We are approaching the US market very systematically: Wipro president & COO

Bhanumurthy B M, president and chief operating officer at Wipro 
Wipro's third quarter (Q3 FY18) numbers lacked some of the firepower that its larger peers tried to show in certain areas. The most surprising element that dragged the company's performance down during the quarter was the provision it made to mitigate the impact of a long-standing client filing for insolvency. Bhanumurthy B M, president & chief operating officer of Wipro, tells Alnoor Peermohamed and Bibhu Mishra in an interview that customer insolvency is a one-off incident and does not portray anything about the overall health of the sector (Energy and utility, or E&U). He also talks about how Wipro has been on the path of non-linearity, successfully backed by various measures it had taken in past quarters and years. Edited excerpts:   

There were various surprises from the industry this quarter. On one hand, there seems to be an uptick in deal wins by major players, but sector- and client-specific issues continue. Even in the case of Wipro, the provision towards customer insolvency is something that was never anticipated earlier?

If you look at our numbers this quarter, our revenues have come mid-range of what we had guided, and our guidance has been increasing quarter on quarter. The same trend continues for the fourth quarter as well. There are some known things in this quarter, like the furloughs, (more number of) holidays, so there's a seasonality. The surprise element was the customer insolvency for which we had to make a provision to mitigate our exposure.

So you did not anticipate this (customer filing insolvency)? Is it because your relationship with this particular customer is four-year-old?

We have been working with the customer and the company declared bankruptcy for whatever reason. For that company as well, it (filing for insolvency) was a surprise; it was an event that happened. Based on that event, we need to respond as to what's our guidance and what's our financial treatment of that. That's what we did. 

How grave is the situation, especially for the sector (E&U)? E&U had been going through a rough patch in the past and you have sizable exposure here.

Like I said, this is one company. I am not going to equate this to an entire industry because this is not an industry trend or a geographic trend. It's just one customer's activity and that's how I'd like to treat it. Overall, in E&U, we have shown a decline in revenues.

Does this client work with any other technology vendors apart from Wipro and what's the exposure?

I don't know about that but we definitely worked with them.

The US seems to be a bit of a concern for you right now as the growth has been flattish in the past quarter. How do you plan to mitigate this?

Regarding the US, I want you to look at it through a different lens. If you look at our focus in the US, there are two or three things we've said we will do there. One was our focus on localisation because we want to get local context into the programmes and be more relevant to the customer. Then we said that not only will we have local people, we will build a full organisational structure in the local markets. Consequently, we are hiring from US campuses and we've gone to US MBA schools. We're getting talent from there. Then, we've set up US delivery centres saying that we'll do delivery locally in the US. We recently inaugurated our centre in Dallas from where we are delivering fairly advanced solutions to the clients. We also inaugurated our Silicon Valley innovation centre to showcase what all is possible and also to create a space where there is a possibility for customers to come with their team and, along with our team, jointly solve a problem in 24, 36 or 48 hours. That's what we did.

We also know that the entire innovation cannot happen within Wipro. We believe that significant innovation happens outside Wipro. Silicon Valley is a good example of where innovation happens. We have created a Wipro Ventures fund. I think it's the 13th investment we made this quarter and many of those are in the US.

Therefore, if we look at all the investments we are making in the US, we are very systematically going about building local capability, building a local presence, and establishing local innovation centres there. I think our strategy in the US is fairly robust right now.

But it's not showing in the financial numbers...

If you look at constant currency terms, the US would show a growth and you have to adjust for all the one-time conversations and all that. So for example, if you look at it at constant currency year on year, the US grew 0.6 per cent.

Give us an idea of where the spending is happening? Analysts say that IT budgets continue to remain flat.

Obviously, a good portion of the spend will come not just in IT, but also in organisations from functions like digital, marketing, and data. Today, almost all organisations are looking for different ways of working. We call it digital. All these organisations are doing this because their own market and competition have changed. Many organisations that have been early adopters of digital have conducted pilots and proof of concepts. They've worked with us and seen our capabilities. There are proof points now with them about our capabilities and this has set the stage for the larger adoption of digital.

Are you seeing large deals in the digital space like some of the recent ones announced by other industry players?

If you look at something like different ways of working in an organisation and how we will incorporate digital methods into their organisation, how we will use digital to address issues of their consumers and how we will deploy digital methods to reduce customer churn... These are all things that are becoming organisational initiatives and not just a point initiative or a function initiative. 

So what does Wipro's pipeline in the digital space look like?

You have seen our digital growth. It's become 25 per cent of our overall revenues. It's definitely grown in the past two to three quarters. It's grown faster than the company average growth. The funnel has to be better.

What is the average deal size for digital deals?

More digital deals are happening because organisations have seen the proof points, they have seen the capabilities, and because there is a need. For example, with the acquisition of DesignIT and Cooper, we've got very strong design capabilities. With Apperio, we had earlier enhanced our capability on the Cloud. These are all the elements of digital. If you look at data, we've added a lot of capability in managing data through our own DDP platform. All these elements of digital are coming together.

Your revenue guidance for Q4 is rather muted...

If you look at our performance in the past three quarters, we have consistently guided in a certain fashion. We have definitely come within the ranges that we have guided. When we give guidance, we do so based on what we see. What we're forecasting is what we see right now.

Your headcount, over the past three quarters, has declined on a net basis while the attrition has remained constant or has improved. How much of that is involuntary attrition due to various factors such as skill mismatch, performance, etc?

One thing that we mentioned earlier is that our gross hiring has remained robust. We're going to campuses and hiring laterally. That's one element that you need to understand. The second thing is that certain activities are getting automated, especially through Holmes. We've done around 87 bots and have 2,500 instances of bots running right now. The third one that you have to understand is that the productivity of our employees is also going up because of the toolsets they are using right now. The last one is about skills. There's a large need for people to enhance their skillsets right now. We realised that we need to democratise the learning process almost four quarters ago. Consequently, we launched a platform called Top Gear, where every Wipro employee could go and acquire a set of skills they thought they require and we offered them a menu of processes. That has been a very strong boon to this.

Will employee headcount degrowth continue?

It's a very small range. Don't read too much into that trajectory.

We are not just talking about Wipro. It looks like jobless growth or growth with fewer job additions is becoming a reality now. Don't you agree?

At the same time, you should also look at the number of places you can provide services. If I look at it in a certain fashion: Earlier, if you did not have a particular toolset, you were not able to address a certain type of customer; now, there's a capability to address that kind of customer.

Are you saying newer types of jobs and newer skillsets are being created?

Yes. People are getting reskilled into newer things. People are doing newer jobs with us. For example, if you get an agile job, you are required to know agile capabilities. You need to know how to run scrums. You must learn to become a scrum master. The other big thing we are seeing in the organisation is that a large number of people have to become multimodal. Therefore, they need different skillsets and capabilities. That means an appreciation of design, strong engineering, and capability to work in agile fields.