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and services such as Custom Application Development and Maintenance (CADM), System Integration, IT Consulting, Application Management, IS Outsourcing, Infrastructure Management Services, Software testing, Service-oriented architecture and Web services. When it comes to IT services, the world is coming to India. With a CAGR of 28 per cent during the last 5 years, the IT-ITES industry’s contribution to India’s GDP has risen from 1.2 per cent during 1999-2000 to 4.8 per cent in 2005-06. Growth Curve A survey by the National Association of Software and Services Companies (Nasscom) shows why the Indian IT industry has become a case study of success:
The Indian IT-ITES industry has recorded 33 per cent growth in exports, clocking revenues of US$ 23.6 billion in FY 2005-06, as compared with export revenues of US$ 17.7 billion in FY 2004-05.
FY 2005-06 also saw the overall Indian IT-ITES industry (including domestic market) growing by 31 per cent registering revenues of US$ 29.6 billion, up from US$ 22.5 billion in 2004-05.
Of the total IT-ITES exports in FY 2005-06, IT software and services grew by 33 per cent, registering revenues of US$ 13.3 billion The ITES-BPO segment clocked revenues of US$ 6.2 billion, recording a growth of 37 per cent. Engineering services and product exports grew from US$ 3.14 billion in FY 0405 to US$ 4 billion in FY 05-06. Domestic market clocked revenues of US$ 6 billion in FY 04-05 from US$ 4.8 billion in FY 05-06.
Growth Drivers According to Nasscom, the growth in India's services exports has been led by many factors, including:
A strong demand and increased traction for traditional services like ADM New services like EAI (Enterprise Application Integration) and package implementation New areas like engineering services. Indian companies are enhancing their global service delivery capabilities through a combination of green-field initiatives, cross-border M&A, partnerships and alliances with local players.
Global software product giants such as Microsoft, Oracle and SAP have established their captive development centres in India. Leading MNC IT companies have operations in India, accounting for 16 percent of their delivery capabilities in offshore locations, with India accounting for 70 percent of the total offshore employee base.
R&D India is fast emerging as a research and development hub for some of the largest IT companies in the world. The country is drawing 25 per cent of fresh global investments in R&D centres. In many cases, such as Oracle, Intel, Adobe, STMicroelectronics (STM), SAP and others, the India R&D centre is their largest facility outside the US or Europe. Others, including IBM, Texas Instruments, Delphi, HP, Microsoft, Google and Cisco have been tapping Indian talent for conducting cutting-edge research. According to Daniel Dias, director, IBM India Research Lab, “India has a rich talent base. As a result, a lot is going on in the Indian context which forms the basis for R&D work.” Meanwhile, the companies that are already here are betting big on India. For instance:
SAP Labs India is SAP’s largest development facility outside Germany. Adobe Systems has 900 people in its India R&D operations — the highest number outside the US.
Chipmaker Intel has 3,000 staff in India, the majority in its R&D unit. Some of Intel India R&D’s recent contributions include complete design of the Centrino mobile chip called Napa.
STM has built a state-of-the-art design campus in Greater Noida, which once fully developed, will have 5,000 engineers. The company has earmarked US$ 30 million in investments over the next two years.
Companies are lining up to invest in India, and a big chunk of their spending is directed towards setting up R&D facilities. As per the data compiled by the Ministry of Communications and IT, against 28 companies that outlined their investment plans, 17 have already infused capital. Six of these companies have committed over US$ 1 billion each towards their India operations. This includes Cisco’s commitment of US$ 1.1 billion, SemIndia’s US$ 3 billion proposed investment, Intel’s US$ 1.25 billion, Microsoft’s US$ 1.7 billion, IBM’s US$ 6 billion, and SAP Lab’s US$ 1 billion investment. Hardware on a high road According to the IT industry’s annual review (2005-06) by Manufacturers’ Association for Information Technology (MAIT), hardware sales in India are tangible proof of the shifting patterns of growth in India’s IT industry.
