IT sector not looking at doomsday scenario: Wipro CEO Abidali Neemuchwala
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Bengaluru: Wipro chief executive officer Abidali Neemuchwala, who is based out of Dallas, US, could not fly down to Bengaluru when the company declared its second- quarter earnings last week because of a prior engagement.
However, in a telephone interview with Mint, Neemuchwala said that Wipro is well-positioned and on its way to make itself a future-ready firm.
The former Tata Consultancy Services Ltd veteran, who joined the company in April 2015 as the chief operating officer and took over as the CEO in February this year, has taken steps to improve Wipro’s delivery and sales capabilities.
Due to slow growth and declining profitability, and the way technology is changing, many commentators and analysts have questioned the Indian IT outsourcing industry and are pronouncing the death of Indian IT. What are your thoughts?
I would not agree with the death of Indian IT. Indian IT has always had the resilience or ability to transform itself. It has the flexibility, the nimble-footedness. One of our industry’s core competencies has been our ability to train a large number of people. Now is the market changing? The answer is definitely yes. So what has made us successful in the past—is that going to make us successful in the future? The answer is certainly no. Will change be required? The answer is yes. Will Wipro be able to undergo that change? Absolutely yes. I am absolutely confident. Are we well-positioned as a company? The answer is yes. This is because I have always believed Wipro as a company is entrepreneurial. We are also very technology-centric. We have made investments in digital technologies, like Internet of Things and cloud. We are making the organisation simple and nimble-footed. We are democratising the operating structure where every single unit can run with that. We started hyper automation and now we are ahead of our plan. So going forward times for Wipro will be better than in the past and I wouldn’t call it a doomsday scenario.
It’s now been over eight months and two full quarters with you as CEO. What has been, say, two heartening features for you as the boss and issues which have disappointed you, which you believe could have made your company do better?
Two most heartening things which I have seen in the eight months are that our strategy and ambition resonates and percolates to employees and customers. This is very important for any CEO. Simply, because no single CEO can do magic in a company unless the CEO has the power of the organisation. And at the same time making employees believe that their future is tied to the future of the company. I am very glad that we have been able to do this and that is a very heartening thing for me. We had a very stable CEO transition (on 1 February Neemuchwala was appointed as CEO and his predecessor T.K. Kurien was appointed executive vice-chairman). We have a very stable top management team. The kind of changes we wanted to do at the top, we have been able to do without losing the senior leadership talent pool. The second thing is that as we started articulating our strategy, our customers are lapping up to this strategy. The newly-acquired and newly-built capabilities like Wipro Digital or Wipro Consulting or our hyper automation journey combined with Wipro Holmes, or our investments through Wipro ventures... we are able to take these capabilities to each one of our customers.
On the other hand, the speed of change which is required and the speed of change a knowledge-based organisation can undergo is something which I would be happier if we could do it faster. Yes, we are an over 170,000-people-strong company. But the pace of change, the training, the way we are changing our processes, all of it I wish I could get done faster. It’s not to say I’m dissatisfied with the pace but it would be heartening if we could bring this change faster than what we are doing.
Two-full quarters as CEO, and you have embarked on a journey by articulating six broad themes. Given these measures you have started, the management has said in the past that a complete turnaround will take time. Will it be fair to ask if the company can come back or say end March 2018 with industry-matching growth or Nasscom-projected growth numbers?
I’m always careful of putting a timeline and so I believe it is not unreasonable to expect this (by coming to industry-matching growth number by March 2018). I feel very confident and I see green shoots coming in a more sustainable manner. I’m very hopeful that four-five quarters is a good time for a very visible outcome or metric for an industry-leading growth or margin.
One of the things which is of concern now for many is that despite making three buyouts, with a combined revenue of $340 million, in the last financial year, and this fourth buyout of Appirio, Wipro is not able to record impressive growth. So on the merger and acquisition (M&A) front, how are you going to make sure Wipro is able to integrate buyouts well and scale up business?
I think there are two parts. First is having a bold and risk taking ability to buy. And second is staying the course and making these acquisitions successful. We have shown that we certainly have the former. Now, it’s time to focus on the latter. So take for example, our acquisition of DesignIt (Wipro Ltd acquired Denmark-based DesignIt for $95 million in July last year). When we acquired it, we had 300 designers. Now we have 450 designers. That company on its own has never seen that kind of explosive growth. I feel very confident that we have the right balance where we don’t give our buyouts such a tight embrace that we squeeze the company. We keep these buyouts in our shadow but not alone. I believe we have learnt from our past mistakes. Now HealthPlan Services (Wipro spent $460 million to buy HealthPlan Services in February this year) is a recent buyout but I do see very early synergy wins there. Although right now because of US elections and some issues in the Healthcare Payer market, there is a level of uncertainty. Cellent (Wipro paid $78 million in December last year to buy German firm Cellent) is taking a bit longer than the other two but that is because of cultural issues. Also, I’m very focused that every business unit should not have more than one acquisition to integrate and digest. So Cellent is under manufacturing and Continental Europe. Appirio will sit with business applications. DesignIt sits with digital.
These four buyouts bring over $550 million in revenue. So clearly M&A is going to play a big part of your ambitious target of becoming a $20 billion firm by 2020. What percentage of revenue do you expect to generate from M&A?
We don’t break out organic or inorganic revenue growth because it can be a bit misleading. But directionally, I can tell you that M&A will not be insignificant. It will be substantial and not small. The ticket size you are seeing is already bold from the Indian IT perspective. But we will not acquire to buy revenue or scale.