Indian IT giant Wipro is set to create hundreds of jobs in the UK by taking advantage of government tax breaks and opening a low-cost regional software development facility outside London and the south-east.
Bangalore-based Wipro is evaluating several regions for its next delivery centre including Birmingham, Cranfield, Edinburgh, Manchester and Warwick. Its existing UK headquarters in Reading currently employs 300 people with room for 500. When this is filled, the plan is to open a new office (probably in the next one to two years) that will also have room for 500 staff.
Key factors in the choice of location will be local access to science and engineering graduates and government tax breaks.
Azim Premji, chairman of Wipro, speaking at the company's global media event in Bangalore last week, said: "What we are looking for is a centre which has good education facilities. That's extremely critical. And when I say education facilities I don't mean arts colleges, I mean science and engineering colleges.
"We want a centre where the general profile of the young girls and boys graduating there is of a nature where they would like to work in that area, they have family roots in that area, they come from a background which is comfortable in that area and don't necessarily want to migrate to… the larger cities."
Wipro is looking for government tax incentives, linked to the number of jobs created, to help offset the cost of setting up its UK delivery centre.
In a trend becoming known as "reverse offshoring" Wipro and Indian rivals Infosys and Tata Consultancy Services (TCS) are using this tactic as they are forced to expand deeper into western countries to extend their global reach.
TCS this week announced a 1,000-person delivery centre in Cincinnati, Ohio and Wipro recently set up low-cost onshore facilities to support US customers in areas such as Troy near Detroit in Michigan and Atlanta, Georgia.
This is part of Wipro's strategy to expand its onshore operations in developed western countries and to recruit more local people there as the company aims for higher-end — and more lucrative — consulting services.
Out of a total workforce of around 88,000, Wipro currently employs around 6,500 staff in Europe (including the UK) and 28 percent of those are local Europeans and the goal is to increase this ratio.
Premji said: "Our objective would be to have our people force in Europe, which is resident in Europe, at least 50-60 percent local Europeans and we are rapidly driving towards that. We are dead serious about this. We want to build a local cadre. We generate a much stronger image for bidding for local contracts, which is also important."
Those higher-end consulting services today account for just under five percent of Wipro's $3.4bn annual revenue and the company is aiming to increase that to between 12.5 percent and 15 percent of revenue over five years.
But Premji dismissed claims this onshore expansion and local recruitment — at local western salary levels — will increase the company's cost base and hit profit margins.
He said: "The billing rates are completely different. They are much higher. So the profit per person you get from consultancy, if it's well run, is higher than the profit per person which you get from the other businesses in the rest of Wipro Technologies."