Wipro expects new measures to boost revenue growth by December quarter

Wipro expects new measures to boost revenue growth by December quarter

Bengaluru: Wipro Ltd has come up with a clutch of measures to improve its delivery side of business. It believes the measures will help it return to industry-matching growth numbers and generate more revenues from existing clients.

Chief executive officer T.K. Kurien said that benefits of these steps should start reflecting from the December quarter, although the management declined to share by when it will get back to industry-matching growth numbers.

Since taking office in February 2011, Kurien has struggled to make Wipro report a 3% quarter-on-quarter revenue growth.

Wipro last reported a 4.6% revenue growth in the July-September quarter of 2012. Wipro recorded 5% growth in fiscal year 2012-13, 6.4% in 2013-14, and 7% last year.

“It’s been about 110 days since I have been on board and it has been very eventful,” said Abid Ali Neemuchwala, who was appointed Wipro’s chief operating officer (COO) in April. “We have looked at our overall delivery structure and we are realigning it to have better velocity within the organization. We are looking at opportunities to make sure we are better able to execute and can also mine and cross-sell better.”

While Neemuchwala said the company has already implemented these measures, Wipro’s management declined to share more details.

By realignment of delivery structure, the company is looking to make each of its six business unit heads responsible for the delivery of software in addition to managing sales, as it aims to emulate the model that powers industry leader Tata Consultancy Services Ltd (TCS), as reported by Mint on 6 June.

Additionally, Wipro has mandated its sales executives to sell at least three of the five service lines the company offers to existing clients, as it seeks to improve its ability to generate more business from these clients, Mint reported on 8 May.

“We have also talked about ADM (application development maintenance) and ADS (application development services) revenues. We have pronounced an ADM practice leader as we see an opportunity to disrupt the market with hyper automation,” said Neemuchwala, a former TCS veteran. Wipro has now tasked Suresh Bala to head this business unit.

For all the measures being implemented by Wipro, some analysts said that the company will take time to script a turnaround.

“With Abid Neemuchwala from TCS as the COO, Wipro has built a strong management team now. In fiscal year 2013 and fiscal year 2014, growth in revenue/client nearly contributed to the entire revenue growth (hunting engine weak) and then in fiscal year 2015 when the company hired highly regarded industry executives from competition (like HCL Technologies) and restructured the sales workforce and incentive structure, revenue/client (mining) slowed down,” Yogesh Aggarwal, analyst at HSBC Securities and Capital Markets (India), wrote in a company note on 24 July. “Even in terms of client buckets—there has been some improvement in the $20/$10 million buckets, but not much improvement in the large $75 million and $100 million buckets. Wipro should go back to industry growth as both mining and hunting teams perform well and second quarter guidance isn’t reflective of that inflection point”

“In Wipro’s case, in order to get closer to the leading pack, the company needs both a compelling vision and an optimized sales engine,” said Thomas Reuner, managing director of IT outsourcing research at HfS Research.

Wipro’s performance in the first quarter (April-June) was, like in recent quarters, underwhelming as revenue grew 1% in dollar terms over the previous quarter, lagging behind bigger rivals TCS and Infosys that reported 3.5% and 4.5% growth, respectively. Wipro’s operating margin declined 100 basis points, or 1 percentage point, from the previous quarter to 21%. In the past five quarters, the margin has fallen by 3.5 percentage points, highlighting Wipro’s troubles.