The country’s third largest software services exporter Wipro has sent ripples across the industry with the recent change in leadership. What Azim Premji has said about the sudden appointment of TK Kurien as the new CEO of the Information Technology business and Executive Director of Wipro is, with the market exploding now, there is a need for a simpler and leaner organization. Seeing its disappointing performance and competition from peers who have shown faster growth in the IT sector, it’s quite clear that the company has made the major reshuffle in its leadership hoping to regain its lost ground.
According to Wipro’s earlier model, the company had several departments targeting the same customers for different kinds of business. But from now on, there will be only one axis. The new structure will have “mini CEOs” with increased risk-taking and decision-making powers, heading different vertical businesses. All functions of sales, consulting, BPO and technical services such as software testing will have to align themselves more closely with these mini CEOs. Now the question is, how effective this fresh structure would be and how it will justify the decision of dumping its joint CEOs, Girish Paranjpe and Suresh Vaswani?
While all the top tier IT companies in India have shown strong recovery from the recession in recent quarters, Wipro has been a relative underperformer, both in revenue and in operating margins in past one year. Analysts said that Wipro’s low exposure to the banking, financial services and insurance (BFSI) segment has been the major reason for its slower growth. This is one thing that Chairman Azim Premji himself admitted. Premji said that companies like Cognizant which have been growing fast have a 50-55 percent revenue contribution from BFSI, while Wipro’s stands at around 27 percent.
Increased attrition level is another issue that the company faced during the third quarter this fiscal. The IT services business lost 1,092 software engineers and the business process outsourcing services lost 226 people during the quarter under review. The impact of such a high attrition quarter-on-quarter was, however, neutralized by the IT products business, which added 731 people in the third quarter. In the world of different challenges, how the new CEO will address the problem the attrition is another significant thing to be noticed. According to some of the employees, both Paranjpe and Vaswani have been the face of Wipro and if the leadership changes then other things will change too. So, chances are there that if those new changes are not favourable for the employees, it will lead to more attrition in the company.
Wipro’s net profit for the third quarter of fiscal year 2011 grew 3.4 percent on quarter-on-quarter basis. The number stood at 1,319 crore as against 1,276 crore reported last quarter. Its consolidated revenues too went up to 7,829 crore from 7,731 crore and dollar denominated global IT revenues rose 5.6 percent to $1.34 billion (QoQ). Despite this growth, the company still lagged behind. The numbers were below street expectations with Wipro posting a mere 1.26 percent sequential growth in revenues, while net profit grew marginally by 2.6 percent.
All said and discussed, we should not forget the fact that Wipro has had a good history of leadership changes at senior level. From Vivek Paul to Ashok Soota, Sudip Nandi, Sudip Banerjee and even Subrato Bagchi left Wipro for their good reasons. But the company tided over the changes smoothly, thanks to the charisma of Premji. But there is a bit more curiosity in the leadership change this time. If you look at Infosys, there is a clear cut Leadership model practiced. The stake holders see a lack of clarity on this front today. As per the Wipro policy, a Chairman has to step down at 67. That leaves perhaps only a couple of years for Premji, aged 65. Is Premji laying the foundation for his son to take over? The mini CEO structure and other structural changes point to definitely a simpler path for Rishad Premji to lead when he takes over. Rishad’s role also has widened with much less public attention. Last September, he was made Chief Strategic Officer. Now he will additionally look at Wipro’s M&A’s. Will TK Kurien also follow the same fate of the CEO duos? This is something to wait and watch.