Trying Times?

Vivek Paul, the Santa Clara-based president and CEO of Wipro Technologies,

recently addressed a press conference in Delhi. The backdrop was the

announcement of the company’s second quarter results. It posted a 40% increase

in half-yearly revenues to Rs 11 billion and a sequential revenue growth of 10%

quarter-on-quarter.

Paul picked up an instance to illustrate Wipro’s strength in the telecom

domain: "A global telecom company approached us to rewrite its

communications software. Our engineers, after carefully studying the source

code, made exactly four changes in it. And the results were astounding: the

software could now execute 45 instructions per second as against a mere three

instructions per second earlier."

Ironically, Wipro has lost its biggest telecom client–Nortel Networks. The

loss is reflected where it’s dreaded most–in Wipro’s financials. Not

surprisingly therefore, Wipro has been exploring other revenue streams and

verticals more actively than ever before. It did meet with some success when it

bagged a $70-million order from Lattice–now its biggest client. "It’s a

systems-integration project, spread over three years. The first year will see

the project up and running, and fetch us a likely $28 million. For the next two

years, we will maintain the implementation," Paul says.

A shrunken pie

Gone are the days when projects were available by the

cartload and IT firms could dictate rates to clients. The situation has changed–IT

firms are on the receiving end of the negotiation table. How’s Wipro tackling

this?

"Well, we haven’t really succumbed to the pricing

pressure. We are increasing our focus on high-value services like system

integration, package implementation, datawarehousing and infrastructure

outsourcing. And our billing rates remain the highest in the industry,"

Paul said.

"Wipro’s R&D business made up more than 50% of the

total revenues in Q2," said a company release. In Q1, the share had stood

at 52%. Analysts believe that a good and stable R&D share is indicative of a

company’s sound financials in the long run, largely because R&D budgets

are last to be axed by clients. The company’s R&D business grew 12% on a

quarter-to-quarter basis.

Taliban or China?

"Afghanistan is to Bangalore as Chechnya is to

Zurich," Vivek Paul, the flamboyant CEO of Wipro Technologies said while

responding to a query on how the ongoing US attack on Afghanistan would affect

the fortunes of Indian IT companies. "India is a very low-risk country for

that matter," Paul elaborated. "But the slowdown continues to be a

real threat," he said, without ruling out the possibility of a

less-than-30% growth in financial year 2001-02.

And how potent a threat is China? "A very serious one.

Especially in the East Asian region, China is going to have a huge advantage

over India, primarily due to the language but also due to low prices. The region

is their home turf and it won’t be easy to beat them there," Paul is

forthright.

Can acquiring a company in the region be an approach to

tackle the problem? "I don’t think it can be the right approach. Cultural

and linguistic issues can make integration a difficulty matter. And mind it,

when you acquire a company you don’t acquire a building or the computers, you

acquire people. And if the assimilation of people causes a problem, then the

takeover can be a disaster," Paul explains.

All said and done, Paul is too cautious to put spell out a

specific revenue target for the ensuing quarter or even for the FY 2001. He

doesn’t rule out the possibility of the yearly growth falling below 30%–the

revised guidance for the next quarter-on-quarter growth is 5%.

Deepak Kumar in New

Delhi