Wipro Technologies met its revenue guidance in the face of the global economic crisis, but is maintaining its usual cautious approach for the quarters ahead. The company, which has major exposure to BFSI and telecom sector clients which together fetch 55 per cent of its topline, is now eyeing more transformational contracts. Joint CEOs of the company - Suresh Vaswani and Girish Paranjape - spoke to Bibhu Ranjan Mishra about the outlook ahead:
Given the global financial environment, is it safe to say that the challenges are only short term for the industry?
Vaswani: It is difficult to predict the short-term economic challenges given the happenings of the last 30 days. In the medium and long-term, though, the prospects look very good as the demand will also be very good.
As you mentioned, BFSI spending has taken a beating. Is the impact more perceptible now?
Paranjape: Frankly, we don't know what is going to happen. Even in the last quarter we were worried about what would happen in the BFSI segment, but thanks to the good work we have done with our clients, we did well in the last quarter. But it is very difficult to say how things will shape up into the third quarter, unless a degree of stability comes back to the market.
The credit crunch has started percolating down to allied sectors like manufacturing, retail and pharma.
Paranjape: Yes, this will have some impact on other sectors, but more of a consequential nature. Clients in these sectors may cut back on their budgets somewhere, or there might be some kind of delay in decision making. But nothing fundamental will change -- it is going to be business as usual.
It seems decision-making is taking longer now, compared to the last quarter?
Paranjape: It is not endless, but extended, yes. If somebody was taking decisions in three months, they will now take decisions in six months or even nine.
Vaswani: We have to see what's happening over the next two or three weeks, how the overall economy is shaping up and how industrial environment is shaping up. That's exactly what all the customers are talking about. Big decisions may get slowed down.
Are customers becoming demanding in such an environment?
Vaswani: Customers are becoming demanding in the sense that they are looking for different things -- looking for bigger change and bigger transformation. Customers are doing what is absolutely necessary to be done and there is a sense of urgency also.
Why are companies talking about transformational deals right now?
Paranjape: Because this is top of mind for clients. On the one hand, they want to be cost-efficient and do things in a more planned and efficient manner. On the other, they also want to transform their operations.
But what's new about all this? Wasn't the concept in existence when the idea of outsourcing took shape?
Paranjape: Well, in the initial stages, transformation was not uppermost on people's minds. All they wanted was efficiency and cost reduction. Having done that, we are now moving to the next stage.
How much of an impact of the current financial contagion have you witnessed on the telecom sector?
Vaswani: Telecom was impacted in any case in the past with all the consolidation taking place. Now the economic situation has posed another challenge. However, we are contesting some big opportunities in the telecom service provider segment. If we win, things will start looking very rosy. Interesting growth opportunities lie ahead for us, globally, in India and the Middle East.
What portion of your revenues in the telecom sector comes from telecom service providers?
Paranjape: Because of our history, revenue from service providers is much more on the telecom equipment side. But if you look at growth rate, it will be the other way round in three years. The telecom service provider space will be a far bigger opportunity for us. In any case, these things are kind of converging because many of the equipment vendors themselves are now moving towards providing back office operations for service providers.
Are clients coming in to ask for renegotiation of contracts?
Paranjape: This is very sporadic, and not something mainstream. There have been a few cases of pricing renegotiations. It is more client-specific, and not confined to any specific sector.
Are you going in for more fixed price contracts?
Vaswani: Instead of fixed price, we feel that outcome-based service contracts are better from the customer's point of view because they give more accountability to the service provider. This is better for a service provider because he constantly looks at innovating to deliver better service to the customers at a lower (better) cost. Obviously, we want to drive fixed price contracts and move away from staff augmentation contracts. We want to drive more non-linearity by using a lot more tools and frameworks in our delivery model.
Will more work be offshored thanks to cost reduction by clients and service providers?
Paranjape: It will definitely help both customers and service providers. We are not talking of pricing, but cost. When we talk of cost, it's a very straightforward conversation. If I move some of the work offshore, that is less cost for you and better for me. That is how we can create a win-win situation.
