…and the beginning of a new one, with Rishad Premji at the helm
Harish Puppala | Rakesh Sharma
A few days ago, Azim Premji, the executive chairman and MD of Wipro, announced his retirement. He will serve until the end of July. Media reports indicated that Abidali Neemuchwala will be appointed Managing Director of Wipro Ltd from July 31. Azim Premji's son, Rishad A Premji, who is currently chief strategy officer, will be reappointed Whole-Time Director as well as Executive Chairman of the company. Premji will continue as non-executive director and founder chairman.
In this podcast, we look at the rise of Wipro under Azim Premji - from a small-time oil maker to a world-class IT company that played a major role in the growth of post-liberalization India.
Wipro’s humble beginnings
Wipro, as some of you may know, is not a name or a word. It is an acronym. Wipro began as the Western India Vegetable Products Limited under Mohamed Hasham Premji in 1945, making vegetable and refined oils in a small town in what is now northern Maharashtra. That is now the stuff of business legend in India - their main area of business was the production of sunflower vanaspati oil, and, later, soaps and other consumer care products.
That company did pretty well for itself. An NDTV report claims that company filed for an IPO in February 1946. One interesting story about Premji’s father, maybe even apocryphal - according to some reports, after the Partition of India, Mohammad Jinnah invited Hashem Premji to move to Pakistan, but Azim’s father turned down the request and chose to remain in India. Some accounts claim that was Azim’s grandfather, but in any case, the family chose to drop roots in India.
in 1966, at age 21 and as a student at Stanford University, Azim had to return home after his father's death to take charge of the business. He soon diversified into bakery fats, toiletries, soaps, and lighting products and also added a hydraulic cylinders division. The dropout from Stanford would eventually graduate in the year 2000. According to Mint, “In what can be described as his tenacity and a hallmark of his greatness, Azim Premji completed his bachelors of science degree in electrical engineering from Stanford 34 years later in 2000.”
Wipro kicked into high gear in the 1980s. It entered the IT space after IBM withdrew from the country. It started with manufacturing microcomputers under a technology-sharing agreement with US-based Sentinel Computers. Later, it started providing software solutions to complement its hardware operations. The 80s saw a series of ventures by Azim Premji and Wipro. He started a manufacturing plant for the production of hydraulic tipping systems in 1983, followed by an entry into the manufacturing of industrial cylinders and hydraulic cylinders. In 1989, Wipro formed a joint venture with General Electric (GE) for the manufacture and distribution of imaging products called Wipro GE Medical Systems, which became a subsidiary of Wipro the following year.
A Bloomberg analysis noted- “...recognising the opportunity that a few other early movers also spotted in information technology in the 1980s, Premji changed the company’s name to Wipro and made a foray into the tech sector. Initially, Wipro manufactured minicomputers via a collaboration. However, subsequently, it entered the software services industry and gradually that emerged as its largest business, making Wipro one one of India’s leading and most respected IT services firms, alongside Tata Consultancy Services and Infosys.”
Azim Premji was a skilled businessman and leader. Many industry leaders of today saw in him the leadership style and business ethics that they wanted to emulate. For instance, Mindtree founders Krishnakumar Natarajan, Rostow Ravanan and Subroto Bagchi. Or Suresh Vasawani, former CEO of Wipro who went on to lead Dell and IBM before starting his own venture capital and private equity fund.
Natarajan, Chairman of Mindtree, told Moneycontrol, “In my early days as a campus recruit, I got to know him and observed him...you would notice a lot of the ability to become a great professional and you get influenced by some of those actions. This you then start inculcating in the way you work.” Natarajan stated unequivocally, “He is a very tall and respectable leader. We have learnt a lot from him when working there…His rigour, detail orientation, precise questioning and the ability to take on difficult issues head on have always helped many professional managers blossom.”
