Bangalore: India’s third-biggest software services exporter Wipro Ltd is restructuring business units aimed at simplifying decision-making to better compete with rivals.
It has redefined three of its strategic business units (SBUs) as healthcare, pharma and life sciences; manufacturing and hi-tech; and energy and utilities. Three of its other units —technology, media and telecom; financial services; and retail and transportation have been left unchanged.
The number of business segments remain unchanged at six. The changes will be effective from 1 April.
The restructuring follows Wipro’s 21 January announcement to replace joint chief executive officers (CEO), Girish S. Paranjpe and Suresh Vaswani, with a single CEO, T.K. Kurien, after the firm posted disappointing earnings numbers in the three months ended 31 December.
The joint CEO structure was better suited to dealing with the economic slump, chairman Azim Premji said on 21 January. Given that growth had returned, a “simpler, leaner” structure was required, he had said. Premji said the “portfolio challenge” faced by Wipro, where fast-growing areas such as banking, financial services and insurance (BFSI), and healthcare, were under-represented in its businesses compared with larger rivals Tata Consultancy Services Ltd and Infosys Technologies Ltd. He had also spoken about missing the upswing in these segments, while rivals had taken advantage of it.
Graphic: Yogesh Kumar/Mint
Wipro, which met third quarter profit forecasts with a 10% rise, has been struggling to keep up with its larger competitors in winning big contracts. Wipro had forecast IT services revenue of $1.38 billion (Rs 6,292.8 crore) to $1.41 billion for the fiscal fourth quarter.
New Jersey-based Cognizant Technology Solutions Corp., which has three quarters of its staff based in India and posted a revenue of $1.31 billion for the December quarter, forecast a 26% revenue growth in 2011. This brings it within touching distance of Wipro.
The impact of the restructuring cannot be predicted right away, although bringing aligned businesses together will help with research and development and operational synergies, said Abhishek Shindadkar, an analyst tracking the firm at ICICI Securities Ltd.
“The revenue from each of these verticals will go up as a result of the recombination, but for an apple-to-apple comparison of the final impact, we will have to wait,” he said.
Wipro has been typically overweight on the technology segment that includes telecom and semiconductors, which contributes 24% to its revenue.
As part of the restructuring, the firm will aim to bring in a larger share of revenue from growth sectors such as BFSI and healthcare.
Healthcare, pharma and life sciences will now be led by Sangita Singh, who previously headed the enterprise application services business, The Economic Times reported on Monday.
This unit will consolidate under it what was earlier the healthcare and pharma segment with the life sciences and services division. Healthcare and pharmaceuticals added 8% to Wipro’s revenue in the December quarter.
The metals and minerals unit will be clubbed with energy and utilities. Energy and utilities contribute about 9.9% to Wipro’s revenue, and will continue to be headed by Anand Padmanabhan.
The manufacturing segment, which contributes about 15%, will be clubbed with hi-tech to create a new unit to leverage the synergies between the two, the firm said.
“The model that we have created now is centred on the customer and designed for swift, impeccable execution and single-point accountability,” Kurien said in a statement on Monday.
Reuters contributed to this story.