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Table of Contents Topic Page No
Table of Contents Topic Page No
TABLE OF CONTENTS
Topic Page No:
Company Overview 2
Global IT Industry Overview 5
Wipro’s SBU’s 7
Strategic Alliances 8
European Market Perspective 10
SWOT Analysis 12
Comparative Analysis 14
Wipro’s Strategy to become Global 15
Positioning for Global Strategy 22
Financial Analysis 26
Financial Statistics 28
Road Map of IT 32
BCG Matrix for WIPRO SBU’s 33
Future Road Map of WIPRO 36
Suggestions and Recommendations 37
Bibliography 38
Wipro Infotech India - Wipro Infotech is the IT services, solutions and products
division of Wipro. It operates in the geographies of Asia-Pacific and the Middle-East.
Wipro Infotech is one of the leading manufacturers of computer hardware and a provider
of systems integration services in India. The company manufactures a popular line of
desktops, notebook PCs, data servers and offers a range of technology services. Wipro
infotech, the company’s middle east and Asia Pacific IT services and products business,
recorded revenues of Rs 2.70 billion, an increase of 68 per cent over the same period last
Wipro Lighting –Vision: innovative range of cleanroom luminaries, clean & pure Wipro
Lighting manufactures and markets the Wipro brand of luminaires, lamps and
accessories. Wipro Lighting caters to both institutional and retail consumers, offering
lighting solutions across various application areas such as commercial lighting for
modern work spaces, manufacturing and pharmaceutical companies, designer petrol
pumps and outdoor architecture.
Wipro consumer care Products - At WIPRO, the consumer care and lighting division,
which precedes the mainstay IT services, made news recently with its aggressive moves.
It gobbled up Hindustan Lever's dormant brand Glucovita in the glucose drinks segment
and then upstaged Marico Industries to take up the distribution of Chandrika soap. And
there are no pauses, as Vineet Agrawal, President of Wipro's Consumer Care and
Lighting division, is betting on further acquisitions to help the business leapfrog to new
highs.
Strategic alliances: In its sixth acquisition in seven months, Wipro on Thursday said
it has acquired the Finland-based Saraware Oy in an all cash deal worth $32 million.
140
Project Based
120
Services
100 69.1
62.3 65.6
80 56.3 59.2 Infrastructure
Related Outsourcing
60 26.3
25.9
40 24.3 24.9 25.4 BPO
14.7 16.6
20 10.9 Wipro13.2
11.9 as a company going global 11
17.1 18.5 20.2 22.3 24.8
0 Application
2006 2007 2008 2009 2010 Outsourcing
• Improving IT efficiency continues to be a priority
• Infrastructure consolidation continues to be a focus area
• Preference towards ERP packages vis-à-vis custom built applications
• Increasing interest in Integrated BPO+IT solutions
• Regulatory changes adding to IT budgets
• Outsourcing contracts getting shorter
Wipro gears up for mega global deals: Tech major Wipro seems to have enhanced
significantly its delivery capabilities through its series of acquisitions, building multiple
domain expertise and readying a bouquet of service offerings. The company says it is
now ready to venture into deep waters to contest for mega deals, in the range of $250 to
$500 million, with top global players like IBM, Accenture and EDS. Suresh Vasvani,
president, Wipro Infotech, told The Times of India, ‘‘All the investments we have done
so far towards enhancing our service lines have started yielding results. This has given us
immense strategic edge. As a result, we currently have a pipeline of several $100 million
deals and many mega deals of international size. We started experiencing this trend in the
domestic market a couple of quarters ago by winning work orders from HDFC and Dena
Bank worth $80 mn and $70 mn respectively. Most of these mega deals are going to be
in the areas of offshoring, infrastructure management and business process outsourcing.”
Wipro’s integrated services approach seems to have worked well for it. It has brought all
its services; consulting , infrastructure management, software applications, systems
integration, data centre, BPO services and PC business under a single package.
"Customers are looking at companies that can provide integrated services. total
Strengths Weaknesses
Large Employee Base: (42000 as on 2005-06 with High reliance of US and European markets.
low attrition rate)
Lack of focus on Consumer durables and
Large number of Bluechip Clients like Nortel, Engineering products.
Compaq and Seagate
Small size of Balance sheet to make a deal and
Operating profit margins at 32.3% lower than its acquire new profitable companies as compared to
peers. TCS and Infosys.
