Azim Premji, the chairman and 81% owner of Wipro Technologies, is relaxed and smiling. He should be. His software-services company has shaken off the gloom that seemed to descend when its dynamic chief executive, Vivek Paul, left the company in September, 2005.
Though analysts wondered whether Wipro would recover from the blow, they needn't have worried.
In January, Wipro announced that its revenues jumped by 9%, to $617 million, while profits grew by 11%, to $118 million, over the previous quarter. Since those results were released, Wipro's stock price has zoomed 15%.
After Paul left, Premji, 60, took charge immediately. He realigned the executive suite by eliminating Paul's position, distributing the responsibilities among four long-time lieutenants.
Premji described those changes and more when he met with BusinessWeek's Mumbai Bureau Chief Manjeet Kripalani on the sidelines of the packed annual conference sponsored by Nasscom, India's powerful software trade association. Edited excerpts follow:
It has been six months since you began your restructuring process. How well has it worked?
The company now hums a little faster, we're seeing if we can get stronger as a team. We're investing more for the future, in people, in innovation, marketing, in the brand. Also in changes in business models, that's part of our innovation emphasis. Our salesforce has more better-qualified and experienced program managers. We're pulling up people from within the organization and retraining them.
The most important thing is innovation -- productivity innovation, innovation in training, in business models, in intellectual-property investment, in non-linear delivery models like managed services, in compensation programs.
We're also looking to innovate in our strategic acquisitions. We've done two deals recently and will do more, with internal funds. We have a war chest of $800 million, which is big enough.
What is your biggest challenge? Increasing competition from Accenture and IBM? China? Vietnam?
Our competitors are legitimizing the India delivery model for us. Now we have to stay ahead of them in the India delivery model while mimicking them more in terms of their brand and consultancy prowess.
China is competition for everything. Eastern Europe will start gathering a larger critical mass in this business. Vietnam will get on the bandwagon of IT services. We have operations in China, and are looking at Vietnam. We've done research there, it's positive and looks interesting.
These are not easy places to scale up a business. We'll have to pick more people starting from university level, transfer mid-management from India, and get involved with universities earlier, when curriculums are being set, so we can tailor the requirements. One should consider locating closer to university towns like Ho Chi Min City and have intimate relationships there.
The most important thing is to shake our complacency. Generally the environment in India is more ambitious and our competitors are more ambitious.
What about your back-office and call-center operations -- you've had trouble there, haven't you?
In the transaction-processing space, we have built expertise in finance and accounting and hope to build it similarly in human resources, especially for the British and U.S. markets. Right now, 93% of our back-office work is voice, or call centers, and 7% is transaction processing. We would like that mix to be 50/50 in three years' time.
So the back-office operation is getting back on the growth track. We will grow with industry growth rates next year -- that's 30% -- starting April. It's a tough business. But it still adds a lot to our ability to sell our services with an integrated offering. Customers are more open to it.
What's your next move?
There's our consulting business, which is going O.K. But you will see more spirit in it starting April. For the plain-vanilla outsourcing work that we do, we have a new delivery model and are investing more in leadership training, in negotiation training, cultural training, even training for dealing with the press.
We will dramatically increase the amount of time our employees spend on training and measuring what they're achieving, and on figuring out whether people retain what they learn.
That's a quantum innovation. We need more training because we have reduced our lateral hiring from other companies and are hiring more people straight from universities. Finally, we're focusing on the Middle East -- India will see lots of investments coming in from the Middle East.
Tell me more about your innovations.
We're making innovation more institutionalized. We are today the largest third-party provider of research and development services in the world. We have a thought-leadership position. We have tied up with Wharton and Berkeley universities. We're applying lean technologies to our processes in everything from intellectual patents in IT and back-office work to service delivery. We will soon also have an innovation tie-up in India, with the Indian Institute of Science in Bangalore, which does some very good work.
What's the result of that? Well, 29% of last quarter's jobs came thanks to the innovation we introduced. Innovation itself accounted for 5% of our sales in the last 12 months. That's $100 million in annualized revenues. Now we plan to make innovation leap to 10% in three years.
But you need an environment that's conducive to innovation for it to really take hold, and India doesn't have that, does it?
Within the country, we need to build a more robust ecosystem to encourage innovation. And we need incubation facilities so we can monetize the ideas. And we need to build more risk-taking ability, instead of being the risk-averse people we are.
We have to create the right opportunities. The U.S. specializes in this in a unique way. We have been trying to tell the government not to fund innovation, or expertise, or systems, but instead provide back up like insurance to promote venture-capital funders so they can take more risks.
Finally, do you have a succession plan in place?
Succession plan? Of course I do! I have one for all the key people in the company, including myself. It's reviewed by the board every six months. It's fundamental to all companies. Of course, I can't tell you what it is!Do you want to discuss stock tips? Do you know a hot one? Join the Stock Market Discussion Group.