Outsourcing giant Wipro eyes consulting gigs

Indian firms have taken over quite a bit of software development from the U.S. Now, they want to become the guys in the blue suits.

Michael Kanellos Staff Writer, CNET News.com
Michael Kanellos is editor at large at CNET News.com, where he covers hardware, research and development, start-ups and the tech industry overseas.
Michael Kanellos
3 min read
BANGALORE, India--In an effort to move up the tech food chain, Indian IT services giant Wipro Technologies has begun inching into consulting.

The company, which has more than 40,000 employees, is now trying to build up a business unit that will specialize in providing IBM-like professional consulting services for companies trying to figure out strategies for projects such as entering emerging markets.

Rakesh Emani
Ramesh Emani,
senior exec, Wipro

As part of that effort, Wipro has opened an office in Boston to pitch project management consulting, Ramesh Emani, president of embedding and product engineering, said in an interview this week at the company's headquarters here.

Wipro's move into consulting is part of an effort to avoid inevitable competition in its current areas of expertise such as business process outsourcing and application development--markets that Chinese companies with even lower labor costs are entering.

Consulting is also an extension of the work currently performed at Wipro--which, along with Infosys and Tata Consultancy Services, is one of India's top outsourcing companies.

Humble beginnings
Wipro started as a vegetable oil distributor in the 1940s, and it moved into high tech in the '70s when the Indian government exiled multinationals. Emani, in fact, was one of the engineers who helped developed Wipro's--and India's--first PCs in 1978.

When pricing pressure began to take its toll on computer makers in the 1980s, Wipro spun off its hardware unit into a separate company and turned the engineering group behind it into an R&D department for hire. That department, in turn, morphed into the outsourcing conglomerate that Wipro is today.

"We are not apologetic about being a services company."
--Ramesh Emani
Wipro's history also explains its slightly unusual mix of projects. Unlike most rivals, such as Infosys (which launched a consulting group last year), Wipro takes on both software and hardware projects.

In its embedded systems group, for example, Wipro is currently building a prototype of a digital TV for a U.S. start-up, an MP3 player for the European market on behalf of an Asian customer, and several set-top boxes.

As in outsourcing, the push into consulting primarily comes out of the lower costs of doing business in India. Despite double-digit annual salary growth in India, a freshly minted college graduate in the country might earn $8,000 to $20,000, depending on the company, according to sources, far less than someone in the United States. As a result, several individuals can be put on a project.

"Profit per person is very low," Emani said.

Under the microscope
IT services came under the microscope earlier this month when IBM's stock dropped after a miss in earnings from its Global Services Group.

That reaction, however, is partly tinged by culture, Emani asserted.

"Services companies are not very glamorous in the U.S.," he said. "We are not apologetic about being a services company."

Wipro won't try to compete against broad-based consulting outfits such as the Boston Consulting Group. Instead, it will mostly confine itself to familiar niches.

And although Wipro and others in India are facing more competition these days, the companies are still growing rapidly. Wipro's net income grew 58 percent to $363 million in the first quarter. Compound annual growth in revenue for the last five years has averaged 45 percent.

The growth rate translates into a lot of additional bodies. In 1999, the company had 8,000 employees. In 2003, it had 19,000. Now it has 42,000, with most of the growth coming through hiring, not acquisitions. Its number of development centers has grown from 14 in 1999 to 38.

"The biggest challenge is cultural continuity," Emani said. To that end, the company has focused the "bulk of the growth?at the entry level."