While strengths and weaknesses of the Indian software sector have been an outcome
of the past decisions and initiatives, what lies ahead is well captured in the
opportunities and threats. While India’s share in the global technology marketplace
continues to remain miniscule (at 1.8%), this presents an opportunity for Indian
software companies to increase their penetration into newer markets and newer
domains. Further, as more global companies are looking towards outsourcing their
tasks to Indian software companies with a view of becoming more cost competitive,
the imperative for the former (Indian software companies) lies in moving rapidly up
the software value chain, into high-end domains like telecom and banking services.
In this initiative of moving up the value chain, Indian companies are then likely to
benefit from the scale advantages of the selling and marketing expenditure that
have been made in the past. Talking about probable threats to the fortunes of these
Indian tech companies, the most serious being the ‘successful’ replication of the
Indian offshoring model by the global tech biggies like EDS, IBM and Accenture.
While, at present, most of the managements of Indian software companies are of the
belief that it would be rather difficult for these global giants to completely replicate
the Indian model owing to the changes that they would have to make in their
revenue and cost structures, as and when these MNCs are successful in the
replication process, it would pose tough times for the Indian companies. Finally,
Indian software companies, in retaliation to increasing pressure due to global
economic slowdown, have reengineered their business models and widened their
service base through moving up the software value chain. Not only have these
changes helped these companies in improving their financial performance, even the
Comparative analysis:
It is clear that valuations (based on our FY04 earnings estimates) for most of the Indian
software majors now look stretched. And this is a result of the ‘irrational exuberance’
displayed by market players on stocks of these companies time and again. The main
concern lies in the fact that nothing so ’revolutionary’ seems to be happening with the
software companies that vouch for their prices rising so rapidly. While the overall
environment certainly has shown signs of improvement, investors need to practice utmost
caution from rallies of these kinds as they take along with them even those companies
that have destroyed capital in the past. Temptations are definitely very hard to suppress
but we believe, fallacies resulting from such temptations in the past must have made
investors more wise and introspective in their investment decisions.
Past strategies: Growth has four faces: organic; acquisitions; diversifications and joint
ventures. Premji's growth strategy over the past years shows a marked change from
earlier patterns. Between 1966-2000, Wipro grew through diversification, partnerships
and organically, through innovations it pioneered. Today, growth is also through
acquisitions and borrowed ideas, and there are fewer partnerships.
Interestingly, Premji's entry into the BPO (business process outsourcing) was remarkably
late in coming, and seems to be a somewhat knee-jerk reaction to slowing growth rates in
his core businesses. In July 2002 Wipro acquired Spectramind in a Rs4320mn deal. The
takeover caused a few rumblings amongst analysts who felt that Wipro overpaid for
India's largest non-captive call-center (GE's operations in India are estimated to be larger)
but Spectramind is already a growth driver, contributing about 4% to Wipro's total
revenues.
Moving up the value curve is another growth strategy. It is no secret that Premji would
like Wipro to join IBM and Accenture in the sophisticated and lucrative tech consulting
business, helping customers design their IT systems, and not labor in the lower level
space of offshore coding. Moving towards this goal, he bought NerveWire Inc, a
financial services consultancy located in Newton, Massachusetts, for Rs912mn.
Recent strategies: IT Services and Products segment accounted for 69% of the
Company's revenue during the fiscal year ended March 31, 2006 (fiscal 2006). Wipro
provides its clients customized IT solutions in the areas of enterprise IT services,
technology infrastructure support services, and research and development services. The
Company provides a range of enterprise solutions primarily to Fortune 1000 and Global
500 companies. Wipro addresses the banking and financial services segment, the
manufacturing sector, and the retail, energy and utilities industries through its range of
service offerings. The Company's enterprise solutions division accounted for 63% of its
IT Services and Products revenues in fiscal 2006.
Service line expansion - Wipro will build a full port- folio of technology services. The
company has already added a number of new services such as package implementation,
infrastructure outsourcing (including remote network management), business process
outsourcing and so on.
Investing in human capital - Wipro Technologies is investing a lot in training, not only
on the technical side but also on teaching its engineers how to be consultants. The
company's employees, who several years ago were basically "code cutters", have
demonstrated the ability to take on large, complex projects and run them out of India.
Now, they must be able to develop a peer-like relationship with customers, persuading
customers instead of just accepting direction and doing a good job of execution.
