Wipro Non Linear revenue strategy focus on Cloud, Mobility & Analytics

Early 2011 Wipro dismantled its joint CEO model and appointed TK Kurien as CEO who restructured Wipro into more simple, agile and customer centric with focus on core momentum verticals and the four key industry verticals included 'Banking, Financial Services and Insurance (BFSI)', 'Energy & Utility', 'Retail and consumer products' and 'Healthcare'. Wipro has been undergoing a massive restructuring exercise under TK Kurien, who is making extensive cultural changes within the organization, to bring back sustained growth for Wipro as it lost its number three position to Cognizant Technology Solutions. Some of the changes are aligning the organization structure with demand generation process and efficiency, variable component of management and mid management salaries linked to client and employee satisfaction, focusing more on existing accounts for more revenues, new team for chasing the change the business deals and focusing on increasing the non linear revenues from emerging areas like cloud, mobility and Analytics. “The future is clearly the non-linear model. We are already seeing signs of it. The linear model will break. Our focus will now be on cloud, mobility and analytics,” said Kurien. “I want to leave behind a legacy of growth. Thought leadership will not bring revenues.”

Wipro is focusing on analytics, social media (for enterprises), cloud and mobility for its future revenue growth and hopes these new service lines grow by 30% YoY and it is aggressively investing on these non linear initiatives. Wipro is looking to invest $1Bn in overseas acquisitions over the next 18 months and looking at deal size of around $50Mn - $300Mn and looking for specialized companies in analytics, cloud computing and mobile communications. Wipro is focused on industries including health care, financial services, energy and utilities, and retail and is looking for regions like Saudi Arabia and in parts of Northern Europe and Asia for their acquisitions. The company recently acquired Promax, an Australian company specializing in trade promotion for strengthening its analytics practice which gives it a head start over competitors in a segment where its peers are looking to enter for future growth. According to industry sources, Wipro had around 250 analytics clients and the company is strongly betting on Analytics for non linear revenue growth. Wipro has been showcasing client wins in new areas like analytics and cloud. "The company's keen focus is to grow its new focus areas like Analytics (35 new accounts in the year), Cloud (40 new wins in this quarter) and Mobility (50 new customers added in FY13)," reads a recent report from brokerage house Prabhudas Lilladher.

Wipro is also focusing on mining its 138 largest clients by using dedicated engagement managers and a report by Motilal Oswal highlights the fact that post restructuring, Wipro has seen impressive client additions and mining of large clients to increase its number of customers in the higher contribution buckets (USD100m+ clients up from 1 to 7 in 5 quarters). In a recent conference call with analysts, Kurien also mentioned that the company was investing in sales capabilities and had divided its sales teams into hunting (new client acquisition) and farming (mining existing customers) teams. Consequently, Wipro's sales and marketing expenses were the highest since the fourth quarter of 2003-04, adds the Prabhudas Lilladher report. Wipro restructuring is almost complete and company is looking at specializing in sub -verticals with longer revenue cycles, build capabilities in analytics and cloud computing through acquisitions and standardize its back-end using lean manufacturing principles for revenue growth. Another area where Wipro is betting big is mobility and company had less than 150 people working on mobility solutions earlier; the number now stands at over 1,500. Wipro Technologies has announced that Wipro’s Mobility Solutions will collaborate with Kony Solutions, Inc., a mobile application development platform provider and will offer an integrated portfolio of mobile application technology and services to enterprise customers in the US, UK, Australia and West Asia.

Wipro revenue growth for IT services was lowest among peers in Q4 FY 12 and its guidance for the first quarter of FY13 was muted and the company blamed it on certain delays in deal closures during the fourth quarter FY12 and lackluster domestic market revenues, especially in the telecom and government verticals. Wipro is also seeing pricing pressures, challenges in its key BFSI vertical and problems in some of its largest clients who are slowing down spend and internally with in Wipro it has to improve its cost structure and CEO Kurien also said that he is looking to trim the middle management and encourage them to improve their performance. Wipro is also targeting a different strategy which will allow its clients increasingly look at it as a combination of a consultant and technology company and have a say at the management or board rather than being just looked at as technology providers. Analysts believe Wipro will log a net profit of 15% CAGR FY12 through FY15 fueled by a significant contribution form these non linear initiatives. 

