'We are not going to take leaps'

Wipro Technologies Vice Chairman and President Vivek Paul was recently honoured by Time magazine as one of the 25 influential businessmen in the world.

Paul is credited with Wipro's revenues having grown from just under $150 million in 1999, when he joined Wipro, to over $1 billion today.

Before joining Wipro, Paul was at General Electric (GE) for 10 years and managed GE's Global CT (Computerized Tomography) business and reported directly to the current General Electric chairman.

The engineering graduate from B.I.T.S, Pilani who went on to acquire an MBA from the University of Massachusetts and then worked at the Boston-based Bain & Co. and at PepsiCo Inc spoke to Sanjay K Pillai from California on, among other things, what the future holds for Wipro and the industry. Excerpts.

What is your view of the IT outsourcing space today? Almost all leading tier I companies in India report that growth is booming.

We do think that things are looking up. The good news is that it is not restricted to just one sector.

It is fairly broad based, which means basically that customers in different segments are looking up in terms of their outlook towards doing more work in the coming three to nine months. By the same token, it is across different services and across a broad set of service lines that we cover.

How long do you think will this last?

It is difficult to say how long this will last. There are no indicators to say that this bull run will go away immediately after the timeframe (nine months).

The trend does seem to be positive. There was a fair amount of pending projects and a lot of customers are intending to take advantage of the new momentum that is being generated. Also, much of the uncertainty has died down after Bush was elected.

What have companies like Wipro done right over the last eight quarters that are being translated into the kind of growth numbers that we see today?

Clearly, a combination of 'verticalising' our business lines early and our end-to-end positioning. I think the real key differentiator here is the range of services we offer, starting from consulting and going down all the way to BPO.

Within that whole range, we have customers who can get in any of the service lines. They can move sideways, they can move towards higher-end services, they can move towards BPO services. That gives them a very, very unique advantage when dealing with Wipro.

The other area where we think we have a unique proposition is our product engineering and R&D services. We think we are the world's largest R&D services consulting company, and of course R&D services.

How has this helped in terms of being part of a customer's IT budget?

If you look at the budget of a CIO, typically 50 per cent is on the application side and 50 per cent on the infrastructure side.

Traditionally, the CIO has felt that he or she could really address the 50 per cent of the budget that is on the application side, but felt that for the other 50 per cent he had to either do it in-house or go to an IBM or EDS or CSC, and do a complete outsourcing deal.

We now have a proposition that they don't have to think in this binary fashion – they have the option to keep some of the work in-house and yet enjoy the benefits of offshoring and not only outsourcing.

You are based in the US. How have customer preferences or budget allocations there changed? What has brought about this change?

Customers don't want to do mega deals because they feel that they lose control and their experience of mega deals in the past has been less than satisfactory. They are beginning to look at smaller deals.

So when we today push back some customers and say we would rather not do financial engineering for you, customers are generally more accepting of that. This was not the case three years ago or two years ago.

What is the next leap that companies like Wipro have to take to be in the same league as the EDS' and Accentures of the world?

The world takes big steps in R&D and so I would say that we are not going to take leaps because leaps have an underlying expectation that when you land on the other side you may land or you may trip, and we just have too much going for us to want to take those chances.

A lot of people, you know, ask us a question -- what are you doing to become more like Accenture or Bearing Point? The way we look at it is, if consulting carries a big load of technology development, it is attractive to us.

Consulting on a standalone business is not that attractive to us and so we don't have to be a Bearing Point, we have to be a Wipro. Our view is that we just have to continue to be able to grow on the basis we now are.

No company in the history of the world has grown and added head count at the speed that we have in such a short period of time and done it without a stutter in the delivery. So we have to just make sure that we stay the course.

We continue to recognise that the market is moving in our favour, customers want more of what we have got, we have got to continue to innovate in terms of new service lines.

In all industries, with maturity vendors go for specialists. This is true of manufacturing and it's true of services. By the same token, would not specialists in, say consulting or application outsourcing or BPO be preferred by customers?

In specialisation, customers look for companies that have either demonstrated an ability to work in a certain area or have demonstrated a solution that has been implemented.

On both counts, we have a list of active customer projects that we can demonstrate where solutions have been used by customers to get the benefits of their IT investments.