The Company develops strategies and implements solutions for its clients to manage
multiple sources of data for use in their decision-making processes. Wipro uses its
expertise in package software to architect, implement and maintain client-specific
solutions. The Company also provides consulting services. Wipro provides offshore
testing services. The Company's service portfolio in testing covers the entire gamut of
user needs from product concept to deployment, across the stages of the
product/application life cycle.
Effective as of July 1, 2005, the Company reorganized the Global IT Services and
Products segment into two operating segments: IT Services and Products, and BPO
Services.
In December 2005, Wipro acquired mPower Software Service Inc. and its subsidiaries.
Pursuant to the terms of this acquisition, the Company also acquired MPact India, a
joint venture between MasterCard International and mPower Software Services Inc. In
December 2005, Wipro acquired BVPENTE Beteiligungsverwaltung GmbH and its
subsidiaries (NewLogic Technologies AG), a European system-on-chip design
company. In April 2006, the Company acquired cMango Inc., a provider of business
service management (BSM) solutions. In May 2006, Wipro acquired, subject to
Wipro competes with Accenture, EDS, IBM Global Services, Cognizant, Infosys, Satyam
and Tata Consultancy Services.
Wipro GE Medical Systems Private Limited is a joint venture with General Electric.
General Electric holds 51% of the equity in the joint venture and Wipro holds 49%. The
joint venture provides customers in South Asian markets after-sales services for all GE
Medical Systems products sold to them. Products offered in this market consist of GE
Medical Systems products manufactured worldwide and portable ultrasound equipment
manufactured in India by this joint venture for the global markets.The Company
competes with Hindustan Lever, General Electric, Philips, Hitachi Ltd., Hyundai Motor
Company, UT Limited (India), Danfoss Group, Komatsu Ltd. and Siemens.
Strategy for Middle East: Middle East forms a critical component of our global
strategy,' says Wipro. Being a rapidly growing IT services market, Middle East forms a
critical component of our global strategy,' said Suresh Vaswani, President, Wipro during
his visit to the region. 'Wipro is extremely committed to building a strong customer base
in the Middle East and will continue to provide value to our customers through our
global experience, understanding of various technology domains and bringing
customized solutions to our customers in the region.' Wipro Limited successfully
Strategy for west Asia: WIPRO sees a tremendous synergy in the Indo-Gulf markets
and it aims to further strengthen this relationship in the years to come, according to Mr
Rajat Mathur, Vice-President, International Operations. Speaking at the recently-
concluded India-Gulf Partnership Summit in Dubai, Mr Mathur said that West Asia and
the Gulf were moving into higher value services as IT was increasingly relied upon to
drive business momentum. He said this region formed a critical part of Wipro's global
business strategy. "Wipro as a company is extremely committed to building a strong
customer base in the UAE and across the region. We are confident that our efforts in
bringing best practices will spur healthy growth of ICT industry in UAE,". In 2004-05
alone, Wipro had year-on-year growth of 85 per cent in APAC/Middle East region. In
Q2, 2005-06, the company had a growth of 28 per cent in the Asia Pacific/Middle East
region. In Q2 ending September 2005-06, Arab National Bank, Saudi Arabia, selected
Wipro as its partner for managing the data centre operations of the `Disaster Recovery
Centre'. In addition Manso Group, a diversified business group in KSA, having interests
in petrochemicals, steel, laminates and transportation business has chosen Wipro to
Implement Enterprise Application Platform - SAP Enterprise Version.
Wipro's strategy for future growth: Wipro, a leading India based provider of IT
services, has drawn up its strategy to become a world leader in the field. The company
has stated in its latest annual report that the markets addressed by it are undergoing rapid
Wipro expects to significantly grow its global IT services business and the percentage of
its total revenues and profits contributed by this business over the next few years. It
hopes to achieve this objective by identifying and developing service offerings in
emerging growth areas as separate business opportunities, such as infrastructure support
services, business intelligence services and telecommunication, internet and application
service providers.
