Wipro's Rishad Premji, CEO Delaporte to go for major change to boost growth

Over the past many years, the one thing that has remained constant at Wipro is frequent changes at the top. So much so that there are few in the analyst community who even jokingly say it’s always “work in progress” at the Bengaluru-based company.

Starting from its experiment with joint CEOs in 2008 to being one of the first Indian IT services company to appoint a non-Indian CEO earlier this year, Wipro has taken many bold decisions. Some have succeeded, some not. The joint-CEO model, for example, is considered a big failure. Since then, the company has seen five CEOs (including the joint CEOs). Every time, the company has appointed a new CEO, whether from within such as T K Kurien or Abidali Neemuchwala, whom Wipro hired from TCS, all of them have come with their own ideas, setting up different deadlines to execute and achieve them.

Thierry Delaporte, a French national and a former top executive at Capgemini, is no exception. Last week, Wipro announced a new structure and operating model with several changes at the top almost six months after Delaporte took charge as the CEO in May (see table “The new order”). This time, though, many believe that Delaporte has opted for a major upheaval rather than cosmetic surgery.

Expectedly, the changes have seen exits of some leaders, but Delaporte has made his intent clear. “The organisational change is substantial … let’s not underestimate it,” he said during an analysts’ meet this week, apparently the first by the company in five years. “Strategic priority now will be to drive and accelerate growth in specific markets, specific sectors.”

Wipro probably has contributed more leaders to India’s technology industry in the early days than any other company. But over the years, the company had grown top-heavy with all the accompanying rigidities, said an industry analyst requesting anonymity. In fact, it is one of the few companies that sees senior leaders leaving after reaching retirement age. In IT firms, senior leaders tend to opt out and, say, set up a VC firm or an investment advisory ahead of that deadline.

What the company has announced under Delaporte involves streamlining the structure and making the company more outward-oriented. “Thierry is dramatically simplifying the Wipro organisation, removing layers of management and moving the decision-making closer to geographies and customers. This reorganisation is clearly intended to speed decision-making and increase accountability at Wipro,” said Peter Bendor-Samuel, founder & CEO at management consulting firm Everest Group.

The earlier Wipro structure was fairly complex with multiple Strategic Business Units (SBUs), Service Lines and geographical units, often causing overlaps in profit and loss (P&L) responsibilities. The rationale then was explained as allowing faster decision-making at the local level.

In the changed environment, Executive Chairman Rishad Premji and CEO & MD Delaporte have created four Strategic Market Units (SMUs) focused on four regions, and two business lines to be known as GBLs, or global business lines. The North American market, which accounts for 59 per cent of Wipro’s revenues, the Americas has been split into two SMUs. America 1 cover verticals such as healthcare and medical devices, consumer goods and life sciences, retail, transportation and services and communication among others. America 2 will cover the large verticals such as banking and insurance, manufacturing, hi-tech, energy and utilities, apart from a geography that is Canada. The rest of the world will comprise two SMUs — Europe and Asia Pacific, Middle East and Africa, or APMEA, which means emerging markets can get their due share of attention.

In terms of GBLs, the company has brought together Consulting, Wipro Digital, Engineering and R&D under a unit called iDEAS (Integrated Digital, Engineering & Application Services). The second unit, Icore, will house the business process management unit and cyber security, which require different types of attention and investments. A chief growth officer will also be appointed.

Overall, the company hopes the exercise would result in a reduction of P&L responsibilities to nearly a fifth, though it is not yet clear how it will impact employee equilibrium. But the changes has strong backing from the management and the promoters. “This is a new and exciting chapter in our journey and I have never felt more confident or excited about our future,” said Rishad Premji. “You will see an obsession for growth,…[and] much stronger external market orientation.”

This is important since Wipro has been an underperformer company among the tier-I providers despite favourable market conditions. In the fiscal ended March 31, 2020, for example, Wipro’s revenue growth at 4.2 per cent was the least when compared with TCS’ 7.15 per cent and Infosys’ 9.81 per cent. Even HCL Technologies reported a 17 per cent topline growth. The company’s margin at 18.1 per cent was also the lowest in the peer group.

Part of Wipro’s underperformance is attributable to external factors such as high exposure to verticals such as healthcare and energy and utilities (E&U) which have seen significant pressure, but a good part also has to do with instability at the top. “Frequent leadership changes are not healthy as these do not contribute to a steady strategy and gameplan,” said Hansa Iyengar, principal analyst with Omdia (formerly Ovum). “Delaporte will also be under tremendous pressure to improve margins and profitability, and shedding the middle bulge will help boost profits in the near term.”

Though the Indian IT outsourcing services industry has remained resilient during the Covid-19 induced crisis, the post-pandemic phase will be driven by the rising need for clients to rapidly digitise their front-end and backend operations to come to terms with the new environment. Indian IT services firms are bracing themselves to tap these opportunities with a renewed focus and differentiated strategies. Given this, Wipro does not want to stay a laggard. In fact, the company has already shown a marked improvement in its performance in the past two quarters, signing large deals and increasing the pace of M&As. 

The market, however, does not want to bet on the company yet. “Even as the street called out incipient signs of a turnaround on multiple instances, it just turned false positives in the hindsight. Accordingly, investors will be more cautious this time and wait for execution evidence,” said a recent note by ICICI Securities.