We think that selling multiple service lines and offering more value to clients gives us an opportunity to get ourselves firmly entrenched. It increases the stickiness with customers and it has the potential for more downstream revenues from the time you start at a customer account.

And this has happened to us again and again when we have competed against some of our local peers.

Does being an end-to-end service provider mean that Wipro gets a look in from customers while your competitors may not, and the ability to snag the customer with some offering or another?

No, I think it is not a foot-in-the-door strategy. It is more the way in which we can deliver greater value to our clients. So, once you do that, obviously the added benefits of that are that you will be able to sell multi-service lines within a client organisation.

Focussed companies seem to be growing faster than those that are all over the place. In the last eight quarters, Infosys, Tata Consultancy Services and Cognizant have grown faster despite Wipro offering a wider spectrum of services.

If you look at our verticals, retail, for example, we have been growing faster than our peers. If you look at manufacturing, we reported a 17 per cent growth rate. So I don't agree with this at all.

Does this strategy make sense especially when Wipro has not been able to mine its customer base as deeply as other competitors closer home have done?

If you look at the top 25 customers that we have, almost without exception we are offering at least two service lines to them. The important thing is that many of these service lines we are talking about have been brought to the market and offered to customers in the last 24-30 months.

There is no doubt in my mind that if there is an area that Wipro can do better, it is to go in terms of deeper account penetration, in terms of building the larger accounts.

So my view is, we have got a great performance track record. We continue to be the leader in terms of profits. We continue to be the leader in terms of industry approach.

We continue to be the leader in terms of adding new service lines, all three of which are quickly copied by other players in the market place, just like we take best practices from out there as well.

So there are lots of things that others do well which Wipro could learn from, and one of this could be customer mining?

Absolutely. We have blazed our own trail and as a result there are certainly areas where we can improve, and we will do everything we can to improve. But we have a core asset and the asset is our process depth, our vertical strength and our service breadth.

Those are three things that will continue to propel Wipro to ever greater successes, and of course we will shore up all the areas where we feel we need to catch up with others.

Which of the plethora of service lines that you have ready has the maximum potential and why?

At this moment infrastructure services and testing services have seen the fastest pickup, because they have now reached the stage of acceptability by the client.

So we have broken the ice in terms of remote network management, and we are just seeing that being very highly accepted. We started separating testing services as a service line. That is something that we are seeing more and more customers beginning to deconstruct from their development chain and outsource that.

So both of those continue to be very promising. And finally, the transaction processing piece of our BPO business, which is vertical specific stuff like mortgage handling and invoice handling or what I would call aggregate transaction processing. These are all areas we continue to be quite bullish about.

And which service line has reached some level of maturity where you don't see much upside?

The good news is that this whole business is still nascent. A lot of people ask, is this offshoring phenomenon mature? Is it behind us? And one just has to look at any forecast, even Forrester, to say that we are only one eighth of the way through the culmination.

So when you say that one looks more mature than the other, all that means is that one has had a life of 18 months or greater, and the other has had a life of less than 18 months.

So you have to calibrate for that because in some sense we are sitting on a climactic sea change in terms of what is going to happen in the world out there.

Having said that, I have to say that as I look at our outlook on the one hand we tend to continue to feel pretty good about that and we have maintained that stance for the last 12 months.

On the other hand, when we look at the equity markets, we cannot understand why people would think that our prospects have improved by 50 per cent from July to December. So I leave aside equity market expectations because they move in rhythms that are mysterious to any human being.

So what has Wipro learnt from the slowdown? How do you insulate yourself to a larger extent from the effects of a future slow down? Wipro was hurt because of the large exposure to R&D earlier.

What the slowdown indicated was that we needed to have a diverse stream of businesses like we do today – a classic portfolio diversification.

There is not going to be any way that one can fight the economic cycle, you cannot fight the business cycle, so we will have to sort of bob up and down.

But if we create this diversified portfolio, if we create strong customer relationship, I think that we will do well. The slow down that you talked about was a slow down in the general business, but an absolute wreckage on the technology side.

That is a once in a lifetime thing that happened and we still did better than everybody else. Ultimately nobody can fight the business cycle, but the diversified portfolio that Wipro has holds it in good stead.

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