The intention is also to increase the number of clients through a dedicated sales team
focussed on new client acquisitions and increasing its presence in Europe and Asia. The
goal is to make every new client account earn over $1 million in annual revenues within
twelve months. Also the company intends to increase its share of business with existing
clients by expanding its range of IT solutions and by increasing its knowledge of industry
segments and individual client businesses to allow it to better understand client
requirements. The focus would be on improving operating margins by increasing the
revenue per IT professional by providing higher value added services, increasing the
number of productised services and increasing the proportion of the company's fixed
price contracts. In India, the growth plan includes offering a full service technology
solution including systems integration, support services, software and networking
solutions along with branded hardware products which the company hopes would
enhance profitability significantly. The company is also planning to pursue selective
acquisitions of IT service companies that would allow it to expand service offerings and
Traditional business: The Company has been in the consumer care business since 1945
and the lighting business since 1992. The consumer care business has historically
generated surplus cash for the company to be able to grow in other businesses. The
strategy is to maintain a steady growth in operating income through efficient capital
utilisation, strong brand name recognition and expanding nationwide distribution
network
Wipro expects to close at least one acquisition in 2007. This is in line with Wipro's
strategy of acquiring a string of companies across different verticals that either fill up
their technology gaps or a ready customer base. It has put through half a dozen
acquisitions over the past 12 months.
In a vision exercise that Wipro went through in mid 2000, Wipro Technologies expected
to generate annual revenues of US$4bn by 2004. Half of these revenues were to come
from organic growth and the other half from acquisitions. The company is still far from
this goal: revenues in 2001/02 amounted to US$470m. However, Mr. Paul emphasizes
that the US$4bn figure was not meant to be a target but a vision that was used as a
Like many other Indian IT services companies, Wipro Technologies has also been trying
to diversify away from the US market, which in 2001/02 accounted for 57% of the
company's revenues. It has been targeting particular industries in Europe such as telecom
and utilities. As a result, the share of Europe in revenues, about 36% in 2001/02,is
relatively high compared with many other major Indian software exporters. Japan has
also emerged as a significant market.
The Company's India and AsiaPac IT Services and Products business segment, which is
referred to as Wipro Infotech, is focused on the Indian, Asia-Pacific and Middle-East
markets, and provides enterprise clients with IT solutions. The India and AsiaPac IT
Services and Products segment accounted for 16% of Wipro's revenue in fiscal 2006. The
Company's suite of services and products consists of technology products, technology
integration, IT management and infrastructure outsourcing services, custom application
development, application integration, package implementation and maintenance, and
consulting. In addition, Wipro provides its domestic customers with access to its range of
global IT services, including enterprise solutions, and research and development services.
The acquisition of Saraware would help in positioning itself in the GSM/WCDMA
wireless network market, which stood at $32 billion in 2005. Wipro's near-shore presence
in Europe has been fortified by this acquisition. It would also help Wipro prepare for the
3G evolution and give it access to the mobile security (public radio systems used by
police) domain. The acquisition of the Austrian chip design firm NewLogic would
strengthen Wipro's presence in Bluetooth and the wireless local area network (WLAN)
space in the global market. Acquisition would help the company create a strong footprint
Impact in the wipro’s share price in the Indian stock market after it had bought
New Logic and other foreign acquisitions in 2005:
WIPRO Ltd's net profits grew by 97 per cent over the corresponding quarter last year to
Rs 214 crore. Revenues grew to Rs 798 crore, an increase of 28 per cent year-on-year, a
performance backed by cost cutting, and strategies that seem to have paid off. However,
results showed a negative growth vis-a-vis the previous quarter. Total revenues in Q4 last
year was Rs 938 crore and PAT was Rs 217 crore. The company has been following a
three-pronged strategy -- of going after the large $ 100-billion systems integration and
technology infrastructure market competing with global players; entering the APAC and
Middle East regions through Wipro Infotech and following the Six Sigma processes and
eprocurement as strategies to cut costs. Wipro Technologies, which contributed a major
chunk of revenues at 65 per cent, has shown a growth in offshore realisations of 3.4 per
cent and onsite realisations of 2.6 per cent. Wipro Technologies also contributed 93 per
cent of the PBIT. Revenues from the Global IT arm were Rs 521 crore for the quarter and
PBIT was Rs 190 crore. Operating margins went up to 36 per cent for the first quarter
