is willing to spend what he spent last year or more if he gets value. So I think the industry growth rates next year will not be very different from this year except India. The country is a function of our leadership making decisions. So we are feeling comfortable. We are willing to bet on high growth rates next year and commit resources up front. We are hiring resources now; otherwise how can we get the growth next year?

There is a significant amount of philanthropy that you do. What would you want the world to remember Azim Premji as? How does this giving come about?
It is the right thing to do. How much can a human being consume? Tell me that. I am not a person who believes in the legacy of leaving all the wealth to the next generation, and the next generation, and the next generation. What better way to husband wealth in terms of fiduciary responsibility than through a charitable foundation which is irrevocable? This is the best legacy you can leave, isn't it? I am finding that the government is so weak in execution. See what a mess they made of our public distribution system, of public and primary education. Thirty per cent of boys and girls in standard V can't read and write. It is really frightening. There are six million teachers; one million never attend school.

What is the update on Azim Premji University?
It has taken off well. We have got first-rate professors. We are so pleased. We have got 40 professors on board. We have hired from all over, including the IIMs. We have about five expatriates now who are willing to come to India for three years, at India salaries with housing. We are doing two courses now. We have 94 students. We started with two masters in teaching and community development. Next year, our target is to take in 400. We are taking them from smaller towns; we are taking them with field experience in teaching or development. About 35 per cent are women. Over 80 per cent of them are on scholarships. Our fees account for 10 per cent of our operating expenses. It is all funded by the income of the endowment.

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