WIPRO - IBEF

WIPROWipro has emerged as one of the major Indianglobal brands in the area of IT consulting services.BackgroundWipro Limited (formerly Western India VegetableProducts Limited) was incorporated in 1945 and itcommenced operations of vegetable oils business in1946. In the mid-seventies, it diversified into newerbusinesses, such as computer hardware, fluidpower, and finally into software/hardware productsand systems integration/ software solutionsprovider, and eventually developed into acomprehensive IT company from India, by the startof the next century. The story of Wipro'sphenomenal and uncharacteristic journey ofunrelated, but successful diversification is a uniquecase study in corporate wealth creation, which hasprimarily, been through successful informationtechnology businesses being run on global scale.In 1977 Wipro perceived a supply-constrainedmarket in computer hardware in India, and it set upWipro Infotech Ltd. to address this business by waysourcing components and packaged software fromsmall US based firms.Wipro entered the nascent“mini computer” market in India, and soon becomea market leader in rapidly expanding institutionalcomputing market.With the emergence of personalcomputing era in the early eighties it becameimperative for Wipro to address this need, and itforged an alliance with Sun Micro Systems forselling Sun workstations in India.The personalcomputing segment was Wipro’s major business formany years through various technical andmarketing tie-ups till it finally entered into jointventure with Acer for manufacturing PCs in India.In another somewhat unrelated diversification itformed a joint venture with GE, for addressing themedical diagnostics imaging market in 1989.Having identified healthcare equipment segment asan emerging business opportunity, Wipro set up agroup company called Wipro Biomed Ltd toaddress the healthcare instruments marketoutside the diagnostic segment. Wipro's forayscontinued further in the field of technology and duction plantsWiproSoftware, hardware,systems integration,enterprise solutions& ITES1945Azim PremjiIndia, America,Europe, Asia PacificIndia, USA, UK,Europe, China189

applications with tie-ups in packed softwareproducts such as spreadsheet, and databaseapplications through another group companycalled Wipro Systems. It also entered the field ofmedical/healthcare software in association withGE and eventually acquired the healthcaresoftware applications business GE Healthcare ITSystems in India.The company's promoters hold the majority stakein Wipro (81.7 per cent).The next largestshareholders are the Indian public (with 7.5 percent stake) followed by foreign institutionalinvestors (with 4.7 per cent stake). Foreigncompanies, domestic financial institutions, privatecorporate bodies, trusts and mutual funds hold theresidual shares.ProductsWipro is a diversified conglomerate with a presencein businesses as diverse as information technology,vegetable oils & soaps, financial services, medicalsystems, lighting and hydraulic cylinders.Wipro'sstrategic classification of its businesses follows acombination of product-market and geography on190typical transnational dimensions, which are GlobalIT Services and Products, India and Asia-Pac ITservices, Consumer Care and Lighting and FluidPower.Wipro's businesses are run through divisionsand subsidiaries of Wipro Limited, and its corporateorganisation is structured along strategic businesslines such as Wipro Infotech,Wipro Technologies,Wipro Fluid Power,Wipro GE Medical Systems(now known as GE Healthcare) and WiproConsumer Care and Lighting.Global IT Services and Products Segmentcontributes to over 75 per cent of revenues,followed by India and Asia-Pac IT services andproducts with 16 per cent and the remaining byConsumer Care and Lighting and Fluid Power.While it has done fairly well in most of itsbusinesses, it is Wipro's IT business which hasmade a significant impact on global dimensions.Within the IT business of Wipro, it offers the entirerange of services, which includes softwareproducts, an enterprise solution, system integrationand IT enabled services. In terms of verticaldistribution, the company operates in diverse areasencompassing manufacturing, telecom, retail,finance, and energy & utilities

