The Live Wire in Indian High Tech
Last year, India's Wipro Ltd. (WIT ) landed the kind of breakthrough deal it was craving. Sony Corp. (SNE ) handed the company a $5 million contract to write information-technology applications for its TV and computer assembly plants in the U.S. By hiring Wipro and its army of low-cost Indian engineers, Sony expects to save 30%. "I was extremely happy with CAP Gemini," the IT consultant that previously did the work, says Vinnie Tiru, Sony's U.S. chief information officer, "but they couldn't provide the offshore resources and low pricing." If Wipro performs well, Tiru says, Sony is prepared to grant it far heftier contracts to work as a partner on a global basis.
Proving itself to giants like Sony is vital to the Indian company's strategy. Wipro, with $711 million in revenues, is already a world-class provider of high-quality software to such clients as Compaq, Home Depot (HD ), and Nokia (NOK ). Wipro also ranks as one of the world's largest research-and-development contractors, with 4,000 engineers designing chips and telecom equipment for top U.S. electronics companies. Since 1997, Wipro's software exports have leaped nearly fivefold, and should jump 36%, to $653 million, in the year ending Mar. 31, says Salomon Smith Barney.
Now, Wipro and a handful of other Indian software houses aim to become low-cost alternatives to full-service IT consultancies in the U.S. Rather than just write software applications, Wipro wants to create and customize entire business processes, such as designing and managing billing and employee benefits. To succeed in this realm, where contracts can be worth hundreds of millions of dollars, Wipro will have to battle global IT leaders such as IBM (IBM ), Electronic Data Systems (EDS ), and Accenture (ACN )--at a time when these U.S. firms are hiring thousands of staff in India. It's a daunting prospect, but this may be the only way to achieve higher margins. Wipro's profits rose just 3% in 2002's final quarter, because of intensifying competition from rivals in India, the Philippines, and China.
Wipro is making big strides. In the past 18 months, it has won contracts from Lehman Brothers (LEH ) and Delta Air Lines (DAL ) along with a $70 million deal from National Grid Transco PLC, a British power and telecom utility. Wipro broadened its services with its recent acquisition of India's top call center, Spectramind, which handles everything from computer help-desk support to airline reservations. And this unit quickly drew the interest of Microsoft Corp. (MSFT ) Chairman William H. Gates III. While visiting Wipro's Bangalore office in November, Gates announced a new call center--and a desire for broader collaboration.
U.S. customers that have outsourced in India for years pushed Wipro to diversify. "Clients used to tell us to drop down and do 100 push-ups," says Wipro President Vivek Paul. "Now, they say: `We want you to lead."' Indian-born Paul, hired from General Electric Medical Systems in 1999, is largely responsible for shifting Wipro into overdrive. At the time, the company was rudderless. Founded 57 years ago as a maker of edible oils, Wipro moved into electronics and software in the 1980s. When two top execs left to start their own company, Azim Premji, 57, who owns 84% of Wipro, gave Paul free rein to refashion it into a global giant.
Early on, Paul pushed GE's (GE ) "Six Sigma" quality standards, even pasting the Six Sigma rules on Wipro's bathroom walls. He also recruited managers with experience in finance, telecom, and retail. U.S. expertise is especially important to Paul, who at 44 divides his time mostly between Wipro's offices in Bangalore and Santa Clara, Calif. Last month, he hired Christopher Corrado, the former chief technology officer for global tech services at Merrill Lynch & Co. (MER ), to expand Wipro's work in the securities sector.
The risk for Indian companies like Wipro is that they will run too fast and stumble on major consulting jobs. Still, Wipro has an edge when it comes to managing a vast Indian staff. If it can keep clients like Sony happy, it could well become an IT heavyweight.
By Manjeet Kripalani in Bangalore and Pete Engardio in New York