by Stephanie Overby

Indian Outsourcer Wipro’s Strategy: Innovation Push, Global Hiring, Acquisitions

Sep 21, 200714 mins
InnovationIT LeadershipOutsourcing

Wipro's marketing chief talks about the offshore service provider's global strategy, which includes acquiring a U.S. vendor, hiring U.S. and European IT workers and warily eyeing China.

With the IT services market as competitive as ever, every vendor is working hard to differentiate itself in the field of global competitors. With $3.4 billion in revenues and 72,000 employees, Bangalore-based Wipro is a known quantity in many circles. But a Wipro survey found that its brand recognition is just 50 percent among U.S. IT buyers, compared to 100 percent for the likes of IBM and Accenture. So Jessie Paul, who was hired as Wipro’s chief marketing officer in 2005, is hard at work on building a new global identity for the Indian giant.


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Senior Editor Stephanie Overby recently talked to Paul, who for the past decade has been a marketing executive for Indian companies iGate and Infosys as well as Ogilvy and Mather Advertising. She spoke about Wipro’s challenges presenting itself to the U.S. market, its recent expansion everywhere from Mexico to the Middle East, its efforts to hire and train American workers and its new mantra: “applied innovation.”

Stephanie Overby, What is the message you’re trying to send to U.S. IT leaders about Wipro?

Jessie Paul, Wipro CMO: We’re working on building brand awareness in the U.S.

It’s driven by a need to differentiate ourselves. In the past, we could say we’re an Indian offshore provider. Now everyone else has set up shop in India, so now we have to figure out what makes us different not only from Infosys and TCS, but also from Accenture and IBM.

We did a study to figure out what we could use that others hadn’t talked about and was relevant to us. One of the things that differentiates Wipro is that for the last nine years we’ve had an innovation council. Any employee could say, “I have a great idea,” and we would fund it for three years. We had some real success with that initiative as a way to get ideas from the ground up.

At the corporate level, we’re one of the few service providers who has a target for revenues from innovation. We have a goal of 10 percent by 2009. At the end of [March 2007], we had 7.5 percent of our revenues generated by innovation, so we think we’ll hit our goal.

The other thing is that one-third of our IT services revenues comes from R&D outsourcing, which allows us to offer end-to-end IT service and gives us access to new technologies.

Putting it all together, we came up with the message of “applied innovation.”

Is that a hard sell? Historically, Indian IT services providers haven’t been known for innovation. They’ve been known for being very process oriented with a focus on quality and cost savings.

Paul: You’re right. In the past we were known for quality and repeatability. But quality and repeatability are no longer differentiators. They’re hygiene factors. When you come to an Indian provider, you’re going to get that quality and get it at a slightly lower cost. That’s a given. So the question is, what are you doing beyond cost arbitrage and quality?

It’s a new area for us, and so we have to do a little bit of education on what we mean by applied innovation.

So what do you mean by “applied innovation”?

Paul: It’s not pure innovation. It’s not new technology or IT patents for their own sake. It’s innovating for clients to cut costs or reduce time to market or improve reliability.

For example, Wipro invests in building techniques for software quality such as lean software development [a translation of lean manufacturing principles and practices to the software development] and Six Sigma, but in the past you never really knew what the benefit was. Now we can say that we’ve done it on 600 projects and seen an average cycle time reduction of 20 to 30 percent. So we’re able to say when we share this innovation with you, this is how much you’re going to save.

We can talk about delivery model innovation. For one of our clients, we set up an outsourced CTO office to help them drive technology change. We work with the client to make sure the technology is best for their business, and we’re able to do that because we have complete input.

We invested early in a Linux operating system for cell phones, so when the market was ripe we were able to give that to the client with customization at a lower cost to market than if they had done it on their own.

We’ve started an applied innovation advisory council, limited to 10 of our client company CIOs. We’ll provide them with content that they find relevant, and they’ll also provide input on our innovation strategy.

