The swiftness the change in leadership at Wipro highlights the scale of challenges that have plagued the IT major. Right on top of that list is the company’s financial performance, with net profit falling year-on-year in the fourth quarter of financial year 2023-24 (Q4FY24). Then there are the departures of around 10 senior leaders in 2023.
These factors together led to the premature exit of Thierry Delaporte as Wipro’s CEO and MD, and the selection of internal candidate Srinivas Pallia as his replacement.
That said, those tracking the company were not completely surprised by the development. According to Gaurav Vasu, CEO and Founder of market intelligence firm UnearthInsight, there was speculation about Delaporte’s exit for at least six to eight months. “This was on account of financial underperformance, the exit of key leaders and high-quality middle-level talent,” he says. After the pandemic, there was a lot of hype around tech investments and tech transformation. That helped Wipro and others in the industry—Tier-I and II firms. But a host of factors, like inflation, interest rate hikes across the world, and a slowdown in tech spending had a negative impact. “It was obvious in those companies that had not built a multi-vertical, multi-geo, and client-first strategy of farming existing clients, since getting new deals was taking longer if there was no differentiated offering or capability,” Vasu adds.
Without a doubt, Pallia, a hiker, will have to hit the ground running to restore confidence among employees and investors. He takes charge at a turbulent time. On a year-on-year basis, its net profit declined 8% to Rs 2,835 crore in Q4, and for the whole of FY24 it was a 2.69% decline. But there is a silver lining—Wipro’s net profit rose 5.8% quarter-on-quarter in Q4. “Pallia will need to assure everyone of leadership stability and investment in newer capabilities like Gen AI/AI and analytics,” says Vasu. It is important to demonstrate disruptive productivity improvements, he adds. “Of course, there is the need to get it right on market positioning as well.”
Pallia was in charge of Wipro’s Americas business in early 2021 before moving in as the top boss of the company. He came aboard in 1992 as a product manager before holding key positions like head of business application services and president of the consumer business unit.
Understandably, there has been a debate about bringing in an external candidate as opposed to an internal one. Delaporte, who was based in Paris, joined Wipro in June 2020 for a five-year term after a 25-year stint at Capgemini. He succeeded Abidali Neemuchwala, whose tenure also ended prematurely.
Gaurav Dua, Head (Capital Market Strategy) at brokerage Sharekhan by BNP Paribas, believes transition is a theme at frontline IT services companies today. “Going for someone from within the system is a smart way of doing it because they are in sync with the strategy. Infosys had earlier brought in Vishal Sikka, and it was an experiment that did not quite work out. In the case of Wipro, Delaporte was stationed abroad, but the company’s large base existed in India.”
Pallia will have his hands full, with a clear focus on margin improvement. In March 2021, Wipro bought London-based global management and tech consultancy Capco to strengthen its presence in the BFSI business. The $1.5-billion all-cash deal was the company’s largest and came less than a year after Delaporte took charge. At that point, Wipro had said it would be possible to deliver “high-end consulting and technology transformations”. However, it has faced several challenges, with BFSI revenues coming under pressure for IT majors. “Capco put more pressure on the aggregate margin at Wipro. The Street will now expect the company to improve or sustain both revenue growth and margins in the short run until the BFSI and hi-tech spends improve in the US,” maintains Vasu. According to him, the M&A bet around Capco with lower margins and growth, in addition to difficulties in integration around the cultural fit and solution mindset, “was always going to be challenging”. Given how all of this has led to Wipro’s net profit being under pressure, it is something that Pallia will need to address.
Overall, in the IT industry, too, growth has not been easy. “There is a clear slowdown in IT spending, and one is witnessing a low- to mid-single-digit growth scenario. That gets even more difficult with a change in leadership,” says Dua. All eyes will be on Pallia and what he brings to the table in a difficult situation. “It is not only about the individual, but how he is synchronised with the organisation’s goals. It has been said that if an outsider is brought in, people tend to leave.” Wipro will hope its decision will inspire confidence internally.
@krishnagopalan