In January, India's Wipro Ltd. landed the kind of breakthrough deal it was craving. Sony Corp. handed the company a $5 million contract to write information-technology applications for its TV and computer assembly plants in the U.S. By hiring Wipro and its army of low-cost Indian engineers, Sony expects to save 30%. "I was extremely happy with CAP Gemini," the IT consultant that previously did the work, says Vinnie Tiru, Sony's U.S. chief information officer. "But they couldn't provide the offshore resources and low pricing."
If Wipro performs well, richer rewards could follow. Sony wants an IT vendor that can do much more than write software applications, the forte of Indian companies. Among other things, Sony wants a supplier that can design business processes for everything from parts procurement to product development. If it delivers, Wipro could work for Sony worldwide. "We need a company that can act as an extended arm of our global business," says Tiru.
Meeting such expectations is vital to Wipro's strategy. The $711 million company has proved a reliable provider of high-quality software to such clients as Compaq, Home Depot, and Nokia. Since 1997, Wipro's software exports have leaped nearly fivefold, and should jump 36% to $653 million in the year ending Mar. 31, says Salomon Smith Barney. Indian rivals such as Infosys Technologies Ltd. and Tata Consultancy Services also are thriving, even as U.S. vendors struggle. "The Indian firms are clearly gaining share at a brisk pace," says Gartner Inc. Research Director Frances Karamouzis.
Profits are less impressive, due to intensifying competition--not just from Indian but also from Filipino and Chinese rivals. Wipro's earnings rose only 3% in the last quarter. To boost margins, Wipro must compete with IBM, Electronic Data Systems, and Accenture in the IT consulting big leagues, where contracts can be worth hundreds of millions of dollars. It won't be easy. A Gartner survey of 917 big U.S. companies found only 5% source IT services offshore or plan to do so soon.
That's why Wipro is eager to prove itself to clients like Sony. Indeed, multinationals that have outsourced to India for years now demand broader services. "Clients used to tell us to drop down and do 100 push-ups," says Wipro President Vivek Paul. "Now they say, `We want you to lead."'
Wipro is making strides. Last year, for example, it snared a $70 million contract from National Grid Transco PLC, a British power and telecom utility. On Nov. 11, Wipro paid $26 million for the utility practice of IT consultancy American Management Systems Inc. It added a new dimension in July by buying Spectramind, India's top call center, which handles everything from computer help desk support to airline reservations. Major new clients include Delta Air Lines and Lehman Brothers. On Nov. 13, Microsoft Corp. Chairman Bill Gates visited Wipro's Bangalore office, which will set up a call center, and spoke of broader collaboration.
Wipro shifted into overdrive after hiring India-born Paul from General Electric Medical Systems in 1999. Wipro was rudderless at the time. Founded 57 years ago as a maker of edible oils, the company moved into electronics and software in the 1980s. Then, its CEO and finance chief left to start their own software firm. Azim Premji, 57, who owns 84% of Wipro, gave Paul free rein to refashion it into a global giant.
Paul recruited managers experienced in such industries as finance and telecom. In May, he hired Steve Zucker, Electronic Data Systems Corp.'s Northeast U.S. marketing head, to chase outsourcing contracts from blue-chip corporations. "We need a few successes to build on," says Zucker. "Then we hope to grow very quickly and blow this space out."
The risk for Indian companies like Wipro is that they will run too fast and stumble on major consulting jobs. Then clients may return to U.S. IT vendors--who are rapidly building their own Indian operations. Still, Wipro's edge is its skill in remotely managing its vast Indian staff. If it can satisfy clients like Sony, it could well emerge as an IT heavyweight.
By Manjeet Kripalani in Bangalore and Pete Engardio in New York
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