By most accounts, buyers of IT services are more disappointed in the level of innovation provided by their outsourcer than almost anything else (see “Outsourcing’s Innovation Crisis” and “More Outsourcer Innovation Consternation”). Why spotlight innovation?

Paul: For a lot of tactical vendors, it doesn’t make sense. And there is a little bit of disappointment among customers about the level of innovation they’re getting, but this is also in its early stages. Not many people are getting what they expect, but that’s true of the early stage of any technology offering. The potential is there to differentiate us from other India-based players who only talk about cost savings or quality.

As we continue to grow at 30 percent a year on a very large base of revenues, the question starts to be, are you going to deliver services end to end? Why should I use you instead of my incumbent vendor? We’re now competing not only on how well we do something, but how innovative we are and how well we can quantify those benefits for customers. That’s why innovation makes sense.

Three big concerns for IT leaders outsourcing to India right now are increasing salaries, attrition rates and the rising rupee. How do you address those worries?

Paul: The rising costs of India are not that much of a factor. Costs have always been rising and we’ve coped with that through productivity improvements. We have a lot of experience mitigating that risk. It also helps that we do a lot of automation. Once you automate something, you don’t need as many engineers.

We are constantly working on retention. We offer opportunities for higher education, allowing employees to join as non-engineers with basic degrees and paying for their engineering degree. We have a lot of comprehensive HR policies that include benefits like maternity leave. Wipro’s attrition rate is between 13 and 17 percent, whereas our U.S.-based competition has attrition rates averaging 21 percent.

The rising rupee is something which is going to continue. The [Indian] economy is going up. We are looking to contain that, and one of our solutions is the global diversification of our business.

Wipro does seem to be all over the map—literally—these days. In the past few months, you’ve announced new development centers in Monterrey, Mexico and Atlanta, Ga. You created an outsourcing joint venture in Saudi Arabia and recently announced plans to enter Egypt. What drives Wipro’s globalization strategy?

Paul: There are three types of regions we want to be in. One is emerging markets, such as India and the Middle East. The Middle East is a huge growth area. In places like Dubai and Saudi Arabia, there are no players who hold a monopoly and we have long ties there, so it’s a good market for us to target. We’re also looking at developed countries where the outsourcing market has not matured yet, like Japan, Germany and France. And the third is new markets like Canada or Mexico.

If you’re looking at why we open specific development centers, sometimes it’s purely to get access to certain skills in that particular market. We did some acquisitions in Austria and Finland because we do a lot of wireless work.

Another reason we might open a specific center is for proximity reasons. We’re looking for places where we can be close to clients—places that have a good education system and are not terribly expensive. As our mix of business changes and we move up the value chain, we need more face time with the customer. That’s why we’re opening the center in Atlanta and we’re looking for two other cities in the U.S. We’re growing so much—we already have over 8,000 employees in the U.S.—it made sense to have a dedicated center there. Similarly, we have locations in Portugal because it’s a lower cost center to serve the European Union market and it has a retail focus.

A third reason we might go into a specific area is because clients want us to have operations there. We’re opening a center in Mexico because one of our clients had a presence there. It’s a client-centric strategy.

How does your acquisition of U.S.-based infrastructure management company Infocrossing fit into your diversification strategy? (For more on this, see “India’s Wipro to Acquire U.S. Services Provider Infocrossing” and “India Moving Down the Value Chain?”)

Paul: It allows us to have hosted data centers in the U.S. A lot of our clients in verticals like health care have regulatory requirements that dictate that data stay in their home country. With our acquisition of Infocrossing, data can stay in the U.S. In the past, we’ve [partnered] with U.S. vendors to accommodate such requirements, but it wasn’t as good a solution.

The sense is that most Indian vendors are unwilling to invest in major assets such as data centers or U.S. employees because it dilutes their profit margins. Why did you make this particular investment?

