Green shoots in Wipro under Thierry Delaporte, but execution is key in coming quarters

A laggard

When Delaporte took the reins at Wipro, it had lagged behind its peers for years and the revenue gap had been widening. In FY12, the difference in revenue between Wipro and Infosys was $1 billion and that swelled to over $5 billion last year. Infosys’ FY21 revenue stood at $13.56 billion and Wipro’s at $8.1 billion.

In the case of HCL Tech, Wipro was $1.8 billion ahead by revenue in FY10 and that, too, changed after a decade. HCL Tech displaced Wipro to become the third-largest IT service provider in FY19 with $8.6 billion in revenue to Wipro’s $8.1 billion.

In a span of two years, the tables turned again, widening the difference to $2 billion. In FY21, HCL Tech’s revenue grew to $10 billion, while Wipro’s was stagnant.

Wipro missed former CEO Abidali Neemuchwala’s lofty goal of $15 billion in revenue by 2020, which he had set in an email to employees when he was appointed in 2016. In fact, the company added only $549 million in revenue between FY17 and FY20, compared with $2.5 billion for Infosys, $4.5 billion for TCS, and almost $3 billion added by HCL Tech.

Accelerating growth was the need of the hour for Wipro to regain lost ground and, as chairman Rishad Premji put it during a November 18 analyst call, the company now has an “obsession for growth” and chose Delaporte to deliver it.

Winds of change

When Delaporte, a Frenchman formerly with Capgemini, was appointed CEO last year, he knew what he had to do – take Wipro on a growth trajectory, and fast.

Before that, structural issues that had impeded growth had to be addressed. A former Wipro executive told Moneycontrol that just like many large companies, it was leadership heavy, wasn’t attracting enough large deals, and acquisitions weren’t successful.

Many of the company’s acquisitions did not work well. The $460 million purchase of HealthPlan Services in February 2016 was meant to meet demand arising from the US Affordable Care Act, dubbed Obamacare, which did not go well when Donald Trump won the elections in 2016.

“So the pressure to perform began to mount. Growth continued to be at the lowest,” the executive said. “Surgery and physiotherapy were long overdue at the senior level. That is what Thierry did.”

Delaporte implemented a new model on January 1, scaling down 20 company units to four strategic business units based on geography and sector – Americas1, Americas2, Europe, and Asia Pacific Middle East and Africa (APMEA).

While the Americas are based on sectors, Europe and APMEA are based on geographies to drive growth from these regions, where the company expects 58 percent of incremental revenue.

These units are to be aligned with two global business lines (GBL), based on capabilities – iDEAS (Integrated Digital, Engineering & Application Services) and iCORE (Cloud Infrastructure, Digital Operations, Risk & Enterprise Cyber Security Services).

He also created a new role, chief growth officer, to drive large deals in Wipro, which it was missing.

As with any leadership change, the exit of incumbent executives and an influx of new people followed. Media reports said that over 70 executives left the company after Delaporte took over.

Leadership churn

Milan Rao, president - marketing, innovation and tech and global head - manufacturing & communication business, and Anand Padmanabhan, a Wipro veteran who headed business development and strategies, left when the reorganisation was announced. President and COO Bhanumurthy BM will retire this year.

Other executives who left over the past few months include Nitin Parab, global head - tech business, Anuj Bhalla, global delivery leader, Bill Stith, who led the healthcare vertical, and Rohit Adlakha, chief information officer.

These exits, to some extent, were reminiscent of the churn that Cognizant continues to see even two years after Brian Humphries became CEO. The latest include Arun Baid, a senior leader in the banking and financial services sector, and Dan Smith, chief security officer.

An industry veteran who has tracked the firm for more than a decade said that unlike Cognizant, Wipro lost fewer critical executives who forged close relationships with customers.

“Milan (Rao) was one critical exit we saw, but the scale (of exit) has been less compared to Cognizant. Other key leaders such as Angan Guha, Rajan Kohli and Nagendra P Bandaru continue to hold key positions, which is important,” the expert said.

Chunky Satija, practice director – healthcare at Everest Group, an IT consultancy firm, told Moneycontrol last year that the leadership churn in Cognizant had impeded growth in its healthcare services, considering that as the executives who had developed deep relationships with consumers left, the impact was felt. Healthcare was one of the key verticals for Cognizant.

This has not been the case in Wipro so far.

“So, I don’t think the exodus and influx of key senior people from outside without context about the organisation will impact the firm like it did with Cognizant. So they are not comparable,” the expert said.

The rejig made the organisational structure simpler. Delaporte now has fewer people reporting to him directly, which means it is easier to drive consensus and hold people accountable. This layer of executives now has more authority, ownership, and hence driving change becomes faster within the team, the expert said.

As Delapote said on the analyst call on November 18, the focus will be on gender and ethnic diversity and on inclusive leadership.

Key personnel include Stephanie Trautman, chief growth officer, to drive large deals, Subha Tatavarti, chief technology officer, and local executives such as Tomoaki Takeuchi as Japan’s country head, and Pierre Bruno as CEO for Europe, one of the key focus areas for the firm.

Acquisitions

Another significant change Wipro made was its acquisition strategy, which Delaporte reiterated many times was key for growth. This was reflected in the significant acquisitions the company made between July and now. Among them was the $1.45 billion deal for Capco in March, Wipro’s largest purchase, which also broke the string-of-pearls acquisition strategy that the company had practised.

According to experts, the acquisition of Capco, a London-based management and technology consultancy, might be a positive move.

Chirajeet Sengupta, a partner at Everest Group, explained that a string-of-pearls strategy might work when a company is trying to build competencies like automation or artificial intelligence, where there are not many big companies. But it won’t work when a company is trying to break into big and established areas like banking in Europe.

“Then it is either go big or go home,” Sengupta said. So Wipro went big.

While Wipro’s acquisition track record might not be the best, experts pointed out that Capco might be different. Mrinal Rai, principal consultant at ISG, a research and advisory firm, said earlier that one of the challenges with Wipro’s past acquisitions was flawed strategic alignment. That, at least, is not an issue with Capco.

Banking and financial services account for about 30 percent of the company’s revenue. However, it had lost momentum over the past couple of years, pointed out Yugal Joshi, vice president at Everest Group. The Capco acquisition might boost its BFS portfolio.

Although integration challenges remain, this could complement Wipro’s portfolio, experts added.

Is this enough?

“The company is definitely in a better place now. What Wipro needed was bold leadership and Thierry has provided that. By restructuring, he has removed the duplication of initiatives internally and has positioned executives closer to customers,” said Sengupta of Everest Group.

Wipro CFO Jatin Dalal, in a recent interaction with Moneycontrol, said the company is looking at 11-13 percent year-on-year growth in Q1 of FY22, which is reflective of trends in demand, bookings that were closed, and the volume growth seen in Q4.

While the early signs are encouraging, experts said the company has a long way to go before it can reclaim the third spot in the hierarchy of India’s IT companies.

Wipro’s fourth-quarter results were one of its best only because of its past performance, which was already behind the industry growth. Wipro still has a lot of catching up to do and its ability to execute the restructuring strategy will be key in the coming quarters.