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Though Wipro Limited is a group of companies, our main focus in this report will be on the IT services business segment of Wipro Limited. IT Services account for more than 70% of Total Revenue and more than 90% of Operating Income for the Wipro Limited.
Wipro Limited (NYSE:WIT) is amongst the largest global IT services, BPO and Product Engineering companies. In addition to the IT business, Wipro also has a profitable presence in niche market segments of Consumer Products, Lighting, Furniture, Eco Energy, Water treatment and Hydraulics. The company has been listed since 1945 and started its technology business in 1980. Today, Wipro generates USD 6 billion (India GAAP figure 2009-10) of annual revenues. Its equity shares are listed in India on the Mumbai Stock Exchange and the National Stock Exchange; as well as on the New York Stock Exchange in the US.
With more than 100,000 associates from over 70 nationalities and 72 plus global delivery centres in over 55 countries, Wipro’s products and services span financial services, retail, transportation, manufacturing, healthcare services, energy and utilities, technology, telecom and media.
Wipro’s focus has been on business transformation with innovation in service delivery and business models. More than 800 active clients that include governments, educational institutes, utility services, and over 150 Global Fortune 500 enterprises have benefited from this approach.
Wipro is in more than one line of business, so it has got a Corporate Level Strategy. This corporate level strategy has identified following business lines for Wipro.
Each of the above business lines has its own Business Level Strategy. The business level strategies, that determine the products and services that each division offers and the customers it caters to, are listed for each division below.
Wipro Technologies is the global IT services business division of Wipro Limited. With over 20 offices around the world, Wipro Technologies is a provider of integrated business, technology and process solutions on a global delivery platform.
Wipro Infotech is the strategic IT partner for companies across India, the Middle East and Asia-Pacific – offering integrated IT solutions.
Wipro Consumer Care and Lighting
Wipro Consumer Care and Lighting, a business unit of Wipro Limited, has a profitable presence in the branded retail market of toilet soaps, hair care soaps, baby care products and lighting products.
Wipro Infrastructure Engineering
Wipro Infrastructure Engineering was Wipro Limited’s first diversification in 1975, which addressed the hydraulic equipment requirements of mobile original equipment manufacturers in India. Over the past 25 years, the Wipro Infrastructure Engineering business unit has become a leader in the Hydraulic Cylinders and Truck Tipping Systems markets in India.
Wipro GE Medical Systems Limited
Wipro GE Medical Systems is a joint venture between Wipro and General Electric Company. Wipro GE is India’s largest exporter of medical systems. Wipro GE manufactures Ultrasound and Computed Tomography systems in India and is a supplier for all GE Medical Systems products and services in South Asia.
Now that we have the knowledge of various business units of Wipro Limited, we will analyze the strategy pursued by Wipro using Contemporary Strategy-Structure Theories. We will use following three theories to analyze the strategies of Wipro.
Miles and Snow’s Four Strategic Types
Porter’s Competitive Strategies
Miller’s Integrative Framework
Miles and Snow’s Four Strategic Types
If we use Miles and Snow’s four strategic types to analyze Wipro, it’s evident that Wipro uses Analyzer strategy. It seeks to minimize risk and maximize opportunity for profit. Knowing that Cloud Computing is becoming the trend and vendors such as Amazon, Salesforce, Microsoft, and Google have invested heavily, Wipro too partnered with leading providers like Salesforce and Microsoft to provide professional and system integration services for enterprises. Wipro did so only after the risk and profits associated with cloud computing was clear to it.
Wipro has the ability to respond to the lead of key prospectors. At the same time, it has maintained operating efficiency in its stable product and market areas. With enhanced business performance at the core of its deliveries due to its strong R&D and Innovation focus, Wipro gets 95 percent repeat business. Its operating margin has been more than 20% in the IT Services business for last couple of years.
Wipro has a structure made of components that provide it both flexibility and stability. It has clearly identifiable verticals dedicated to different industries like banking, automotive, energy, manufacturing, etc. These verticals are highly standardized and they use routine technologies for efficiency. Wipro has different R&D and Practice Centers dedicated to new and emerging technologies. They provide the much needed flexibility whenever Wipro enters into new undertakings.
Porter’s Competitive Strategies
As per Porter’s competitive strategies, Wipro follows the differentiation strategy. It emphasizes heavily on the quality, innovation, and its technological capabilities. It is world’s first SEI CMM Level 5 Company. One of the world’s largest third party R&D services provider, Wipro has been a pioneer in adopting and adapting several improvement methodologies like Lean, Six Sigma, Kaizen, etc. to further the efficiency of its processes.
