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Company Perspectives:
Wipro is an integrated corporation that offers a diverse range of products, solutions and services in systems, software, consumer care, healthcare, lighting and infrastructure technology. We are driven by our passion for quality and our commitment to customers. This drive has catapulted us among the ten most admired companies in India. Through constant innovation and a people-first attitude, we strive to assume leadership positions in all our businesses in the new millennium.
The third-largest company in India, Bangalore-based Wipro Limited is an ever-growing and ever-diversifying global company that manufactures and sells products and services ranging from cooking oil and soaps to healthcare instruments and information technology (IT) consulting. Although Wipro's chairman and managing director Azim Hasham Premji is committed to the company's diversified business model, its future clearly lies in its continued successes in software and IT services, which make up nearly half of the company's sales and has consistently outpaced the growth of Wipro's other businesses. Wipro's world-class technologies division provides a range of high-tech services such as global IT consulting, e-business integration, and legacy systems maintenance to clients such as Cisco Systems, Thomas Cooke, and NEC. Wipro's IT efforts are so reliable that in 1998 the company became the first in the world to have been awarded the Software Engineering Institute's (SEI) coveted Level 5 Certification for quality. After an impressive debut on the New York Stock Exchange in 2000, Premji, who owns 75 percent of Wipro, became one of the top billionaires in the world.
Humble Beginnings: Mid-1940s to Early1970s
Western India Vegetable Products Ltd. (Wipro Limited) was founded in 1945 by M.H. Premji. The company sold vanaspati solidified sunflower oil to retailers, who sold it in bulk, scooping 50 and 100 grams for customers who brought along their own containers. In 1947 the same year that India gained independence from British rule, 32-year-old Premji laid the foundations of a vegetable oil mill at Amalner in Maharashtra. When Pakistan's prime minister offered him a position as finance minister, Premji turned it down, citing his loyalty to India and his fledgling cooking oil business. Little did either man know that later, in the new millennium, Wipro's value would dwarf Pakistan's gross domestic product. Wipro went public in 1947 for roughly $30,000.
Premji continued his political career along with his business in India. He became the first Indian chairman of Bombay Electricity Board and a board member of the Reserve Bank of India, the State Bank of India and the Life Insurance Corporation of India. But Premji's untimely demise occurred in 1966, due to a heart attack. Soon after, his 21-year-old son Azim left his unfinished studies in engineering at Stanford University in the United States and returned home to India to take over the business. What used to be a sleepy business run by various members of the family now became a highly professional one, leaving Azim Premji as the only one in the family working at Wipro—a characteristic that still would hold true decades later.
Premji planned to professionalize, diversify and expand his father's business, which was already valued at about $3 million. He immediately recruited top-notch managers from the renowned Indian Institute of Management (IIM), where top graduates are also courted by blue-chip firms in the West. "We were the pioneers in packaging for the mass market," explains Premji. "We went from bulk packs of vanaspati to [single-use] consumer packs." The packaging innovation took off, and the marketing and distribution network expanded into rural areas. At this point, the company had no plans to go global. By 1971 business nearly doubled from when Azim Premji took over.
Going High-Tech: Mid-1970s to Late1980s
The company's first departure from its main cooking oil business came about in 1975. Drawing Azim Premji's his engineering background, and at the suggestion of one of the new IIM recruits, M. Seethapathy Rao, Premji launched Wipro Fluid Power, an operation that manufactured hydraulic and pneumatic cylinders. And under the direction of P.S. Pai, Wipro's consumer care division expanded beyond oil in 1979, establishing operations in soaps, toiletries, and baby care products. Along with major expansions in distribution, Wipro's consumer care division gained so much financial strength for the company that the company was able to further diversify into IT and healthcare instruments.
Wipro would diversify into computers almost as soon as India's computer industry began to develop in the mid-1970s. At the time, the Indian government was the largest purchaser of computers sold in India, and was standardized on the Unix-based platform, which helped Indian companies build a solid reputation in Unix-based software development. The growing IT industry in India attracted multinationals such as IBM, Motorola, and Texas Instruments, who took advantage of India's wealth of low-cost engineering labor. But in 1977 the Indian government decided to throw out U.S. computer giant IBM over a dispute about investment and intellectual property, creating what Premji saw as a golden business opportunity. He quickly set up an electronics unit. But instead of luring ex-IBM employees into his business, Premji hired managers from a truck maker and a refrigeration company.
