Giving Slowdown a Soft Snub

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How

does Azim Premji, who once held the mantle of being the richest Indian in the

world, react to the much-talked about slowdown? The 56-year-old chairman of

Wipro is all abrasion and caution, "I love the downturn because it makes me

look at the fundamentals. And for the same simple reason, I would like to be

paranoid about it, even exaggerate it."

Premji’s approach has ensured good returns for Wipro. The conglomerate grew

by 35% to garner Rs 3,092.2 crore in revenues for the year ended March 2001. But

that growth also takes into account its non-IT divisions. Wipro Technologies,

the group’s bellwether company, grew by a whopping 70%, far ahead of the

industry average. It accounted for 57% of the group’s revenues.

"Growth ahead of the industry average" is all that Premji promises

while projecting the company’s performance in fiscal 2001-02. The policy

regulations of the US market–Wipro being NYSE-listed–don’t permit him to

give a specific figure. And of course, the monster of the slowdown certainly

dances at the back of one’s mind.

Foresight Japan

Wipro established an early presence in Japan, and was quick to see the

potential hurdles–language being a key one. Worse, the staff was wholly
ignorant of the native culture and etiquette. As an Indian company, Wipro was

ill-equipped to deal with the Japanese client–the ‘comfort factor’ was

badly amiss. It invested to remove those barriers. "Today, we have 140

engineers who speak the language; and 100 who read and write it as well,"

says Premji.

The move has started paying off. Currently, Wipro has 100 professionals doing

on-site development in Japan and another 900 working at offshore centers for

Japanese clients. The company operates there through its subsidiary, Japan KK,

established in 1998. Japan accounted for 7% of the company’s overall software

exports in 2000-01, and hopes have been set high for the region in the ensuing

fiscal–the target is 100%, minimum.

Apart from the language-and-culture edge that the company boasts of, what

will yield such a high growth rate in Japan? "We have a tradition of strong

quality processes, which are fundamental to working with the Japanese. Some of

our leading customers in Japan are Daiwa, Mitsubishi, Epson, NEC, Fujitsu, and

Sony."

The company is following a strategy of being geographically diversified in

terms of revenues. "Europe and Japan contributed 35% of our revenue for the

year 2000-01. We expect strong growth in these markets based on the lower base

and our past experience of growth in these regions," says Premji.

Isn’t China a threat?

Interestingly, Premji doesn’t think so. Forget being a threat, if one were

to go by his gut feel, they’re not even competition, though the Philippines

and Malaysia are! Premji is not brushing the Dragon aside–he’s prudent

enough not to do that. But then, the Chinese have a lot of catching up to do, he

feels. They fare miserably on the English language front, and the blockade is

bigger than it appears.

"They have other disadvantages as well," he says. One, they are

still low on the value chain, especially when it comes to software development.

But aren’t they pretty good at springing surprises? And then there are reports

that the Chinese government will be setting up over a 100 IIT-caliber

institutions. A few years down the line, they could suddenly be churning out

thousands of software engineers, ready to take up global development projects at

significantly lower rates. Mass training in the English language has already

been initiated, and a state-controlled mechanism would ensure that results start

showing up soon.

"They are a highly structured and disciplined lot" is all that

Premji will agree to, but that doesn’t budge him from his earlier stand. The

media-shy IT Czar is forthright on this aspect. "Coming up to notch,

including on the language front, will take time. It took us 20 long years to

reach present levels. I don’t see a reason to worry about China in the near

future."

One thing is for sure: Wipro is not likely to be caught unawares when the

Dragon turns its glare at the software export space. The strategy–well that’s

not something one would expect Premji to chat about. Is he toying with the idea

of setting up an operation in China, akin to that in Japan? "No, there’s

no need for that. India still offers the best price-quality-technology

advantage. And this won’t change soon," he says.

Let’s talk India

For

now, Wipro is focusing on India, so far as setting up development facilities is

concerned. The company’s guiding principle here–go where the horsepower is–remains

manpower, manpower, manpower.

So most of the company’s offshore centers are located in India–five of

them to be precise. A sixth will be coming up in Kolkata, with Wipro entering

into an MoU to that effect with the West Bengal government. Wipro has bought 12

acres of land in Kolkata, 50 acres of land in Hyderabad, and announced that a

development center in Mumbai will become operation in phases, starting next

quarter.

So where’s the logic in setting up new development centers in the aftermath

of the US slowdown? Is the answer that Wipro isn’t apprehensive of the

slowdown touching Indian companies? "Indian companies are going to be

benefited by the slowdown because more projects will be outsourced from the

US," says Premji. Does that imply that Indian companies are not feeling the

pinch at all? "Customers are taking longer to take decisions," he

concedes. But then, "the cake remains big, despite the slowdown".

What does the future hold?

Nobody knows, and Premji doesn’t pretend to either. His vision is to make

Wipro a $5-bn organization by 2005, but that’s not a target; he makes it amply

clear.

What of the vision…are Indian companies flexible enough to work their way

around slowdown-like situations? "The process of adjusting to the economic

downturn is slower for an IT services company because the area is more

complex," says Premji.

And how good is Wipro at quickly finding alternative means for growth, when a

given situation or client threatens to bring a sudden drop in its revenues?

Fairly smart, one would admit, going by the General Electric instance. GE is the

company on which Wipro once depended on for 18% of its revenues. The world’s

most respected company, GE is also known for its aggressive bargaining stands.

When it demanded rates that wouldn’t suit Wipro, the latter decided to call it

a day for several projects. Today, GE accounts for just 3% of Wipro’s

revenues, and yet that has not affected the company’s march. Was that about

crisis forecast and management?

Last fiscal, Wipro added another vertical to its global IT business–Telecom

& Internet Service Providers–to provide IT services and solutions to

network-based service providers. The entity contributed 3% to the revenues

during the last quarter.

Wipro Technologies, headed by Vivek Paul, and Wipro Infotech, led by Suresh

Vaswani, continue to be the group’s flagships. Paul continues to operate from

Santa Clara in the US, and his stand on targeting markets other than the US are

well known. "The company will be aggressively making its presence felt and

marketing its services in Europe and Japan," he is reported to have said.

Vaswani is optimistic about Wipro Infotech’s growth. "Domestic market

is showing an increase in operating margins," he says. And where is the

competition going to come from? "Essentially, it will be companies like IBM

that we are watching out for."

Deepak Kumar in New Delhi