IT Gaints: Wipro Group - A Big Group That Isnt

Wipro is one company. One legal entity. But its structure and
governance are more similar to those of a loose group. Part of the reason is
legacythe consumer care and lighting division, Wipros original business is
still within Wipro Ltdand part of it is because of its now-famous
"string of pearls" acquisition strategy. In fact, Wipro has been the
most prolific acquirer in the last two financial years, acquiring some seven
companies in the IT business alone and getting into a joint venture with one of
the worlds top telecom companies, Motorola.

Hence, it makes a lot of sense to analyze Wipros success in
integrating the acquired entities with the parent for the purpose of evaluation
of Wipros performance as a group. Most of Wipros acquisitions have been in
the last two years. And barring one3D Networks by Wipro Infotechacquisitions
have been for the purpose of acquiring technology skills or domain skills. Both
the size and nature of these acquisitions such as Quantech, Saraware and
RetailBox, are such that integration is not much of an issue.

Success Story

A better indicator would be to evaluate the integration of Wipro BPO,
acquired in 2003 when it was called Spectramind, with Wipro. FY 07 was the
year in which the integration, not in a legal sense of the word but in terms of
building business synergies, was complete. Spectarmind was the largest BPO
company in India at the time of its acquisition and was growing well. TK Kurien,
the CEO who took over from its founder-CEO, the charismatic Raman Roy, however,
started asking some difficult questions in true GE-like fashion (Kurien is a GE
import). The answers convinced him that building a scaleable, efficient model by
platformizing skillsets, a better integration with Wipros IT business and
growing non-voice revenues were the key priorities. Sounds simple today, but at
that time, it meant decelerating growth. He took that hard decision. It is only
last year that the first phase of that integration was complete. Wipro BPO did
lose some steam in growth and ceded the top BPO position among IT services firms
to TCS; but it is now more of an integrated entity within Wipro.

The only other acquisition where the integration would be
equally tough though on a smaller scale would be 3D Networks. Unlike other
acquisitions, 3D Networks was a direct competitor to Wipros network
integration business in India and the Apac. And, the two companies had a very
different reputation: while 3D was perceived as a street-smart firm, Wipros
own reputation has been that of an extremely ethical, long-term player, albeit
slower. Also, the principal networking vendors that they were identified with
were different. It happened in November, and it may be to early to draw
conclusion.

Interestingly, how it plays in the consumer care and lighting
business though on a standalone basis, is not of interest to Dataquest
readersalso has implications for IT business, especially on leadership
issues. Though many analysts have opined that it makes sense for Wipro to get
out of the business, others say Wipro will never exit the business because of
sentimental reasons and also because it is a growing business with fairly
healthy margins of 25%. In fact, Wipro has silenced those who think it may be
looking at exiting the business by making the $246 mn acquisition of
Singapore-based FMCG company, Unza Holdings. However, this has given rise to a
new set of speculations that Wipro may actually hive this business off as a
separate entity. That will, among other things, consolidate the IT business. But
more importantly, it may have some implications for leadership in IT.

Wipro Technologies has not had a full-time CEO since the exit of
Vivek Paul. The fact that chairman Azim Premjis son, Rishad has joined in the
business has also added to the speculations, with some predicting that he may be
given the consumer care and lighting business to grow, and later, take the reins
of the overall group. But all that is pure speculation.

The Year that Was

Last year saw Wipro being able to measure its returns on innovation. With
1,000 people working in innovation, its combined (across service lines)
innovation revenue was already in the excess of 5%.

Like most offshore firms, Wipro Technologies dependence on
application development and maintenance (ADM) came down. Its early focus on
infrastructure services is paying off and Wipro is clearly the leader among
large offshore firms in this area, drawing more than 10% revenue from this area.
Package implementation, of course, like for all others, was a high growth area.
On the flip side, its traditional strength, telecom technology services did show
a slower growth. Among the major customer wins were ITV in the UK and ANA in
Japan. On the global delivery front it set up centers in Romania, Brazil and
Portugal.

In the domestic market, wins included MySAP suite implementation
from Zuari Cements, infrastructure management contracts at HDFC Standard Life
and Oxigen Services and data center and SI contract from Bharti Airtel. Wipro
Infotech announced a joint venture with Dar Al Riyadh Group to tap the fast
growing IT services market of Saudi Arabia. DQ