In 1980 Wipro launched information technology services for the domestic market, setting up in Bangalore a crack-team of R&D and marketing managers, headed by Ashok Narasimhan. Their professionalism, innovation and insistence on quality were to make Wipro the No. 1 listed information technology company in the country within the next 15 years. By 1984 the company diversified into software, which it would discontinue by 1990, but it led to Wipro's foray into its growth business, software services. Wipro began manufacturing PCs and workstations in 1985, quickly building brand recognition and securing the enviable position of commanding a premium price over the competitions' cheap clones. Wipro assembled and redistributed hardware for U.S. companies like Nortel, Sun Microsystems, and Cisco Systems.
India's $80-million market in medical equipment attracted General Electric Co. (GE), which in 1989 chose Wipro for a joint venture to develop and distribute ultrasound devices and other medical instruments, especially throughout India and South Asia. In addition to creating a new business segment for Wipro, the joint venture instantly secured Wipro's reputation as a software integrator and led to scores of R&D contracts with major companies, including Cisco Systems, Hitachi, and Alcatel. Wipro GE came to be the largest exporter of medical systems.
Rapid Growth and Expansion in the 1990s
India's software industry continued to take off throughout the nineties, at a compounded annual rate of nearly 60 percent for most of the decade. India quickly became the third-largest supplier of IT labor, and its communications infrastructure rapidly improved. Part of this growth was driven by a growing number of U.S. corporations that began to tap into the cheap IT labor market in India, often for 40 percent to 60 percent less than the cost of U.S. labor. As a result, Wipro typically contracted out teams of engineers to work at U.S.-based companies. As successful as this model was, it could not be counted on to last, due to mounting competition and Wipro's growing need to offer more sophisticated technology solutions.
Wipro began to shift its IT business away from costly on-site development projects in the United States, to more profitable offshore development closer to home. To help keep its competitive edge, the company replicated the development labs of some of its major clients, including AT&T, IBM, and Intel Corporation. And while Wipro continued to offer a range of programming services, including hardware design, networking, and communications and operating system support—it continued to diversify into other lines of business. In 1992 the company established a new lighting business, offering a range of lighting solutions for domestic, commercial, industrial, and pharmaceutical lab environments. Wipro discarded its PC brand in 1995 when it formed a joint venture with Acer, a Taiwan-based computer and peripherals manufacturer and distributor.
By 1998, Bangalore became one of the many IT centers in India, with about 250 high-tech firms, plus about 100 just outside the city's limits. And Wipro became the center of this Indian "Silicon Valley," as India's second-biggest software exporter. Both software and hardware businesses generated 57 percent of the company's sales, and 75 percent of its profits, with software employees numbering over 5,600 of the company's 9,000 total. Still, Premji saw continued value in keeping Wipro's non-IT businesses, which he was always quick to point out were the best in their niche markets. The company invested about 25 percent of its advertising budget into branding for its consumer care and lighting division. The Santoor brand, for example, grew by 20 percent in 1997. Wipro's power cylinder business grew at a similar rate as its hardware business, and kept the company well poised to benefit from any boom in future infrastructure expenditures. In 1998 Wipro started exporting hydraulic cylinders throughout Southeast Asia. Also, a lot of synergies existed between the medical systems and IT businesses within Wipro. Wipro GE emerged as the largest healthcare systems company in South Asia in 1998, and in that same year, became the top exporter of such systems in India.
Wipro proved to be a nimble and formidable competitor throughout the nineties. From 1991 to 1997, for example, Wipro went through six corporate restructurings, keeping the company ready to adapt to the constantly changing technological landscape. By September of 2000 Wipro's technologies division completed what may have been the most significant restructuring effort, re-engineering the division's operations toward four major market sectors: content housing platforms (computers and Web servers), content transportation (networking media), content access devices (mobile phones, PCs, etc.), and service providers. And even its Six Sigma quality initiative, which aimed to reduce the defect rate to virtually nothing, already led to an eightfold gain over the investments in its first 20 months, which began in 1997. Wipro projected that it would apply the Six Sigma concept, allowing a maximum of 3.4 mistakes for every one million opportunities for error, to every key process by 2002.
