The telecom and product engineering solutions, or PES, business accounts for a third of the revenue for Wipro Technologies, the global software services arm of soap-to-software maker Wipro Ltd, but the growth of this business trails the company average.
With nearly 13,000 engineers, among the largest independent R&D team that builds products for customers, the PES business had seen business slowing in the past two years from global telecom equipment vendors that have seen a flurry of mergers between them. With the mergers of Alcatel SA with Lucent Technologies Inc. and AT&T Inc. with Bell South Corp., Wipro expects business to gradually grow in new areas such as fourth generation phone networks and WiMax, a wide area broad band protocol, said Sudip Nandy, chief executive officer of the PES division, in an interview with Mint.
Nandy?was until recently the chief strategy officer of Wipro Technologies. Edited excerpts:
Revenue growth from PES division has been trailing the company growth for the past few years. Are you planning any new strategies to stimulate growth?
A flattish growth in verticals such as telecom equipment vendor and semiconductor and systems solutions, where we have large presence, has resulted in sluggish growth for overall PES business. While the semiconductor industry is cyclical in nature, the business from telecom has dried up due to the consolidation of large vendors.
In other verticals such as aerospace, defence, industrial automation, medical electronics and consumer electronics, we are seeing growth above company average.
In telecom and semiconductor verticals, we are seeing a start of slow recovery. As silicon vendors rationalize their product strategy, and as the design centre of gravity moves from the western world to Asia, we see outsourcing happening and expect better growth in the coming quarters. It may not be a rapid step-up in performance. The recently acquired design subsidiary of Oki in Singapore gives us capabilities in radio (and related technologies) and access to the Asia-Pacific market with many Chinese designers to tap into the consumer electronics market.
Business from telecom service providers is growing faster compared with telecom equipment vendors.
Will telecom and semiconductor clients continue to be big revenue generators?
Yes. We want to add the consulting piece to our product design capabilities and expand the range of offerings as part of product management work such as market scanning and market comparison, and services such as tech documentation, tech training and also down stream services such as customer support. We are trying to create a product company mindset and a product company capability in a services company
Does that mean you’ll structure the deals on integrated pricing?
To start with, we will not do integrated pricing, but sell discrete services. The consulting for the product is sold to the product manager. Development is sold to the head of engineering. Some part of that is sold to the manufacturer. We won’t do end-to-end now. We have a whole lot of intellectual property, which we plan to expand two- or threefold so that we have 30-40% of the design that the companies want to have ready.
We will take the risk-reward model, wherein we will not charge the normal rates but lower. If the customer is successful, we will get the higher money upside. The royalty model needs more time to take off.
Would you have to build new skills to expand your offerings, especially in consulting?
We have a small consulting group that we acquired from NerveWire few years ago that’s focused on the product services architecture, headquartered in Boston. This high-end consulting team of 30 is growing rapidly. So far, this consulting group was focused on the US, but now starting to focus on Europe and Japan in the embedded space.
How much revenues do you earn from aerospace and defence?
Revenues from defence are small but the big revenues will start flowing from mid-2009 to end-2009. We work with customers such as Lockheed Martin Corp. and Northrop Grumman Corp. We currently have three tie-ups and will announce few more. Automotive and medical electronics are relatively bigger practices for us. Automotive contributes less than 10% of our business and growing thrice at our growth rates.