Despite a better than expected performance by its information technology services business, Wipro has given a muted forecast for the year’s fourth quarter. T K Kurien, chief executive of its IT business, tells Bibhu Ranjan Mishra & Pradeesh Chandran this guidance reflects what it sees on the ground. Edited excerpts:
How has been your experience in 2013?
If you look at the overall environment, 2013 is quite positive compared to last year. Our focus this year is going to be in hunting more and to win more.
In the third quarter (Q3) of FY13, you improved from where you left in Q2 and met somewhere around the middle of your revenue guidance (expectation). But your conservative revenue guidance for Q4 puzzles many.
Actually, in the third quarter we managed to meet somewhere close to the upper end of our revenue guidance. We won quite a few good deals. But, to translate those into revenue depends on the ramp-up cycle. When the ramp-ups would start is a little uncertain. Second, we see discretionary budgets are starting to open up but when those would translate into revenue is another question. Besides, the fiscal cliff issue in the US is still not over. We don’t want a shock coming because of that. We expect this to be sorted by the end of February. All those elements have been factored in our guidance.
The guidance is a reflection of volatile market conditions?
Until now, we have a record not missing the guidance. We want to make sure that we never miss. We are conservative at one end and realistic at the other end. What we see is what we guide.
But it is not just in Q3 that you added 50 clients. In the earlier quarter, you added 53 and a quarter before that, around 35. Have those not started generating revenue?
Very true but we are also shedding clients. So, if you look at our tail accounts, it has now come down to 20 from 89 three quarters ago. It is a big drop as we rebalanced our portfolio. In the last nine months, we have lost $52 million in top line (revenue) in areas we didn’t want to grow it. That is reflected in some form or shape in our last quarter results and guidance.
Is the focus shifting to larger accounts?
We are focusing a lot on our top 10 accounts. Six quarters ago, the number of our $100-million clients was just one. It has gone up to 10. That is a big change. If you look at my competition, we are not very far from them.
Looking at your Q3 performance and the macroeconomic environment, do you expect FY14 to be a better year for Wipro?
We have remained optimistic but cautiously. The portfolio we have will determine the growth. The customers who are growing ahead of the industry will spend more with you. There are other customers who are stressed in terms of relationships. It is the portfolio mix you have which determines the bullishness or cautiousness.
You are perhaps the only company among the Indian top-tier IT services companies which has seen a drop in volume.
Our volume growth in Q3 was a negative one per cent. But we offset that with increase in pricing realisation. Our pricing realisation is one of the highest in the sector today.
What is going to be your approach hence?
I think the key for us now is that we need to get hyper growth and that means eating somebody else’s lunch. That is where the whole organisation is going and that is where the DNA of the organisation is getting built.
When do you expect this to happen?
I am always trying. I think it will take one or two quarters more to achieve that hyper growth. But as you know, when you want to eat somebody else lunch, that person will also try to eat his lunch.
The drop in your employee utilisation indicates you have now built a huge bench (employees not deployed on any project). Is it not an added cost?
The mix of bench has changed considerably. A year ago, about 60 per cent of my bench was experienced people. Now, 70 per cent of the people on the bench are freshers. That means my bench cost has not gone up. We will also not change our fresher hiring policy and will continue hire them.