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| I don't see scope of improvement in pricing in Q4: T K Kurien | | Interview with Chief Executive Officer, IT business, Wipro |
| Bibhu Ranjan Mishra / Jan 21, 2012, 00:07 IST |
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 In the just-ended quarter, Wipro continued a winning streak in its information technology (IT) business. The company met its own target for revenue and has improved in most of the parameters that decide strength of the organisation. In an interview with Bibhu Ranjan Mishra, the IT business CEO, T K Kurien, talks about the challenging environment and the company’s strategy to convert those into opportunities. Edited excerpts:
Your Q3 numbers are in line with the expectations. But your volume growth of 1.8per cent this quarter is lower than most of your competition.
Volume growth is an important measure but not a critical one. What is important to me is the quality of revenue. We have significantly improved the number of fixed price projects. If you take the cost out of the fixed price projects, it affects the volumes.
How do you define quality of revenue?
We have some internal mechanisms. Like, who I am selling to – Am I selling to the business or to the CIO? How much of that are integrated deals and outcome-based in pricing? The third measure is how much is consulting-led. We have seen the number of consulting-led deals going up by almost 25 per cent from the beginning of the ongoing financial year.
But your consulting revenue is down in the third quarter.
This is a quarterly aberration because of the lesser number of working days. It will come back.
You have not been able to reap the benefit of a depreciating rupee as much as your competitions. Why?
Our operating margins in Q3 went up to 20.8 per cent from about 20 per cent in the previous quarter. The rupee benefited our margins by about 70 basis points. On the other hand, we have significantly invested in sales and marketing, which we would continue to do.
Would you consider revisiting the hedging strategy?
The last thing one should do is to change the hedge book based upon the market and currency movements. It is important that it remains consistent. That is the only way you will be able to manage downturn and upturn, and that is what we are trying to do.
What about the pricing environment?
The pricing environment is stable, expect the investment banking side. I don’t see any scope of improvement in pricing in the coming quarter. Investment banking is under pressure because the trading volumes are coming down and they are unable to make up.
Most vendors are already giving significant pricing discount. Has it gone to the pre-2008 level?
Pricing has come back to the old level in some of the contracts. For us, it’s not about increasing the coupon size, but increasing the value. Our objective is to sign outcome-based deals more and more.
The minute you say outcome-based deals, the whole game changes. You have the flexibility of deciding the number of people to be deployed in that project.
How far are you behind your target of having one $500 million-plus client? Your client mining strategy seems to be paying.
It will take time. But we expect to have the first $250 million-plus customer in the next year. We are mining accounts much better, but we still have a lot of work. We have put in a strong account management structure and making sure that this works. Our number of $100-mn plus clients has gone up to six from just one a year ago.
Was the account mining strategy part of the restructuring process?
The restructuring is still a long way to go. It is done but not culturalised. The day it becomes part of the culture, we will have consistency of performance.
The macro economic environment continues to be uncertain. Will it not affect the sentiments of clients, at least in the short term?
Whenever the environment is under pressure, you always have the opportunity. It’s really up to us to grab those opportunities. The uncertainties in the global economic environment affect discretionary spending. But it is not a secular trend; you will have to look out for opportunities in that environment.
There are $47 billion worth of contracts up for renewal. What are the strategic advantages Wipro enjoys to grab these?
We have to hunt for deals in areas where we were earlier not that active. A majority of the deals coming for renewal are in the infrastructure management side and we are going to focus on those in a big way.
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