Increased focus on Non Linear Revenue growth by TCS for FY 2013 growth

Tata Consultancy Services (TCS) became the first $10-billion Indian IT company in March 2012 and this significant achievement is fueled by the solid base it created over the past few decades and the domain depth & expertise it has acquired across different domains. Despite the persisting macroeconomic challenges, slower GDP growth & job growth, and continued currency volatility, TCS, in FY2011-12, registered 15 % increase in net profit to Rs 13,517 crore, while its revenue increased 31% to Rs 48,894 crore. TCS believes there is significant potential for growth as the addressable market is still large which is also expanding continuously and market growth is further assured with relatively low current level of penetration. To further fuel the growth momentum TCS is focusing its efforts to generate more revenue from its non-linear businesses that includes three strategic initiatives-- software products (TCS financial solutions), platform-based BPO, and iON (IT-as-a-service solution for small and medium businesses). It is also planning to increase its focus on new technologies such as smartphones, mobility and cloud to drive growth and has made significant investments in these areas. TCS, with a brand value of $4.1 billion is competing with the big boys like IBM, HP and Accenture.

TCS Financial Solutions increased its client base by adding 39 new clients in FY12. TCS BaNCS is a market ready universal financial platform for banking, capital markets and insurance, offered by TCS FS. Recently Malaysia-based financial services group AmBank has decided to deploy 'TCS BaNCS', integrated banking suite, spanning conventional and Islamic banking, will support both retail banking and lending functionalities and also has bagged a contract from South Africa's Nedgroup Insurance Company (NIC) for deploying TCS BaNCS Insurance, part of the it's financial services platform, will serve as the new policy administration system for Nedgroup short-term insurance services. TCS also announced that Letshego Holdings (LHL), a leading consumer lending company based in Botswana, has selected the TCS BaNCS suite as the core banking system for its Greenfield venture into retail banking in Africa. The integrated core banking solution will process loans and deposits across seven countries in Africa — Botswana, Swaziland, Tanzania, Uganda, Zambia, Namibia and Mozambique. TCS is increasing its focus on Africa as it is trying to increase its revenues from the region.

iON uses scalable cloud computing technology to deliver automation suite to SMBs, eliminating the need for them to invest in any IT assets and requiring them to pay monthly rentals rather than a one-time license fee. The suite includes human resource management, customer relationship management, payroll and finance management solutions along with niche industry-specific solutions. iON is being marketed through a channel partner network of 109 cloud service providers and has 256 mid-market customers. The company also said that it wants to ramp up over 1,000 customers this year and targets a revenue of $1 billion in the next five years.

Through its Platform-based BPO offering, it offers services in segments like Life Insurance and Pension Policy, Analytics and Finance and Accounts. TCS was the first Indian IT Services Vendor who initiated platform-based BPO in 2007 as the then CEO, S Ramadorai felt that platform-based services can be ‘templatised’ and some processes can be leveraged across different sectors. This strategy has been successful for TCS as it yielded dividends and this offering has been well received by TCS clients, which has been proven by the fact that TCS has bagged multi-million dollar deals in life insurance and pension policy, analytics and finance and accounts verticals. For example, since some processes in retail are similar to manufacturing which will eliminate the need to develop applications or write codes from scratch. Diligenta, UK subsidiary of the company has won the Friends Life Deal based on its insurance platform offerings. TCS has aggressively invested in developing its Platform BPO offerings in the past few years.

According to Motilal Oswal Report on TCS, as a part of its disruptive innovation strategies, TCS is increasing investments in many areas including new sensor-based technologies, intelligent infrastructure, platforms for genomic research, information fusion for enterprises and green technologies. The company has significantly increased its intellectual property (IP). It filed 460 patents in FY12. Cumulatively, TCS has filed 855 patents till date, of which 72 have been granted.

In the recent TCS Annual General meeting, Ratan Tata announced TCS's growth plans, "Our focus is to find a balance between traditional markets like the US and Europe and other emerging markets like Australia and the Middle East, which present good opportunities. Going forward, TCS will be focusing on non-linear growth since the situation in the West continues to be a concern."  Future opportunities for TCS are extremely good and banking, financial services and insurance (BFSI) segment continues to be the thrust area for the company, TCS CEO and MD N Chandrasekaran added.  The company has opened multiple development centers in Latin America, China and Philippines. With all these initiatives, TCS is hoping ride over the economic volatility and demand concerns and company is all set to a lead revenue growth in FY13 too. TCS expects analytics, mobility, cloud computing and non-linear platform-based services to contribute 10% of its total revenues by 2014-2015, which will be around $1 billion given the company’s $10 billion-plus revenue last fiscal.