In hard times, Wipro hires few and manages with less

STRATEGY SHIFT: Azim Premji's company shows IT companies new way of management.

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Bangalore: Investors looking at the latest financial results of Wipro Ltd, India's third largest software exporter, were surprised at the low level of hiring by the company compared to its peers such as Infosys and Tata Consultancy Services. Was it a knee-jerk reaction to the global financial meltdown or a careful strategy to realign cost structures? They wondered.

Wipro says the slowdown in staff addition is part of a plan to de-link the number of new software professionals to growth in business. Known for a cost-conscious approach under the leadership of Azim Premji, the company is challenging that linear model used by outsourcing companies all these years. Henceforth, the mantra would be to do more with less, a senior Wipro official said.

“There will be a shift in the IT services model,” Pratik Kumar, corporate vice-president for human resources, told Network 18. In a constantly evolving market place, now also hit by the financial crisis, pricing models are changing and so will the cost structure. "Companies have started looking at profitability per employee,” he said.

The company added only 1,895 people to its rolls in the first six months of the financial year 2008-09, compared with 11.321 people in the same period last year. Wipro’s hiring in such small numbers is unusual, but looks like it is working given that revenue and profits in the last two quarters have grown. IT services revenue grew 32 per cent to $2.1 billion even as this hiring squeeze was put in place.

Kumar said widespread salary increases, soaring property rates, rupee volatility and increased commoditization of the offshore business indicate that a revenue model leveraged on the headcount was bringing lower and lower margins. For instance, operating rating margins in Wipro’s global IT business have fallen from 28 per cent in 2003 to 22 per cent last year. Other companies, too, face a similar trend.

Kumar says that Wipro has been trying hard to send the message to analysts that they should no longer link the revenue growth of the company to its headcount growth.

To make the model more efficient, Kumar says managers will have to do “more with less”. The first step in that direction is to bring more people out of the 'bench' and put them on active projects. At the moment utilization rates (not including trainees) are at an all time high of 80 percent in Wipro. Last year, it was at 70 per cent.