Financial PerformanceWipro's revenues have grown at a CAGR ofaround 25 per cent between 1999 and 2005, whilenet profit has grown at an impressive CAGR of 110per cent in the same period. Most of this growthhas been driven by earnings from overseas markets,the share of which in the total revenue has grownfrom only 35 per cent in 1999 to nearly 75 percent in 2005.The company has consistentlymaintained high profitability levels. It has managedto earn handsome returns over equity and capitalemployed, with its returns on capital employed andon net worth at 30.6 per cent.The company hasbeen very conservative in its financial structure andhas continued to remain low on debt even thoughit could have improved its return on equity throughgearing.Wipro's contribution in making “Madein India' globalWipro, as a part of its growth strategy, had beenhistorically global, and had sought international tieups in businesses where partners broughttechnology, access to global markets and processknow-how, while Wipro brought access to localmarkets, management capability and in most casesan existing presence. Whereas this worked well tillthe mid-nineties it became imperative for Wipro toallow alliances with greater controlling shares ofpartners, as India went through economic reformand liberalisation. One of the important milestonesin this respect was the partnership with Acer formanufacturing personal computers and wasfollowed by alliance with Citrix Systems.Having established domineering presence in IndianIT space,Wipro approached the global softwaresolutions market with Indian talent pool and itsexisting technology tie-ups which were graduallymade more comprehensive with virtually allsoftware solutions and IT services being offered.Wipro's successive global forays over the years2000 to 2005 is as follows: 2001 - Opens IT services office in Paris andFrankfurt and enters the European market.Launches West Asia and Australian operations 2002 - Acquires controlling stake in WiproSpectramind thus acquiring access to ITES clientsin US and UK, ties up with US-based contentmanagement company, Interwoven, launchesHong Kong operations, acquires GE's healthcaresoftware arm in India and global Energy practiceof American Management Systems, creatingvertical competencies in healthcare and energydomains for software solutions business 2003 - Acquires Wipro Nervewire, aMassachusetts-based IT consulting companyserving customers in the financial services sector 2004 - Signs agreements with UAE's leadingsystems integrator, ITQAN, as business partner,Gulf Insurance Company for IT consultancy;eGain Communication Corp, a wholly ownedsubsidiary of the California-based eGain to offer191

system integration services. Establishes asubsidiary company,Wipro Shanghai Ltd. In China 2005 - Opens up its third office in Munich,Germany after those in Kiel and Dusseldorf.Wipro has emerged as one of India's truly globalcorporate houses with over 75 per cent of itsrevenues originating from global clients for both ITsolutions and IT Enabled Services, and it operatesglobally through both offices, and incorporatedentities in other countries. 40 global developmentcentres spread over 35 countries employing over35,000 employees from 23 nationalities is a cleartestimony to Wipro being a true globaltransnational company. Further Wipro has managedto attain low regional concentration risk with over20 per cent of revenues coming from Europeanmarkets and has also successfully ventured intoAsia Pacific Markets with its IT solutions. Significantoverseas incorporations include Wipro HoldingsLtd. (UK),Wipro Technologies UK Ltd.,WiproShanghai Ltd,Wipro Japan KK and Wipro Inc.(USA).Factors fuelling Wipro's globalinitiatives192The key factors which have enabled Wipro toglobalise its operations are both intrinsic andextrinsic.The growing need for customised ITapplications required skilled manpower atcompetitive costs.With most product softwarecompanies finding it difficult to providedownstream support and installation andmaintenance services, an opportunity was createdfor existing Indian IT companies. Availability of lowcost skilled manpower, early entry in the businesslife cycle coupled with increasing demand for ITservices and solutions enabled Wipro capture asignificant market share of both the systemsintegration and software solutions pieces.Thecompany also set high quality standards throughsuccessive SEI-CMM levels, and created anorganisation-wide quality culture by adopting SixSigma tools and processes.The key factors behind global success of Wipro areas follows: Comprehensive range of IT services: Wiproprovides a comprehensive and integrated suite ofIT solutions, ranging from consulting toapplication development and maintenance andend-to-end responsibility for project executionand delivery.This is done through a combinationof offshore development centres in India andseveral near shore development centres locatedin countries closer to clients ' offices.Thisintegrated approach is primarily to takeadvantage of key growth areas in enterprisesolutions, including IT services data warehousing,implementation of enterprise package applicationsoftware such as enterprise resource planning,supply chain management and customerrelationship management. World-class quality as measured by SEICMM and Six Sigma initiatives: Wipro is thefirst IT services provider in the world to achievethis standard. SEI-CMM is widely accepted in thesoftware industry as a standard to measure thematurity and effectiveness of software processes. Service offerings in emerging growthareas: Another important factor, which is drivingthe performance of Wipro, is its ability to identifythe key value drivers. For example, it identifiedtechnology infrastructure outsourcing as anemerging growth area in 1998. Broad range of research and developmentservices: Wipro is one of the few major ITservices companies in the world capable ofproviding an entire range of research anddevelopment services from concept to productrealisation.Wipro provides IT services for