In the late eighties, Wipro once again diversified its product line into heavy-duty industrial cylinders and mobile hydraulic cylinders. A joint venture company with the United States' General Electric in the name of Wipro GE Medical Systems was set up in 1989 for the manufacture, sales, and service of diagnostic and imaging products. Speaking of Premji’s courage to branch out, an analysis by Mint noted that Premji was “...resolutely defiant of the Western market wisdom of sticking to a field of “core competence.”
Following India’s economic deregulation in 1991, Wipro ventured into the manufacturing of lamps, powders, oil-based natural ingredients, medical and diagnostic equipment and IT hardware products such as printers and scanners etc. Importantly, it also entered the IT services business in the 1990’s and was among the first to experiment with offshore IT services. 1999 saw Wipro become the only Indian computer manufacturer to receive Y2K-compliant certification from the National Software Testing Laboratory in the US. It also entered into a joint venture with KPN to provide internet services in India. The following year, Wipro was listed in the US via American Depositary Receipts and emerged as one of India’s largest software exporters, and the second largest listed company in India. Throughout the late 1990’s and early 2000s Wipro continued to perform well, with IT remaining its core business. It also opened a Business Process Outsourcing (BPO) unit in 2002 and was one of the best performing stocks between 1998 and 2003 on the Indian stock exchanges.
The year 2000 was a big one for both Wipro and Azim Premji. The company was listed on the New York Stock Exchange in October, while Premji finally completed his degree from Stanford. He may have become a tech titan by the 1990s, but the unassuming and pragmatic chairman of Wipro signed up for correspondence classes in 1995 to complete his engineering degree which he was forced to abandon midway 30 years prior.
Tracing Premji’s career, one can see why he would take that step. Natarajan told Moneycontrol, “Building next level leadership was an important priority for (him) and he brought in several global thinkers like CK Prahalad to help the Wipro leadership grow and think differently. In one of those sessions, I was part of the team which won the competition. For the winning team there was a small gift- a book and a letter. But what was different was that the salutation of the letter was personally handwritten by AHP (or Azim Hashim Premji) and the book had his wishes again with his handwriting. This was my second lesson that building next generation leaders was the responsibility of top management. Also, irrespective of your level you can do small gestures which make it special for individuals…As a leader AHP has always been a great role model for professionals.”
An analysis by Investopedia states, “Premji created a culture of striving for excellence in business operations and Wipro was successful in implementing the objectives that were part of this culture and being one of the first software companies to get SEI Level 5 certification.”
Wipro registered a billion dollar revenue for the first time in 2004. Hard to believe sometimes that an organization with current IT services revenue of $8.1 billion made it to a billion only a decade or so ago. Azim Premji, for a brief time between 2005 and 2008, also served as the CEO of Wipro. The exit in 2005 of CEO Vivek Paul, who played a key role in making Wipro a billion-dollar enterprise, led to Azim Premji staying on as CEO until 2008, followed by a change in corporate structure that led to the installation of joint CEO’s till 2011. That year, there was a reversion in the company back to a single CEO.
One issue that has plagued Wipro is that the IT business's top management hasn’t been entirely stable - growth tended to plateau.
The next generation steps up
Azim Premji will now make way for his son Rishad. The 42-year-old is currently the chief strategy officer and member of the board at Wipro. After announcing his retirement, Premji senior said Rishad brings new ways of thinking, experience, and competence that would lead Wipro to greater heights.
First, the antecedents of the new boss. Rishad has an MBA from Harvard, and worked with Bain and Co. for two years, across multiple industries including consumer products, automobiles, telecom and insurance. He spent four years with GE Capital in the US across several businesses and then joined Wipro in 2007 as a business manager, working at the company’s banking and financial services division. But it was no red carpet welcome for an heir apparent, mind you. Rishad Premji got his first job at Wipro after going through a series of rigorous interviews. He once said that he was also interviewed by Girish Paranjpe, former Wipro co-CEO and now a venture capitalist, when he was in London. He was recognized as a Young Global Leader by the World Economic Forum for his outstanding leadership, professional accomplishments, and commitment to society in 2014.
