Wipro sees clearer skies ahead
The company's product design services unit is stabilizing as it and other Indian technology companies bid for a larger share of product development dollars.
Wipro's R&D Services unit, which helps companies design products such as cell phones and networking equipment, recently posted $58 million in revenue in the December quarter, down from $64 million in the year-ago quarter.
However, Wipro's overall revenue for the company's December quarter grew 26 percent year over year, to $226 million, as North American and European companies turned to it and other Indian IT services firms for lower-cost help with tasks such as application management and systems integration.The product design unit's percentage of revenue contribution to Wipro is expected to hold steady this year, said Sridhar Ramasubbu, the company's general manager for finance and investor relations in the Americas.
Wipro hasn't given forecasts for sales growth for the full year, but expects the March quarter revenue in its global IT services unit to climb 5.2 percent quarter over quarter to about $162 million.
Meanwhile, Indian IT services trade group Nasscom expects the overall Indian software and services exports industry to jump by 30 percent in 2003.
For Wipro, Ramasubbu says the key to success at the R&D services unit is its 4,500 engineers ready to whip up products such as cell phones, networking equipment and high-tech automobile components. "Wipro is a lab for hire," he said. "We have the skill sets, and we can get the skill sets faster than anyone else."
Wipro's activity, to some degree, is similar to the behind-the-scenes work performed by Taiwanese manufacturers such as Compal and Quanta. Initially, these companies assembled PCs and other equipment that were designed by western brand-name manufacturers because their labor costs were low. Now, these companies perform a substantial amount of the design, engineering and software development work, and are increasingly farming out labor-intensive assembly tasks to plants in China.
Korean companies such as Samsung also actively perform research on flat panels and manufacture notebooks for companies like Dell Computer.
Automotive and avionics ambitions The Nasscom trade group is hoping India can snag a larger share of product development spending in the software arena in particular. In a February report, the group suggested that Indian companies should look to help manufacturers develop "embedded" software for technology woven into products in fields such as the automotive, avionics and consumer-electronics industries. Makers of traditional software also may be turning to India, Nasscom said.
"Global ISVs (independent software vendors) are constantly under pressure to supplement their development teams, rebalance their development priorities and reduce costs," the association wrote. "An Indian back-end is well suited to help them overcome many of these problems."
According to the Nasscom report, other Indian companies involved in product design work include Tata Consultancy Services and Dexcel Electronic Designs.
Still other organizations offering to help companies with electronic product designs include Cadence Design Foundry, a unit of San Jose, Calif.-based design technologies company Cadence Design Systems, and the French company Altran.
From food oils to Web-browsing phones At Wipro, a typical product development task for a client may require eight to 12 months, Ramasubbu said. Often, clients are feeling pressure to get a product to market quickly, and don't have the ability to do the design and development work themselves, he said. In some cases, a client may give Wipro engineers strict product specifications, in others Wipro may be asked to help create the specs. In the latter case, the client is engaged in "blue sky thinking," Ramasubbu said. "He's got a wish list, but he doesn't know how to do it."
Examples of Wipro's product design work include developing an Internet-browsing phone for a Japanese telecom company back in 1998, helping chipmaker Texas Instruments produce digital signal processing software, and creating an automotive display unit for Italian manufacturer Magneti Marelli that combined functions including cell phone capability, global position system technology, a navigation system and a CD player.
Wipro's R&D unit revenue from telecom and Internet service provider customers has been flat at $10 million for the past two quarters. That sluggishness reflects a weak telecom industry hit by the economic recession and the bankruptcy of WorldCom.
But Ramasubbu said the company is branching into new areas, such as the automotive industry and industrial automation.
Changing direction is nothing new for Wipro, which has had a colorful history. It was founded in 1946 as a food oils company, but branched into the IT field after IBM left India in the late 1970s. As a maker of PCs and motherboards, Wipro developed expertise that made it an attractive partner to international companies who returned after economic liberalization in the early 1990s, Ramasubbu said. The company worked with heavyweights such as Cisco Systems and Nortel Networks on product design work before those companies set up their own shops in India, he said.