this year as against from 31 per cent in Q1 ended June 2000, and 35 per cent in Q4 last
year. The increase was primarily due to increase in offshore realisation by 15 per cent
and onsite realisation by 16 per cent. In the quarter, Wipro's R&D Services contributed
52 per cent of the Global IT services revenue, Enterprise Solutions contributed 42 per
cent and the remaining 6 per cent, was contributed by Technology Infrastructure
• Wipro Limited Revenue increased by 45% Year on Year (YoY) to Rs. 39.79
billion (Rs. 3,979 Crores)
• Profit After Tax (PAT) grew by 41% YoY to Rs. 7.65 billion (Rs. 765 Crores)
• Global IT Services & Products Revenue was Rs. 28.76 billion (Rs. 2,876 Crores),
a 35% increase YoY
• Global IT Services & Products Profit before Interest and Tax (PBIT) was Rs. 6.96
billion (Rs. 696 Crores) and grew by 32% YoY; Operating Margin was at 24.2%
• Global IT Services & Products added 37 new clients in the quarter
• Wipro’s India, Middle East & Asia Pac business recorded 56% growth in PBIT
YoY. Revenue grew 76% YoY
• Wipro Infotech: It falls under Question Mark. Question marks are growing
rapidly and thus consume large amounts of cash, but because they have low
market shares they do not generate much cash. The result is a large net cash
comsumption. A question mark (also known as a "problem child") has the
potential to gain market share and become a star, and eventually a cash cow when
the market growth slows. If the question mark does not succeed in becoming the
market leader, then after perhaps years of cash consumption it will degenerate
into a dog when the market growth declines. Question marks must be analyzed
*Source: Wipro Infotech had a good third quarter this fiscal. The arm recorded revenues
of Rs 700.8 crore, a growth of 76% Y-o-Y and a PBIT of Rs 58.7 crore, a growth of 56%
Y-o-Y. The services business contributed 32% to the total revenues and grew 49% Y-o-
Y, while the products business grew 91%. The division’s contribution to Wipro’s total
sales stood at 18% in the third quarter as against 15% in the previous two quarters. Wipro
Infotech’s share of Wipro’s PBIT was 7%.
*Source: Europe has been one of the fastest growing markets for Wipro. For the fiscal
year 2005-06, Revenues from Wipro’s the European operations delivered 48% growth
rate and contributed more than 32% to Wipro’s IT Services revenues.
*Source: Wipro's Consumer Care and Lighting division will be firing on several
cylinders in the current year. It is buoyed by the 20 percent plus top line growth achieved
in two successive years(2003-05). When the FMCG industry as a whole has been moving
forward at 4-5 percent.
Wipro's lighting division, set up in 1992, has been catering to specialised niche segments
within the institutional sector, such as software companies, banks and landscaping. The
organised lighting industry is estimated at about Rs 500 crore, and Wipro, Philips and
Bajaj are among the leading players.
*Source: Azim Premji addressing the analysts for the quarter ends 31st dec, 2006.
The infrastructure business is a big growth driver for us. Even if you look at our last
quarter performance, the performance was 20% less sequential growth. At last quarter
we've grown roughly 80% year-on-year. So it is a high growth business and a big growth
driver for us globally as well as a big differentiator for us globally.
The software industry is anticipated to grow at 25% a year over the next five years as per
the McKenzie Nasscom report, and the BPO industry is expected to grow in excess of
30% a year. On a sum total, we will grow ahead of the industry going forward.
Wipro as per current financial data , Revenue increased by 30% to reach 10,626 crores;
Profit after tax grew 27% to reach 2067 crores. Revenue from our combined IT business
crossed two billion dollars landmark. Global IT services business grew 33%; and Wipro
Infotech, the India, Middle East, and Asia Pac business, grew 22%. R&D business as
well as the Europe Geo reached half a billion dollar mark in this fiscal. And employee
strength reached about 53,000 crossing the 50,000 mark.
In the coming years the company will grow by more than 30% in terms of revenue and
profit because of more overseas acquisitions and demand in the IT Market.
IT software and services industry in India accounted for 2.4 per cent of the country's
GDP and 16 per cent of exports in 2002-03.
- By 2008, the Indian IT software and services industry is projected to account for 7 per
cent of India's GDP and 35 per cent of total exports.
2. Strategic Business Units which are right now in question Mark (BCG Matrix)
should increase their market share by implementing long term strategies to
become in the star mark(BCG Matrix). It should strengthn the domestic market as
well by taking the advantages of liberlisation and Globalisation.
3. Establish presence in emerging markets such as Brazil, china, korea, where there
is a huge potential for further growth. Since being the first player in the market
results in market leadership in subsequent years when the market is more open
and attractive for other investors.
4. Wipro should try to improve in net profit margins to improve its valuations in the
coming years.
5. Wipro can take the strategic advantage of growing market demand of retails
which is booming in Indian Market by having strategic alliance with different
Retail Companies.
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