Wipro looks to better tap existing clients

Wipro Ltd is seeking to generate more revenue from existing clients by selling them cloud computing, business applications and analytics solutions, as India’s third largest software services exporter seeks to weather a downturn in demand.

Bengaluru-based Wipro’s effort to win more business from old customers follows a year in which the company’s revenue increased 7%—well below industry lobby group Nasscom’s forecast of average 12-14% growth for India’s software services industry.

The effort underlines Wipro’s focus on near-term growth, according to experts.

“The focus clearly is on account mining,” said an executive. “In 2011, we were very strong in this but over the years, as we have won some big deals and become strong in account hunting. We have not done that well in driving revenue from existing clients. And this is mainly because of our inability to cross-sell service lines.”

To improve upon this, Wipro’s 1,000 account managers have now been mandated by chief executive officer (CEO) T.K. Kurien to sell at least three of the five service lines the company offers to existing clients. Wipro, through its five service lines—product engineering, business applications, business process outsourcing (BPO), cloud computing and analytics—offers solutions to 1,054 customers.

“So this year, we have fixed for every account manager three service lines. So in effect, the account manager is also responsible for incremental growth of service lines. So if he does not sell three service lines in an account, he will not be getting variable pay,” said the executive cited above, who spoke on condition of anonymity as he isn’t authorized to speak to reporters on this matter.

Since taking over as chief executive in February 2011, Kurien has helped Wipro almost quadruple the number of customers who bring more than $100 million in revenue for the company. Wipro has 11 clients that bring in more than $100 million in annual revenue now, versus three marquee clients in March 2011.

While Wipro’s strategy is encouraging, it comes with its own set of challenges because firms need to invest in hiring and developing new talent, with the ability to offer more custom-made services to clients. Such initiatives takes time to implement.

“I generally applaud IT (information technology) services firms that place disproportionate effort into mining existing clients, versus hunting for brand new clients,” said Rod Bourgeois, founder of DeepDive Equity Research, a US-based equity researcher.

Wipro’s focus on generating more business from existing customers puts the spotlight on account hunting and account mining, as the country’s software service providers grapple with the twin challenges of unfavourable currency fluctuation and slowing growth.

Wipro’s cross-city rival Infosys Ltd is focusing on client hunting as CEO Vishal Sikka looks to improve the effectiveness of sales teams by incorporating elements of design thinking, among other measures, while making pitches to prospective clients in an effort to win more orders that exceed $100 million in annual revenue, Mint reported last month.

Under the initiative, a handful of key account managers and the five vertical heads, including the bosses of banking and financial services, and retail and manufacturing, have started engagements with senior executives at some of the largest firms that are expected to outsource large IT work in the coming months. These executives have undergone training in design thinking.

Another reason for Wipro to focus on driving higher revenue from existing clients is the company’s exposure to industries that of late are having their own problems, some experts said.

Wipro generates nearly a third of its $7.08 billion revenues from customers in the energy and telecom space. However, a fall in crude price has forced most global oil giants to discontinue projects while IT vendors see muted growth in the telecom business as firms in that sector across the world grapple with rising cost pressures and the disruptive threats posed by WeChat and Skype.

“Both energy and telecoms sector are not doing well. So this strategy could also be reflective of the fact that getting bigger deals from clients (in these industries) is difficult,” said a Mumbai-based analyst working at a foreign brokerage on condition of anonymity.

Nasdaq-listed Cognizant Technology Solutions Corp., with $10.26 billion in revenue last year, said that its ability to generate more revenue from existing customers over the years has helped the company perform “consistently well”.

“A significant portion of our revenues comes from generating more business from existing clients,” Cognizant CEO Francisco D’Souza said in an interview, after the company’s revenue grew more than 6% over the preceding quarter for the three months ended 31 March. “I can say about 90% of our business comes from existing clients or generating more business from our existing clients, while the new clients we add every year take some time before we can make them our strategic clients.”

For this reason, analysts said IT firms must strike a right balance between generating revenue from new and existing clients—known as client hunting and client mining, respectively.

“It is not surprising that Cognizant or TCS, which lead on revenue growth, manage this balance the best without leaning too much on farming or hunting,” JPMorgan Chase and Co. analyst Viju George wrote in a note last month. “Hunting is necessary to drive long-term growth, while effective mining is essential for near-term growth. Business from new clients is typically only 3-4% of revenues in a year—this can grow four-fold to 12-15% in 3-4 years’ time from proper/effective farming. Likewise, new clients over a four-year period cumulatively contribute to as much as 30-35% of revenues a year depending on farming. Hence, hunting and farming complement each other.”