New CEO has his task cut out as Wipro just about meets Q3 growth estimates

IT service major Wipro’s CEO-designate Abid Neemuchwala plans delegation of more power to his leadership team, diversity in human resources and a prompt response to customers besides revamping the key project execution function. “We will be more empowered on the frontline, faster in responding to our customers and employees. We will spot and grow talent within. There will be more diversity of people and ideas. These will be some of the changes,” Neemuchwala said about his plans for the company at a press conference in Bangalore. “We will need to crank up our execution engine and that is what I will focus on,” he said.

Neemuchwala, former BPO services head of TCS who joined Wipro in March last year as COO, will take over as CEO on February 1. He, however, did not delve into details of his plan. “I do have a well-thought out ambition. I will share it when I will be ready,” he said.

Neemuchwala has his task cut out as Wipro is still struggling to catch up with the industry average growth and fares below par in banking and financial services and insurance segment, a key business vertical for Indian IT service providers. “Any transformation takes a little time. I would give it a few quarters,” he said.

Wipro largely met its own expectation for the October-December quarter with revenue from IT services growing 1.4 per cent sequentially and 6.3 per cent year on year at $1.838 million, roughly meeting its forecast of $1.84 billion for the three-month period. Its larger competitors Infosys and TCS reported a year-on-year growth of 8.5 per cent and 5.5 per cent at $2.41 billion and $4.5 billion, respectively. Infosys posted a 0.6 per cent growth on quarter-on-quarter while TCS reported a marginal sequential decline. Wipro’s quarterly profit from IT services was $375 million. Wipro said it expects revenue from IT services business in the range of $1.875 billion to $1.912 billion for the quarter ending March.

“Change is going to be driven by new businesses such as digital and security. We are leading security business and in digital we made early start,” said TK Kurien, the outgoing CEO who will become executive vice chairman after his five-year-long stint at the helm at Wipro.

“We have defined everything we can do (in the past five years). We took a big bet on energy and utility. It would have been a terrific result if energy prices remained stable. Having said that, our competitors have done well in BFSI. We couldn’t do much as the market dynamics in the segment have been set a decade ago,” he said. The crude oil price plummeted from around $120 a barrel to around $30 a barrel, forcing oil companies to cut IT spending. “When oil prices rebound, we will benefit. We will be in a far better place than we are now,” Kurien said.

“The increased visa fee in the key market US will have a multi-million dollar impact on the company’s profits,” said Jatin Dalal, CFO.

“Mobility is part of our business and there is a cost associated with it. We will build it as part of our cost structure. We will localise (hiring) more in the US,” said Neemuchwala and hinted at opening more centres in the US.

Wipro recently completed the acquisition of Germany-based Cellent AG and signed a deal to acquire Viteos, an IT firm that serves the alternative investment management industry in the US.

About its venture capital investments Neemuchwala said the technology offering of some of the investee companies could be “clubbed into our overall services and we have been successful at that.” Wipro has invested in four US-based tech companies from a $100 million fund. About investing in India, Kurien said “In enterprise IT, we have not seen too many great players coming out of India,” adding that, “You will see one or two (investments) from our side.”