Wipro changes top management amid slow growth

Wipro will replace the joint CEOs of its IT business with a single chief executive, the company said today after reporting lackluster results.

Wipro, India’s third largest outsourcer, reported seemingly strong year-on-year growth in IT services revenue of 19.3 percent for the quarter ended Dec. 31. The rise to US$1.34 billion reflects an overall pickup in business for large Indian outsourcers. Wipro reports results in accordance with International Financial Reporting Standards (IFRS).

But that growth, while strong, was lower than that achieved by India’s top two outsourcers: Tata Consultancy Services, and Infosys Technologies.

Wipro’s growth in the last several years has been a mix of both organic growth and through acquisitions, said Jimit Arora, research director at Everest. “In 2010 the company has not made significant acquisitions,” he added.

The company said its operating margins were flat, as there were fewer working days, and lower staff utilization in the quarter. Wipro, which has other businesses, including in lighting and consumer care, does not break out a net profit figure for its IT services business.

Girish Paranjpe and Suresh Vaswani, the current joint CEOs of Wipro’s IT business will be replaced from Feb 1 by a single CEO, T K Kurien who was formerly head of a new green technology business at Wipro.

The joint CEO structure was one of the key factors that successfully helped the company navigate the worst economic crisis in our time, Wipro said. With the change in environment, there is a need for a simpler organization structure, it added.

Indian outsourcers are seeing an improvement in business from clients in the U.S. and Europe, but there is still uncertainty. It is still early to say that the outsourcing industry has returned to long term growth, said Siddharth Pai, a partner at TPI, a sourcing data and advisory firm.

Increased hiring in India has helped push up costs and increase staff attrition. Wipro added 3,591 people in the quarter, taking the total staff as of Dec. 31 to 119,491. An appreciating rupee is also reducing the funds available to Indian outsourcers to run their operations in the country, thus impacting margins.

Wipro added 36 new clients in the quarter.