Wipro IT Services cuts CEOs by half, lags India-based competitors in top-line growth and invests in the retail vertical

Below is TBR’s commentary on Wipro IT Services’ 4Q10 earnings (fiscal 3Q11). Please feel free to use the below content, or call/email (603-758-1826/ [e-mail]) for additional commentary.

Wipro IT Services goes from two CEOs to one CEO

• TK Kurien, currently chief executive of Wipro’s eco-energy division, will take over as CEO of Wipro IT Services February 1, replacing current joint CEOs Girish Paranjpe and Suresh Vaswani.
• Chairman, Azim Premji, gives credit to the joint CEOs for bringing Wipro IT Services through the economic downturn, and attributes the upcoming executive change to “a need for a simpler organization structure.”
• TBR believes a single CEO will allow the organization to be more nimble, react more quickly to developments in the IT market and drive Wipro IT Services’ transformation from an Indian outsourcer to a stronger competitor to MNCs.
  

Wipro IT Services’ revenue growth lags its India-based competitors

• In calendar 4Q10, Wipro IT Services’ saw solid growth of 17.2% year-to-year. While the organization fell short of HCLT (32.6%), TCS (31.1%) and Infosys (28.7%), its results were a vast improvement over the 6.0% year-to-year increase witnessed in 4Q09.
• The organization’s margins continued to suffer as investments to increase Wipro IT Services’ reputation and presence in countries outside of India continue. Investments include hiring onsite locals, which will create tighter customer relationships. Also, in 4Q10, Wipro IT Services launched a development center in Hungary and began investing in a data center in North Carolina, USA.        
• TBR believes the organization’s main focus is on achieving sustainable long-term growth by sacrificing revenue growth and margins in the near-term. We believe that if Wipro IT Services continues to forgo quick, short-term deals for long annuity projects, it will forever grow at a slower pace than the other Indian vendors, placing it at a disadvantage.
  

Wipro IT Services ramps-up its capabilities in the retail vertical

• Wipro IT Services announced two new offerings catered to the retail vertical in 4Q10

1. Profit Lock: The new inventory shrink management solution will provide retail organizations with an end-to-end view of the inventory shrinkage lifecycle to more effectively manage loss prevention, IT, finance and accounting, merchandising, risk & compliance, supply chain and logistics.
2. ENCORE (Enhanced Commerce Retail Ecosystem): The new platform allows retailers to improve their e-commerce systems by improving transaction processes, providing market insights, analyzing retail operations and managing business processes.

• TBR believes these new offerings will help Wipro IT Services get a jump on the competition as economic improvement stimulates increased consumer spending, subsequently leading to accelerated spending in IT solutions from the retail supply chain.