Wipro was the first to adopt Six Sigma in IT delivery in 1998. Lean methodology was adopted from the world-class Toyota Production System for improving the efficiency of the delivery engine in the year 2005. All these things have clearly set Wipro apart from its Indian counterpart who has been lagging behind Wipro in their R&D services and highest standard of certifications.
Miller’s Integrative Framework
As per Miller’s Integrative Framework, Wipro fits best with the strategic dimension of marketing differentiation. Wipro draws its competitive advantage vis-à-vis the other Indian IT service providers from five specific differentiators.
The biggest differentiator for Wipro against its Indian competitors is that “Wipro entered IT services through the engineering route”, given its entry into hardware in the 80s and then later to positioning itself as an engineering lab for hire to the IT multinationals that entered India in the 90s. The “lab-on-hire” business was eventually scaled up and today accounts for one-third of Wipro’s revenues, making it one of the world’s largest third party R&D provider.
Wipro offers its clients customized innovative technological and process solutions. In 2000, Wipro set up an Innovation Initiative with an internal innovation council, which worked like an internal venture capital fund. Today there are more 800 people working on such innovative ideas. This approach has helped the company to position itself as an innovator rather than a commodity provider of technological products.
Over time Wipro has come to stand for operational excellence. The commitment to quality has been a critical part of Wipro’s product offering. The company is very process-oriented and focused on operational excellence”. Today, Wipro has built up its reputation and credibility by being a stickler for process excellence and delivering on quality commitments is a key brand benefit.
Global Footprint with Emerging Market Knowledge
Wipro’s global footprint is also an important differentiator among its Indian rivals, especially given its higher portfolio split towards emerging markets. The Asia-Pacific (APAC) region contributes to $1 billion in revenues and is considered to be a key differentiator vis-à-vis Infosys.
Company Culture of Linking Values to Business Performance
Wipro’s cultural fit with its clients is also important in the self-selection process. Wipro’s company culture is “less flashy and less aggressive” than some of its Indian rivals. This culture resonates with Wipro’s clients in the manufacturing and retail sector who prefer a more laid-back approach at building a relationship. The company’s cultural tone has been set right from the top, with Chairman Azim Premji often being quoted as saying that the brand Wipro is all about “humility”.
We can see that above three theories, Miles and Snow’s Four Strategic Types, Porter’s Competitive Strategies, & Miller’s Integrative Framework, clearly indicate that Wipro is practicing differentiation strategy.
Wipro has been constantly restructuring itself based on the differentiation strategy that it follows. It has been getting projects in different verticals like insurance, banking, securities, retail, transportation, manufacturing, healthcare, consumer electronics, energy, medical devices, government, etc., so it restructures itself to deliver the projects as per customers’ specifications. Now, we will analyze the level of complexity, formalization, and centralization that exists in Wipro.
Wipro ranks high on overall complexity. Complexity is the degree of differentiation that exists within an organization. As described earlier, Wipro operates multiple business lines and each business line has its own verticals depending on the industry it provides products and services in.
Nature of the tasks performed by the employees of IT Business unit is different from task performed by the employees of the Infrastructure unit employees which is different from the task performed by the employees of Consumer Care & Lighting unit. So, each unit requires specialized knowledge, skills, and trainings. There are more than 20 verticals in the global IT Business Unit of Wipro itself each requiring different functional and social specialization. Due to this high number of specialization, Wipro demonstrates high horizontal differentiation.
As can been seen in the figure given below, vertical differentiation is moderately high because of more levels of hierarchy. Average span in Wipro is about 5 to 6 i.e. a manager can direct 5 to 6 subordinates effectively.
Wipro has more than 72 global delivery centres in over 55 countries and it employs citizens of more than 70 nationalities. Considering this fact, it can be easily observed that Wipro ranks very high on spatial differentiation.
Jobs within the Wipro are highly formalized. Employees of Wipro Technologies use Wings Within, a job portal for existing Wipro Technologies employees to look for another job within Wipro Technologies itself. Other business lines provide similar job portal for their employees.
MyWipro is the intranet portal available to the employees of Wipro Technologies. Clearly defined procedures covering work processes in the organization are available on this portal. These work processes include career progression policies, financial policies, leave policies, attendance policies, timesheet information, etc.
Wipro has a well established recruitment policy. Selection of employees is done by the certified interviewers. These interviewers are from the Band C or above and they have passed certain examinations to be an eligible interviewer.
Talent Transformation is the training division of Wipro Technologies. It has dedicated full time trainers in almost all domains and technologies Wipro Technologies operates in. This division provides one to three months of induction training to campus recruits. It also provides training on demand.
