Wipro CEO Delaporte’s new plan could give the Indian IT services giant the edge it needs to catch up to its peers, according to analysts
- Wipro’s new CEO Thierry Delaporte plans to rehaul the company’s entire operating structure to focus on large deal wins and building strategic partnerships.
- New positions will be created to facilitate the plan and Wipro’s 26 segments will now be cut down to a mere six categories.
- Analysts believe that the changes, if successful, could finally allow Wipro to catch up to its peers like Tata Consultancy Services (TCS), Infosys, and HCL Technologies.
AdvertisementAfter being at the helm of Wipro for one official quarter, its new CEO, Thierry Delaporte, has laid out his vision for the Indian IT services behemoth. And, it’s a big shift from what the company was doing before.
“Wipro is undertaking the drastic restructuring of its business, reducing the layers, and splitting the business by region. It expects this to result in a much more agile and nimble organisation, which will accelerate growth,” remarked Motilal Oswal’s report.
The end goal is to trim down the fat and red tape by prioritising high-growth sectors and markets. Within that, the impetus will be on large deals and strategic partnerships — without compromising on margins.
“Efforts and investments would be focused on these targeted markets to build or sustain market leadership,” said Delaporte during the analyst meet.
While doubling down on high growth areas and focusing on certain markets would ease the operating model, the actual execution of the plan will determine its efficacy, according to analysts.
What’s in it for the shareholders?
For shareholders, this may be the change that finally lets Wipro live up to its full potential. Over the past few years, the company has underperformed in comparison to its peers like Tata Consultancy Services (TCS), HCL Tech and Infosys. Recent changes in leadership only added to the stress.
“After many failed experiments, this was perhaps the last throw of dice by the Wipro board – a CEO who will not shy away from taking hard decisions, to take Wipro to its rightful place – at par with peers,” said Phillips Capital in its outlook report.
|Company||% change in share price since January||Market valuation|
|TCS||21.02%||₹9.93 lakh crore|
|Infosys||50.7%||₹4.71 lakh crore|
|HCL Tech||42.36%||₹2.21 lakh crore|
|Wipro||39.3%||₹1.98 lakh crore|
Overhauling the operating model from 26 segments to just six
The primary change that Delaporte is bringing about is the simplification of the company’s operating model. It will now be divided into four Strategic Market Units (SMUs) and two Global Business Lines (GBLs).
|Wipro’s new operating model:|
|Strategic Market Units||What it includes|
|Americas 1||Healthcare, Consumer Goods, Retail, Transportation & Services, Communication, Media , Tech Products & Platforms and Latin America|
|Americas 3||BFSI, Manufacturing, Hi-tech, E&U and Canada|
|Europe||UK and Ireland, Switzerland, Germany, Benelux, Nordics and Southern Europe|
|APMEA||Australia & NZ, India, Middle East, South East Asia, Japan and Africa|
This will bring down Wipro’s 26 existing segments to just six. The management pegged the overhaul as ‘simplicity over perfection’.
“Changes are aimed at reducing internal friction, increasing client centricity, sharpening focus on select markets and cultivating performance driven culture to facilitate growth acceleration at stable margins. Management has identified shortcomings and has put together a credible turnaround plan,” explained Kotak Institutional Securities while warming that execution remains key.
|Wipro’s new operating model:|
|Global Business Lines||What it includes|
|iDEAS (Integrated Digital, Engineering & Application Services)||Domain and Consulting, Applications & Data, ER&D and Wipro Digital|
|iCORE||CIS (Integrated Cloud Infrastructure), DOP (Digital Operations) and CRS (Risk & Enterprise Cyber Security Services) lines.|
These structural changes are aimed at boosting Wipro’s value chain and giving it more power over the pricing of its products. According to Delaporte, not only will this bring in more money, but it will also help sustain margins.
AdvertisementWipro creates new company-wide engine to go after large deals
In order to work towards the goal of making the operating model more seamless, Delaporte has created an all-new position of a ‘chief growth officer’. One of their first tasks will be to gather the best and the brightest from the organisation to create a sales team. They will also be in charge of maintaining liaisons with global account executives, structuring a large deals team and building on existing alliances and partnerships.
Delaporte also indicated that ‘global account executives’ will be assigned for the company’s top 80 to 100 accounts. They’re role will be similar to that of a client partner, but with more accountability and decision-making authority. And, with more power comes more responsibility. The executive’s primary responsibility will be to drive growth in accounts
Analysts point out that while Delaporte’s plan looks good on paper, it’s success actually hinges on execution. In the coming, it will be important to track deal wins, the value of those deals and where the management’s definition of ‘acceleration in offerings’ lies.
“The plan on people changes is progressing faster than expected. Execution remains key,” said Phillips Capital.
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