Desktops: Desktop shipments have gone from 1.9 million units in 2000-01 to 4.6 million units in 2005-06, reflecting a CAGR of 25 per cent between 1998 and 2005, and a growth of 27 per cent in 2004-05 alone. MAIT estimates desktop shipments to grow to 5.6 million in 2006-07, at an annual growth of 21 per cent.
Processors: In 2005-06, the Intel P-4 processor dominated the market, with an 80 per cent share in all PCs sold during the year. Notebooks and laptops: Between 2000-01 and 2005-06, the annual sale of notebooks grew by 144 per cent, at a CAGR of 76 per cent. While only 41,670 notebooks were sold in 2000-01, a whopping 431,834 notebooks were sold in 2005-06, the bulk going to businesses and 13 per cent going into households.
Servers: From 64,090 servers in 2000-01, sales have gone up to 89,161 units in 2005-06. Annual sales increased by 81 per cent, with 48 per cent of sales headed for India’s small towns, signalling a slow but sure shift to Tier-II towns.
Printers: Laser is in, in the Indian computer printers market. Displaying a CAGR of 52 per cent, laser printer sales have gone from 71,000 units in 2000-01 to 325,000 in 2005-06. Inkjets continue to dominate the market. Of the more than 1.5 million printers sold in 2005-06, nearly half were Inkjets. Dot matrix printers are steady at a CAGR of 8 per cent, while Inkjets are growing at 14 per cent CAGR.
UPS: Sales have shot from 398,195 units in 2000-01 to 1,208,413 units in 200506, displaying an annual growth of 27 per cent and a CAGR of 34 per cent. More than half (55 per cent) of the UPS sold were headed to India’s small cities.
Keyboards and Monitors: Keyboards have shown an annual growth of 26 per cent, and a CAGR of 28 per cent. Monitor sales, dominated by the 15-inch monitors, have shown an annual growth of 27 per cent and a CAGR of 28 per cent.
Internet: India’s internet penetration has gone from 350,000 in 2000-01 to 4,124,000 in 2005-06. One in four SEC-A households in India have an active internet connection, while 48 per cent of all business and 16 per cent of all homes have an active internet connection in the top 4 metros. Users are moving away from dial-up lines and opting for higher speeds and better connectivity of Cable and DSL links and ISDN dedicated lines.
Spread to Tier-II IT or ITES, the action is shifting to India’s Tier-II cities, and the numbers speak for themselves. In 2000-01, 68 per cent of total PC sales were in the top 4 cities Indian metros. In 2005-06, that number is down to 33 per cent. Sales of PCs in smaller towns grew 35 per cent, accounting for 54 per cent of the total market. While the sales growth in the Top 4 cities was merely 10 per cent, in the Next 4 cities, it was a whopping 50 per cent.
Users The profile of Indian IT users is changing. The retail sector has adopted computers with a passion. There has been a 127 per cent growth in retail outlets buying desktops, between 2000-01 and 2005-06. Factories have shown a growth of 46 per cent in the same period, while office locations a growth of 24 per cent. Road Ahead India is up to meet the global IT challenge. According to Nasscom’s projections, overall software and services will grow by 25-28 per cent, clocking revenues of US$ 36-38 billion in FY07. IT-ITES exports are likely to grow by 27-30 per cent in FY 06-07, posting revenues between US$ 29-31 billion. Market Overview Bolstered with such a significant, technically sound resource base, the software industry has grown unimpeded. With a compounded annual growth rate of more than 50% between 1992 and 2001, the Indian software sector has expanded almost twice as quickly as the world-leading U.S. software industry did during the same period, although from a smaller base.India’s software industry statistics illustrate the massive strides achieved by this sector and the opportunities the future holds. According to NASSCOM’s estimates for the fiscal year 2000-01, the country’s software industry is worth $8.26 billion, up from $100 million ten years ago. A study conducted by renowned consultancy firm McKinsey and Co., for NASSCOM, has proven why India is becoming the off-shore software development out-sourcer’s destination of choice. According to the NASSCOMMcKinsey study, the Indian software industry is expected to gross US$50 billion in exports in 2008! This is based on an average growth rate of 35 percent per year. The industry is well placed to achieve this target
Growth of IT Industry (in US $bn)
100 90 80 70 60 50 40 30 20 10 0 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 Years
US $ bn
INTRODUCTION – WIPRO LTD.