Centralization in Wipro is moderate. Each business unit in Wipro Technologies has many accounts. Each account acts as a development centre for a dedicated customer and gets a business target from its corresponding business unit. Decisions on what projects to work on are taken at the account level. Decisions on how to work on the projects are taken by the project managers, team leads, and team members. So, concentration is not at a single point in the hierarchy.
So, we can see that the high complexity, high formalization and moderate centralization support the differentiation strategy of Wipro.
These are the five basic components of the organisational design at Wipro.
The Operating Core
The operating core at Wipro consists of the various professional and technical experts relating to the different 24 verticals of the Wipro’s business.
These are highly trained specialists working in various fields such as Aerospace, Automotive, Banking, Business & Consumer Services, Communication Service Providers, Computer Peripherals, Computer Software, Computing, Consumer Electronics, Consumer Packaged Goods, Energy, Government Healthcare, High-Tech, Hospitality & Leisure, Insurance, Manufacturing, Media, Medical Devices, Mobile Devices, Pharmaceutical & Life Sciences, Public Infrastructure, Retail, and Securities & Capital Markets.
The Strategic Apex
It consists of one Chairman, 2 Executive Director & Joint CEO, IT Business, 1 Executive Director & CFO. And apart from this, there are 8 independent non-executive directors forming the strategic apex of the company.
The Middle Line
This part consists of the team of highly motivated individuals who anchor the organization to relentlessly provide world class IT and business solutions. The management team comprises global leaders, with excellent domain knowledge and across-the-board cross-functional experience, who nurture successful relationships with the client community. It includes 7 business unit heads, 8 service line heads and 6 geographical heads.
The Techno Structure
However, this part has very small role to play at IT Business line of Wipro but in the consumer care and other business lines of the Wipro it forms the core part, hence giving rise to machine bureaucracy type of organisational design. And here we are referring to the organisational analysis of the Wipro Technologies and Wipro Infotech.
The Support Staff
This part consists of the supporting functions of Wipro which handles the general management functions and administrative functions to smoothen out the working of the various business units. There are 7 functional heads under it such as technology, quality, information, financial, marketing, global delivery (logistics) and human resources.
Internal Complex Clustering and Inter-Relationships
At Wipro, Business divisions are highly overlapping, so the add on growth and problems arising from the uncertain environment add to the complexity of inter-relationships between these 5 components. And specially the business units (service wise and geographical), verticals in each and the functional heads are having overlapping projects and relationships are thus complex.
Domination of Operating Core
Analysing the various components of organisational design, we found that most of the technical capabilities to perform the various projects is with the operating core. However, the decisions flow from top but there is considerable amount of autonomy with the operating core in view of their highly specialized and professional knowledge. This is what is in the fashion or trend in the IT industry as a whole. Also it has become internally consistent and hence selected out naturally as most sustainable in the field of IT.
The Organization Design (Present)
The Professional Bureaucracy
Professional bureaucracy fits well for Wipro Limited as a group of organization. It is consistent with its requirement of high formalisation/standardisation and moderate to low centralisation. Wipro’s vertical structure divides the company into units such as Telecom Service Providers, Product Engineering Solutions, Finance Solutions, and Enterprise Solutions. These units further cater to industries such as banking, insurance, securities, and so on.
Each vertical is like a self-contained business. It is like a mid-sized company even by U.S. standards, because each vertical generates about $300 million in annual revenues. Though they work under a common structure, with resources such as Finance, HR, Quality and Marketing, each vertical has people who represent these functions. So, in effect, each vertical is like a separate company. There is intention to delegate more authority and responsibility to these self-contained companies.
Matrix in Functional Terms (For IT Business Only)
Wipro’s organizational design is complex and sometimes baffles outsiders. The IT business has two organizations — Wipro InfoTech and Wipro Technologies. The latter handles the global business while Wipro InfoTech serves India, West Asia and Asia Pacific.
In functional terms, the company has a matrix structure with three verticals and two horizontals. The verticals are the $1.06 billion technology business (which is in the product engineering and the telecom service provider space); the $1.4 billion enterprise business (targeted at manufacturing, healthcare, retail, etc.); and the $799 million financial services business. The two horizontals are the $1.1 billion global practices business (testing, package implementation and technology infrastructure services) and the $290 million BPO (business process outsourcing) operation.
Radical Changes and Transformation in the Organization Structure in 2005
After Mr. Vivek Paul left the company, the then CEO, the company went through major transformation process. The reorganization, tried to bring Wipro’s leadership closer to the customer. In the process, there was de-layering the organization and empowering business leaders with a much higher degree of P&L and growth responsibility.
