This last year has been a tortuous one for Indian IT players. Even the biggies, such as Infosys and TCS as well as the wunderkinds of yesterday like Cognizant, have had to repeatedly restate earnings estimates downwards and watch their revenue growth alarmingly plummet.
The new world of cloud, AI, and digital has not been kind to their old-school ways of doing business that still has a heavy reliance on on-site development and tinkering.
Wipro's fortunes have been no different. It has carried a reputation amongst many observers as being a capable but ultimately underwhelming player when compared to the other two (Infosys, TCS) in the "big three". Its margins have consistently lagged its two rivals, its growth in the past four years has been an anemic 6 percent -- which is around half of that of the four largest IT companies other than itself -- it has regularly lost market share, and, not surprisingly, analysts have remained unimpressed.
Yet today, it is this apparent laggard that is sitting pretty, poised to make substantial inroads in a rapidly deteriorating environment in a way that its old foes Infosys and TCS don't seem to be able to. What could it have done in just nine months to turnaround its fortunes that its peers haven't been able to?
Wipro appointed a new CEO, Abid Neemuchwala, who took charge in April 2015. But a joint architect of Wipro's renaissance is Rishad Premji, the 39-year-old son of company founder and long-time CEO Azim Premji, who as chief strategic officer has been in charge of the M&A function at the firm.
Nothing comes easy within the Premji empire it seems. A Harvard MBA with stints at GE Capital and Bain & Co, the younger Premji needed to work his way up from the position of manager before ultimately snagging the strategy portfolio, and then last year, a seat on the board of the firm. He has spent the last several years sowing the seeds for a resilient company that may just have a chance at navigating the turbulent seas of change that is causing carnage in the industry.
Under Rishad's strategizing and Neemuchwala's stewardship, Wipro has decided to deploy its reserves of cash -- unlike most of its peers -- on companies that it thinks can save it from a world that is rapidly moving away from the traditional onsite deployment and maintenance game. As Mint newspaper has reported, it has coughed up $1.13 billion on four companies that already bring in $550 million in revenues and are entrenched in fields that are going to be bread and butter for technology providers in the future.
By contrast, Infosys has spent $390 million on three companies that have added just $90 million to its coffers currently, with no acquisitions in the last year, while TCS hasn't invested a rupee in either a buyout or a startup, according to Mint.
The crowning achievement of Wipro's recent acquisition binge is undoubtedly Appirio, a US-based cloud services outfit that it purchased for $500 million in October and a good example of the kind of buy that can pay serious dividends down the line.
For one, Appirio is one of the largest independent cloud services implementation partners for SaaS (software as a service) for companies such as Salesforce (in the CRM space) and Workday (which makes HR software). A diverse group of companies such as Coca-Cola, eBay, Facebook, and Home Depot are Appirio's clients, preferring the new world of SaaS to in-house systems implementation models utilizing SAP and Oracle that the more traditional IT services outfits (read: most of them) are more conversant with.
Mint quotes analysts at Kotak Institutional Equities who say that "the acquisition leapfrogs Wipro in Salesforce and Workday implementation over other Indian IT [firms] and places it among the top 5 players globally along with IBM, Accenture, and Deloitte."
In a world of ready-to-use assets that rely on an altogether different kind of sales, distribution, and support model, the Appirio buy instantly appears to put Wipro far ahead of the pack.
That's not all, though. Buried in the Wipro acquisition is an equally tantalizing asset -- leading crowdsourcing platform TopCoder and its rival CloudSpokes, both owned by Appirio. As Mint and Economic Times explain, companies that seek a competitive advantage with the technology that they source or build will not be satisfied by simply using off-the-shelves products. Instead, they will seek to build and integrate, and what better forum to solve problems than a gathering of the best and brightest minds in the business.
Topcoder apparently hosts around a million of these minds, attracting customers from NASA to Harvard University to cable giant Comcast as customers. The ability to parse out sections of challenges means that no one set of code can pose intellectual property rights issues. As the Economic Times article points out, IT professionals are increasingly moonlighting as coders for extra pay, so it may be entirely possible, and ironic, that a TCS brain is working on a Wipro problem for a global client on Topcoder.
Productivity and automation
Then there's automation, in which Wipro is working hard to become a leader in. Its cognitive AI platform Holmes launched 18 months ago, and which I wrote about here, has already achieved success in reducing its dependence on low-cost labour. CEO Neemuchwala, whose favourite word seems to be "hyper-automation", has instituted a mandate to urgently identify tasks not requiring engineers in any of the 20,000 projects that are currently ongoing. Mint cites an anonymous source at the company who claims that at least 10,000 of these jobs will be done away with by the end of the company's financial year.
For an industry where the average revenue per employee fell from $44,775 to $41,619 in just seven years between 2008 and 2015, while revenues more than doubled from $67.7 billion to $146.5 billion, becoming more productive is as urgent a task as anything else on the agenda and automation is a key way towards that objective.
For Indian IT services firms who are being disrupted seemingly at the speed of light, sitting on cash, not actively thinking of relocating their front-end operations to the US, and not thinking of aggressive plays to become part of the future -- in other words, future-proofing themselves -- will simply spell a tortuous and rapid demise.
Global juggernauts have recognized this. IBM, for instance, snapped up one of Salesforce's largest partners Bluewolf, and Accenture picked up another big Salesforce partner, Cloud Sherpas. (Accenture also picked up a stake in crowdsourced testing outfit Applause.)
Death due to obsolescence comes in a flash as Kodak will testify, and so far Wipro seems to be the only company that has made bold and canny bets to stave it off, something that its peers would do well to emulate.