On April 27, after a fine presentation on the futuristic ?machine-to-machine interaction? where Wipro appears to have taken a lead over competition, the new CEO of the firm?s IT services wing, TK Kurien, was asked a more urgent question by scribes?how to fix the banking and financial services (BFSI) story where the firm is lagging peers.
The bread and butter sector of the Indian IT industry currently generates just 27% of Wipro?s revenues of $5.2 billion compared to 44% of TCS and 42% of Cognizant. A surprisingly strong rebound in spending by BFSI companies post the recession has now taken Cognizant very close to displacing Wipro from its No.3 position in the Indian IT landscape. In FY 11, Wipro added incremental revenues of $830 million; Cognizant, in contrast, added $1.31 billion. ?The problem is with the B of BFSI,? Kurien told journalists. ?We have historically not been strong there.?
The history dates back to more than a decade. The Indian IT services industry received a magic tonic in the late 90s with the Y2K phenomena, also called the Millennium bug. It required armies of software engineers and programmers to fix glitches in computer systems and allowed many of the top Indian firms of today to touch base with major American banks for the first time? big corporations such as Bank of America, American Express, Goldman Sachs and Citibank outsourced Y2K work to Indian companies, but Wipro missed the boat. It preferred to stay away from the work thinking it was an ideal case of a spike where the demand would eventually subside. It was also not the most glamorous of work to do. The Y2K work disappeared but the relationships did not. Other IT firms built on the partnerships and capitalised on the next wave of work?all banks figured out outsourcing can reduce costs.
Nonetheless, Wipro managed to grow the overall vertical very fast from a small base between 2001 and 2007, or from 12% of its revenues to 23% in FY07. The firm was reasonably strong in insurance and capital markets but always struggled to break into retail banking. Then came the downturn which brutalised Wipro more than its peers?two of its biggest customers, Lehman Brothers and Washington Mutual?became history. And when the economic recovery took hold, the competition managed to recover faster.
Kurien has now put in place a blueprint of change where ?hunting? for large deals and new opportunities will be the order of the day, where ?farming? existing large accounts for more would become a priority, where building differentiated capability to displace incumbents is seriously pursued and where people would be measured on how proactive they are. The company?s popular lexicon appears to be swinging towards ?speed?, ?agility? and ?hypergrowth?, all very reassuring vibes for the external world concerned about a decision making paralysis that may have infected the company during the previous joint-CEO regime.
?Our strategy is to be proactive. We don?t want to be dependent on the reactive approach to market. We are measuring what part of the business we are winning proactively versus reactively and this puts back pressure on our business units and service lines to identify white spaces that can grow fast,? Rajan Kohli, chief marketing officer of Wipro Technologies and the former head of US sales for the firm?s banking and financial services vertical said.
To understand the fine print of this strategy, we caught up with Soumitro Ghosh, the current global head of financial services at Wipro and one who has been involved with BFSI in the company since 2002?he started the insurance vertical. From his light wood-paneled office in Bangalore?s Electronic City, which overlooks a sprawling campus, Ghosh explained numerous new opportunities that are waiting to be grabbed. None more so than regulatory changes sweeping the developed world.
?Regulatory and compliance changes are happening across retail, investment and insurance world. That is a big driver in terms of spending,? he said. Proprietary trading, where an investment firm traded stocks, bonds, currencies and commodities with the firm?s own money as opposed to its customers? money, is being stopped but can emerge in a different flavour?banks will form subsidiaries to play. This would require new IT infrastructure. Changes in the requirements for capital adequacy and insurance regulations would require new processes, opening up opportunities for business process reengineering as well as IT infrastructure.
Besides regulatory changes, globalisation of banks and new technologies such as the cloud, mobility, analytics and social media are also offering Wipro a chance to play catch up. ?All these opportunities can increase our wallet share. Now, how can one swing that 27% share to a substantially higher number? You have grow faster than the company average to begin with. Over the last one year, we have grown 9-10% higher than the company average. We are on track. However, we have to swing the needle fairly rapidly,? he noted.
That would require big ticket deals, the $100 million ones. ?Those are like the sixes you hit,? the banking head said with a smile. The firm has now put in place teams focused just on the large deals in each of the banking verticals?insurance, retail, capital markets. The firm has also started mapping big accounts microscopically to grow them even bigger. ?In Wipro?s top five accounts, three are from BFSI. These are $100 million customers. The goal is to make these accounts scale to $200 million,? Ghosh said. People heading client management teams have profit and loss (P&L) responsibility and been empowered to take decisions on spending, investments and hiring required to map a customer ?end-to-end?.
A fascinating organisational structure? Ghosh calls it atomising?has been put in place to gear the firm towards a proactive mindset and cover every nook and corner of BFSI comprehensively. Verticals have been broken up into sub-verticals. In insurance, for instance, there is property & casualty and life. Banking is broken into retail, investment, universal, asset management, asset servicing, infrastructure and exchanges. ?This is a good way to cover the market comprehensively. If you have to have quantum growth, psychologically and even mathematically, it is easier to do so if you have more engines than just three. The moment three is atomised into six and then into 12, it is possible for every engine to do $100 million. It is much less daunting than saying one single engine has to do $500 million,? Ghosh explained. Just created, the firm has put the right leaders in place and targets have been allocated at a sub-vertical level. ?The good part of this architecture is that it is scalable. Next year, I can further atomise it,? the BFSI chief added.
The other pieces of Wipro?s strategy is to go after tier two financial organisations, where cloud computing can play a part, and proactively look for product acquisitions. Both Infosys and TCS have core banking products that allow them to enter and cross-sell services. While the firm doesn?t think owning a core banking software product is essential? Cognizant doesn?t have one but has still done well?it is open to plugging gaps in a ?systemic fashion?. New chief strategy officer Rishad Premji has shown early signs of aggression in the energy vertical where Wipro recently announced the acquisition of SAIC?s global oil and gas IT practice. Most certainly, BFSI will be on his radar.
?We are changing our acquisition strategy completely. It could be niche consulting companies and those that bring in competency around package implementation. We may be open to acquisitions of even product companies, something we had stayed away from,? Ghosh said. While the strategies are in place, one would have to wait and watch the execution. Most analysts expect Wipro to rebound in a couple of quarters, and possibly, claw back some of the lost luster. Kurien, Wipro?s turnaround champion, recently told this writer the job has to be done, whatever it takes.