The reorganization also brought the mainstream of the company, which is really our global technology business, closer in alignment with the original corporate staffs, which has now become our business staff.
Leadership at this level speeds things up and gets decisions made faster. It empowers people more, and it allows them to further empower those who report to them, because their jobs have suddenly become much more responsible.
Future Prospects for Organisational Design and Structure
The 21st Century Virtual Corporation!
With more supply of products and services than there is demand, the customer is in a position to demand an ever changing array of tailored products and services. In order to be successful, businesses need to be much more client centric and far more agile and flexible than ever before.
Wipro is responding to this need for radical change by taking an objective approach to the matter. By lending a patient ear to clients and analyzing dozens of outperforming companies, Wipro has realized that businesses must become far more customer centric and develop a highly flexible value chain that can sense and respond with new products and services quickly as market conditions change.
The changing needs of the 21st Century Virtual Corporation demands new business designs that facilitate faster and more extensive collaboration on a global scale. Given this demand, Wipro’s mega alliance strategy of 360° relationships is a unique differentiator.
The environment is the set of forces surrounding an organization that have the potential to affect the way it operates and its access to scarce resources. Wipro’s transaction with its environment can be analyzed based on the forces in specific and general environment.
The specific environment consists of forces from outside stakeholder groups that directly affect an organizations ability to secure resources. Forces in specific environment, that affects Wipro and how it handles these forces, are described below.
As has already been described in the section on Miller’s Integrative Framework, Wipro draws its competitive advantage vis-à-vis the other Indian IT service providers from five specific differentiators. They are technological excellence, innovative solutions, operational excellence, global footprint with emerging market knowledge, and company culture of linking values to business performance.
Wipro’s customers remain cautious after the downturn prevalent in western economy about technology spending, with budgets flat to slightly higher as they look for transformational projects. Customers are taking a lot more time making decisions than spending.
A geographic breakup of Wipro’s revenues from customers:
Wipro’s US based customer’s decision to spend less has forced Wipro to divert its effort towards some other areas like knowledge management. The company is now more focused on building technical competencies in its work force. All its employees below band C are mandatorily required to successfully clear the assessments mapped for them in a particular appraisal year.
Customers are also demanding more robust Business Continuity Plan (BCP) for their accounts operating off shore. This led Wipro to launch an organization wide BCP revamping plan. Emphasis was more on the Banking, Finance, Securities, and Insurance (BFSI) customers as they are the most vulnerable verticals of Wipro due to the inherent nature of their businesses.
For Wipro, changes in customer information technology budgets year on year ranged from flat to an increase of 4%. Company is increasingly focused on technology projects that yield long-term changes in their operations, such as cloud computing, as opposed to those that merely made existing processes more efficient.
Today Customers are looking for partners versus suppliers. Wipro has started a new initiative that is aimed to build better client understanding, business alignment and consultative selling in large accounts, called the Client Engagement Manager (CEM). It has already delivered incremental growth in existing accounts and the increased sales in these accounts are a sign of the success of the initiative (rolled out in 52 key accounts).
Wipro plans to move beyond the market perception of a “low price bidder” to occupy a position that is viewed as operating in multiple models to offer assets to clients through professional service. The company is also orienting towards providing more business value for clients, consulting led account development.
Wipro is also creating Customer Satisfaction Leaders. In 2009, Wipro also undertook a key initiative to strengthen the consulting and customer management skills of our frontline employees by running an academy. The Customer Leadership team of CHRD in conjunction with Enterprise Application Services (EAS) business, in its drive to create world-class consultants launched the EAS Consulting Academy.
Suppliers & Distributors
As Wipro diversified into different sectors it has changed its distributors and suppliers as it best suited for business development. Being an old company, having its presence in India since independence, it has developed a good network of suppliers and distributors all over the country. As the time passed by, based on the need of the business, efficiency and the nexus the company has created; it went for different strategies of distributing its products like in case of its hydraulic products, Wipro has its own dedicated department which takes care of the distribution.
Similarly after 2000 when it studied the use of internet and mobile in marketing and distribution & sales, it started distributing its products online especially in case of products where customers prefer online transactions over retail if available like Baby care products. The network of distributors is based on the sales of products, for example in case of “Santoor” soap which is more sold in Southern part of the country, the distributors network is more dense here rather than in other part of the countries. In service sector as Wipro is acting as a mediator, using mediating technology, it does not have a dedicated suppliers or distributors, but it changes with the changing parties which are being served.