Paul: Among Indian players, we are the largest provider of infrastructure management services. It’s also a relatively asset-light acquisition. Infocrossing tends not to acquire the assets themselves. They’ve taken them over and manage them from their data centers, but they don’t own the assets. That’s why we were interested in them.

It also helps to build out our infrastructure outsourcing revenue, which is growing at 70 percent a year.

Another capability we bought with Infocrossing is the mainframe capability, which is important for a lot of our U.S. and Indian clients. And about 20 percent of their revenue comes from healthcare BPO, another area of interest for us.

In terms of Infocrossing employees, we intend to keep most of them because we feel we have enough growth to support it.

As far as why we’re buying and many of our competitors are not, we have gaps in our portfolio and we want to fill in those gaps. We bought a telecom provider last year. We bought a CAD/CAM company because we work in the automotive vertical and GM is one of our customers. We’re filling in gaps so we can become an end-to-end player. We want to be a global systems integrator.

Most multinational outsourcing providers are putting a stake in the ground in China. What’s Wipro’s take on China’s role in the outsourcing market?

Paul: We’re slightly more cautious in terms of China. We’re opening a center in Chengdu, but we don’t have that many people there today. If you look at the salary costs for India and China, they’re about the same. But in terms of IT maturity, China is not as strong as India. They’re catching up; they’re teaching English in a big way. But we’re going with a client-centric strategy in China. We’re there for the clients that want us to be there.

There was an article in BusinessWeek that stated that IBM had become the leader in serving the local Indian IT services market while India-based multinationals continued to focus on the export market.

Paul: We didn’t agree with the characterizations in the BusinessWeek article. Wipro has always been based out of India. Wipro entered the technology space as a hardware vendor serving the Indian market. It converted into an outsourcer serving the Indian market and then the global market. But we’re still one of the largest players in the domestic market. This year, we’ll have $800 [million] to $900 million in outsourcing revenue from India. Wipro does non-IT work in India in the consumer care area. Wipro is very committed to the Indian market and we’re hugely present in infrastructure, IT services and consulting.

How is Wipro dealing with the H-1B issue, practically in terms of getting visas, and politically?

Paul: The visa situation has been an issue for many years. We’re dealing with it now by doing more localization [i.e., hiring more domestic workers in their host countries]. We’ve done some of that in Europe, where 25 percent of the staff is local. In Japan and Finland, 90 percent of the staff is local. The trend is definitely toward more localization.

Isn’t it much more expensive for you to, say, hire a U.S. professional in Atlanta than bring someone over on a visa?

Paul: It can be more expensive, but it depends on what work you’re doing. Clients are willing to pay a higher rate for the kind of work that is done onsite. It’s not just about salaries. If you add in relocation costs, it can even out. With most of our new centers, they will be primarily local staffs. Atlanta will be entirely localized. We’re looking for seasoned professionals who have done consulting work. We’re looking for defense industry veterans because they are highly qualified and have a great work ethic. We’re also recruiting from local universities.

Our goal is to increase the talent pool we can hire from. We’re working with colleges [in the U.S.] to change their [syllabi] and make their graduates more industry ready. We’ve teamed up with educational institutions in Atlanta the same way we have in India because there’s a difference between what students are being taught and what we need. Our employees need to be able to work in a team environment. So we offer a program where they can do a project for us in their final year of school and that decreases the amount of training they have to do when we hire them. It’s important to make the university programs more relevant for industry. We’re hiring 15,000 new employees this year.

Do you see Wipro’s corporate culture changing at all as it becomes more global?

Paul: Our biggest space continues to be India. Most [about 60,000] of our 72,000 employees continue to be in India. We want to be a global system integrator, so in that sense nationality is not a big consideration. But our culture is still based in India. By and large, we’re still a very techie-oriented firm. Engineering is in our genes from the chairman downward. We are also very committed to learning. We’re investing in training and assimilation, so our culture will continue on as we go global. We’ve also introduced a training program where we take global hires to India for six weeks. We find that the orientation is much easier to do than in the past when training was done in the local geography.