Going Global in the 21st Century
Wipro seemed to have survived the effects of the U.S. economic slowdown of 2000, with massive layoffs and profit warnings, and raced ahead in 2001 amid its own soaring growth rates and a huge expansion in its operating margins. Given that 60 percent of India's IT-related services and software exports were tied to the U.S., Wipro's unscathed emergence was remarkable. By the end of March 2001, the company's net income hit a record $138 million (up 106 percent from the previous year), and operating margins grew from 18 to 24 percent that same year. While revenues from U.S. clients declined to 64 percent from 70 percent, revenues from Europe climbed from 24 percent to 29 percent, and revenues from Japan did the same from 5 to 6 percent. With a fleet of 150 Japanese-speaking engineers, and some 800 engineers dedicated to Japanese customers including Fujitsu, NEC, Daiwa, Sony, Toshiba, and NTT DoCoMo, Wipro's Japanese business promised to grow along with other continued investments in a diversified customer base. Wipro decided to set up an Asia-Pacific regional base in Singapore in 2001. By this time, Wipro had a total of 209 active clients, the top five of whom were: fiber-optic network equipment major Nortel Networks; British gas transport firm Transco; U.S. conglomerate GE; telecom equipment manufacturer Lucent Technologies; and French telecom equipment maker Alcatel.
Along with diversifying its customer base, Wipro set out to expand and deepen its IT service offerings and become a global tech powerhouse that directly competes with giants such as IBM Global Consulting, Accenture, and Electronic Data Service. Even though Wipro came out of 2000 quite well, India's IT industry quickly became flanked with growing competition from countries such as Ireland, China, Vietnam, and the Philippines. And even though 60 percent of Indian software exports were absorbed by businesses in the U.S. in 1999, that accounted for only 2 percent of the global total.
Wipro decided to go beyond the unglamorous back-office code-writing on contract, and pursue even more high-profile, high-paying projects that involved e-business development, new software products, and end-to-end business/system consulting. Instead of doing small portions of large IT software solutions, Wipro would set out to develop comprehensive, end-to-end solutions, which included both software services and hardware, and often involved outsourcing the simpler code work to other countries. For example, in August of 2000, Wipro launched a "Portal-in-a-Box," which was a fixed-price, end-to-end solution to help businesses create a sales presence on the Web. Wipro's new "upstream" strategy would not only help stave off the growing competition, but also enable Wipro to continue its growth, and keep its staff immune from the temptation to go West and start up their own software companies. Wipro also continued to aggressively refocus on offshore projects and expand its efforts in the domestic market.
Wipro has come a long way from its simple sunflower oil business. At the start of the new millennium, Wipro continued to prove itself a pioneer in three main businesses—consumer care and lighting, healthcare technology services, and information technology—altogether encompassing a broad range of high-quality products and services. With its solid reputation in these businesses, deep ties with major world companies, and newly opened offices including the United Kingdom, Germany, Paris, Singapore, the Middle East, and the United States, Wipro promised to quickly become a true multinational corporation.
Principal Subsidiaries:Wipro Inc. (United States); Enthink Inc. (United States); Wipro Japan KK (Japan); Wipro Welfare Limited; Wipro Prosper Limited; Wipro Trademarks Holding Limited.
Principal Divisions:Information Technology; Consumer Care & Lighting; Healthcare Technology Services.
Principal Competitors:Accenture; Booz-Allen; Cambridge Technology; Cognizant Technology Solutions; Compaq; Computer Sciences; Deloitte Touche Tohmatsu; EDS; Ernst & Young; GE; Getronics; Hewlett-Packard; Hindustan Lever; IBM; Infosys Technologies; Johnson & Johnson; McKinsey & Company; KPMG; Perot Systems; Philips Electronics; PricewaterhouseCoopers; Procter & Gamble; Sapient; Satyam; Siemens; Silverline Technologies; Tata Enterprises; Unilever; Zenith.
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