It is no surprise then that the ever pragmatic Azim wrote in a letter to employees that Rishad Premji is firmly rooted in the values that are the bedrock of the company. “His commitment to the spirit of Wipro is absolute. His diverse and cross-industry experiences give him the benefit of a broad view of global business...He has been an integral part of the leadership team since 2007 and has an intimate understanding of our company – from operations to strategy. He has a deep knowledge of the global technology industry and was until recently the Chairman of the trade body NASSCOM, where he helped chart the course of India’s $170-billion software industry in this era of digital transformation.”
Rishad Premji said that over the past four years, he and Abidali worked closely, and that he has “a lot of respect for his strong strategic and operational depth as well his sincerity in leading the company.” Neemuchwala said Rishad Premji’s considerable global experience, deep understanding of the technology landscape, ability to see the big picture, work ethic, strong values, empathetic nature and leadership skills are characteristics “I have personally come to admire and respect and are widely acknowledged by all those who know him.”
Moneycontrol claimed that Rishad did things differently, and well. He changed the way the industry body measured key metrics. NASSCOM now shares the survey of business confidence of its members, instead of the annual forecast, given the changing industry landscape. The report speculated that such “out-of-box thinking is what will perhaps help Rishad, as he and CEO and now also MD Abidali Neemuchwala, lead Wipro through several challenges in the post-Azim Premji era.”
And there are a few challenges for sure. Unlike what it should probably have done, Wipro held off on firing all cylinders in the past few years and lost its third largest IT services firm position to HCL Technologies. Its revenues now stand at $8.12 billion as opposed to HCL Technologies' $8.6 billion, $21 billion for TCS, and $11.8 billion for Infosys. The company had the lowest revenue guidance of -1 percent to 1 percent for FY20 compared to its peers. This is despite restructuring efforts by the top management in the past three years. When Neemuchwala took over the CEO in 2016, he restructured operations, and included an increased focus on digital revenues, besides shedding unprofitable low-end service businesses. He also restructured the global healthcare business after the Trump administration scrapped Obamacare, a big focus area for the company then.
So while the digital portfolio paid off, accounting for about 35 percent of the total revenue, Wipro's legacy business has not improved. An analyst pointed out that profitability was also affected as the company is still shedding unprofitable businesses. However, they are in a much more stable position now, compared to three years ago. Yugal Joshi, Vice President, Everest Group, a consultancy firm, said, "The key challenge for Rishad and Neemuchwala is to bring market-leading growth...They will also have to invest in talent who can orchestrate such large deals for them, understand clients better, enhance their thought leadership and value proposition for the new world.” This means that to keep up with changing trends, Wipro needs to balance next-gen services, which typically come at lower tickets and the traditional business, that usually yields large deals.
In such circumstances, the rapport between Rishad and Neemuchwala, who comes with a proven track record, becomes very crucial. Before taking over as Wipro CEO in 2015, Neemuchwala was the COO at Wipro in 2015. Prior to that he was associated with TCS for 23 years from 1992 and was mentored by current Tata Sons Chairman, and then CEO, N Chandrasekaran. That is good pedigree, and, given the challenges before Wipro, the two gentlemen in question will certainly have to dig deep.
Meanwhile, the doyen, Azim Premji, will serve as the Non-Executive Chairman of Wipro for a period of five years from July 31 2019 to July 30, 2024. In the regulatory filing, Wipro also stated that Premji has been conferred with the title of Founder Chairman of the Company. But ever the pragmatic man, Azim Premji, according to a profile by MensXP, “still travels economy class, drives a Toyota Corolla, wouldn’t be caught dead in a private jet and prefers to live in company guest houses while traveling, all while maintaining that anything that is good enough for his employees is good enough for him.”Who wouldn’t root for this gentleman and his carefully nurtured company!Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.