Why Wipro's business is under stress

Wipro's IT services business recorded better-than-expected margins. T K Kurien, chief executive of the company's IT business, in an interview with Bibhu Ranjan Mishra, and Pradeesh Chandran, says he believes the company is on the right track. Edited excerpts:

How do you rate your performance in Q2?

We have laid out a strategy and are now in execution mode. What we are doing today is in line with the target we had set for ourselves four quarters earlier.

I am neither excited, nor depressed over our performance this quarter. For me, the most important concern is whether our strategy is playing out. I would be depressed only when we fail to execute our strategy.

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Is the strategy paying dividends?

The marketplace is evolving. We play on a simple strategy to focus on core accounts that would give us growth.

It worked well last quarter - the top 10 accounts grew 8.2 per cent. We now have nine accounts that give us revenue of more than $100 million each. So, that is good progress.

Perhaps Wipro is the only company that hasn't seen volume growth.

It does not matter to us. For me, the important thing is to improve efficiency, which would reflect on my pricing.

Ultimately, we don't want to be the largest employment agency in the world; that is not our ambition. Our ambition is to deliver value to customers.

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How did you manage to improve pricing in an uncertain environment?

Pricing has gone up primarily because we are investing in intellectual property creation to drive more efficiency in the front-end.

We are also bringing in analytics, cloud and mobility to deliver more value-added services to customers. These initiatives were reflected in pricing, which rose 1.9 per cent onsite and 1.5 offshore.

But your consulting business, a high-value service, has constantly been under pressure.

Consulting has been impacted primarily due to the cut in discretionary spending. In the third quarter, consulting would certainly return to growth. Next quarter, our analytics services, which showed flat growth this quarter, would also improve substantially.

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The financial services business is returning to the growth path. Is it a good sign for the industry?

We have done well in financial services. But if you peel the onion, you would find the investment banking side of the business is actually under stress, while the retail banking sector is doing well.

Why does the investment banking sector continue to be under stress for Wipro?

If you look at Wipro, we are under-invested in retail banking and over-invested in investment banking. Similarly, we were under-invested in healthcare and manufacturing and over-invested in telecom and engineering services. The areas where we have over-invested are now hurting us.

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Your India business also continues to be under stress. Do you see any sign of improvement?

Last quarter, our India business declined 3.1 per cent year-on-year, and this is not a small number. We were over-invested in telecom, which hit us badly in recent days. We were over-invested in banking, where decision-making has slowed.

We were under-invested in manufacturing, which is hitting us right now, as we don't have a presence there. Our India business has been showing slow growth. But we expect that to change, as the government is taking a slew of initiatives to drive the economy's growth.

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Have you seen any change in the macroeconomic environment?

Nothing much has changed. Our belief is things would improve in the US after the elections. But I still believe as a company, we are under-invested in the US. We should invest more in that region.

In the beginning of the year, analysts had said the demand for IT services would be better in the second half, compared to the first. Going by your deal pipeline, is that correct?

We are clearly seeing more closures happening and deal cycles (decision-making time) have improved.