SmartLite (CFL lights)
Sales and Sales
Lion Industry Inc
Infant hygiene products ( Baby soft soap and diapers)
US2guntur.com (Online distributors)
Farsons Marketing Company
Personal Care Products (Santoor soap and talc)
Wipro Consumers Care pvt Ltd (self organized distribution network)
Wipro Infrastructure Engineering Ltd (self organized distribution network)
Falling exchange rate increases the exports and price of imports. Reducing the price of exports by decreasing the exchange rate makes them more attractive and competitive in export market. Hence demand for export increases. Same applies to It services industry as well. Hence by controlling exchange rate and appreciation for currency, government plays a role in dynamics of this industry.
President of USA Barrack Obama has proposed an anti outsourcing policy suggesting increasing the tax on the benefits gained from outsourcing the jobs from U.S. The idea is to provide lesser incentive to the companies to outsource their jobs. The policy mainly aims at creating and conserving jobs in US market but it has implications on Indian outsourcing industry as well.
The policy will greatly affect the foreign companies that are operating in U.S. if this is applied it will mean that the foreign companies will have to pay heavy tax on the labour imported by them. WSJ and LA estimate a tax rate of 55% on foreign companies. That will be a setback for countries like India, which is the biggest player in outsourcing industry. A present slump in number of H1B visas taken up is also a reflection of the same.
In the long term, it will hurt all the economies, since U.S investment is a big factor and reduced investment from U.S means reduced money in all the markets, especially India. But there is a high likelihood that comparative cost advantages that countries like India might still provide, would outweigh the loss incurred by the tax loss that the companies are going to face in the US.
The general environment consists of forces that shape the specific environment and affect the ability of all organizations in a particular environment to obtain resources. Forces in general environment, that affects Wipro and how it handles these forces, are described below.
Demographic and Cultural forces
Population:1,180,166,000 (2010 estimated)
Age Structure: 0 – 14 years – 31.1%; 15 – 64 years – 63.6%; 65+ years – 5.3%
Languages: 14 official languages – Bengali, Telugu, Marathi, Tamil, Urdu, Gujarati, Malayalam, Kannada, Oriya, Punjabi, Assamese, Kashmiri, Sindhi, and Sanskrit (2001 census)
Literacy Rate: 61% (2001 census)
Per Capita GDP: USD 2941 (2009 estimate)
Labour Force: 523.5 million (2008 estimate); 60% – Agriculture, 12% – Industry, 28% – Services
Number of colleges for general education – 11549; number of colleges for professional education – 4991; number of universities, deemed universities and institutes of national importance – 350 (HRD Ministry, 2005-06)
English enjoys associate status but is the most important language for national, political, and commercial communication
Wipro reflects the Indian demographics. It has a young and experienced work force having average age of 24 to 25 years. 35% of the employees are having less than one year of work experience in Wipro. Average tenure of top 100 managers in Wipro is 11 years. Its workforce comprises of 66% of university graduates. 28% of employees are having master degree.
The study of effect of changing technological factors in the general and specific environment of Wipro led to the following analysis:
Identification of Wipro technology on the basis of various theories proposed to understand the relation between technology and the structure of organization is given below, but due to the conglomerate nature of Wipro different businesses are analyzed separately to avoid any kind of confusion:
Consumers and lighting
Development of LED technology for domestic lighting
As it is already in the domestic lighting sector, Wipro can definitely take advantage of this technical development by taking the first mover advantage, by being the first company to introduce LED based lights in India.
Use or development of Mobile-phone based supply chain
Would support in reducing the investment in IT, especially in distribution sector
“Virtualization software” technology for reducing the power consumption
Since Wipro is trying to produce environment friendly products, it would be a landmark effort if it introduces the virtualization software technology which combines various different machines into single virtual machine running on a single powerful base system.
In the near future, the Central IT spending is projected to grow positively. A positive overall growth in the macroeconomic environment of India projects an increase in the central IT spending. For instance, central IT spending is expected to reach about $75.5 billion in 2010. This total spending will consist of civilian agencies accounting for $41.5 billion and the defense department for $34 billion on IT goods and services.
Indian political structure seems to be stable for IT industry but due to lack of clear majority in the parliament, fears of hung parliament are created leading to the change of consumer psychology in relation to investing and thereby reducing the capital for IT industry. The decision of Indian government to contract IT job to Indian IT companies will create more opportunities for the IT companies and the IT industry at large.
With the growth of offshore outsourcing receiving increasing political and media attention there have been concerted efforts to enact new legislation to restrict offshore outsourcing or impose disincentives on companies which have been outsourcing. This may adversely impact Wipro’s ability to do business in these jurisdictions and c
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