Wipro Technologies is an IT service company established in 1980 in India, it is a subsidiary of Wipro Limited NYSE: WIT . It is headquartered in Bangalore. It is the third largest IT services company in India.It has 61,000 employees as of Oct 2006, which is inclusive of it's BPO arm which it acquired in 2002.The current chairman and majority stake owner is Azim Premji. From inception the software and hardware divisions have been headed by him. Azim H. Premji has been Wipro Ltd.'s Chairman of the Board and Managing Director since September 1968. Mr. Premji holds a Bachelor of Science in Electrical Engineering from Stanford University. Currently, he is also a Director of Media Lab Asia. Wipro was set up in Amalner in 1945. Primarily an edible oil factory, the chief products were Sunflower Vanaspati and 787 laundry soap (a by-product of the Vanaspati operations). The company was called Western India Vegetable Products Limited, with a minor presence in Maharashtra and Madhya Pradesh. The Global IT Services and Products segment provides IT services to customers in the Americas, Europe, and Japan. The India and AsiaPac IT Services and Products segment operates in the Indian IT market and offers IT products and services to the companies in India, Asia-Pacific, and the Middle East region. Consumer Care and Lighting segment engages in the manufacture and sale of consumer care and lighting products. The consumer care products include soaps and toiletries, baby products, talcum powders, and hydrogenerated cooking oils. The lighting products include light bulbs, fluorescent tubes, and luminaries. In the 1970s and 1980s it began to expand and made forays into computing. The Indian promoters hold more than 80 percent of the total share capital of the company while the Indian public holds about 7 percent and institutional investors hold about 6 percent. Wipro's has clients across a spectrum of industries such as consumer electronics, finance, Government, insurance, manufacturing, media & entertainment, mobile devices, Telecom - equipment vendors and service providers, travel & transportation etc. To these clients the company offers services such as application development, deployment & maintenance, business intelligence, business consulting, CRM, data warehousing,
communications, technology consulting, network management, testing services, system design, Web services, wireless networks, software application development and maintenance etc. The company also provides consultancy services like security governance, e-governance etc. Wipro Limited, through its subsidiaries, provides IT services worldwide. It offers software solutions, IT consulting, business process outsourcing services, and research and development services in the areas of hardware and software design. The company operates in three segments: Global IT Services and Products India and AsiaPac IT Services and Products, Consumer Care and Lighting.
The business units of Wipro Ltd. are as follows: Wipro Technologies: Wipro Technologies is a global services provider delivering technology-driven business solutions that meet the strategic objectives of our clients. Wipro has 40+ ‘Centers of Excellence’ that create solutions around specific needs of industries. Wipro delivers unmatched business value to customers through a combination of process excellence, quality frameworks and service delivery innovation. Wipro is the World's first CMMi Level 5 certified software services company and the first outside USA to receive the IEEE Software Process Award. Wipro Consumer Care Ltd. Wipro Consumer Care and Lighting, (WCCLtg) a Business Unit of Wipro Limited, has a profitable presence in the branded retail market of toilet soaps, hair care soaps, baby care products and lighting products. It is also a leader in institutional lighting in specified segments like software, pharma and retail.
Wipro Consumer Care has been one of the fastest growing FMCG companies as reflected by the organizational performance in the last three years. We have grown both organically and through acquisitions. Wipro Biomed Wipro Biomed is the Biomedical business division of the Rs. 90 billion (USD 2 billion) Wipro Limited. Wipro Biomed is India's only Biomedical, Health and Life Science service provider offering integrated products, services and solutions focused on the domestic market. Built on over 15 years of biomedical experience, we have more than 2000 customers in diagnostics, life sciences and medical systems.Wipro Biomed has three businesses - Life Science Group, Diagnostics System Group and Medical Systems Group. We have developed expertise in consulting, deploying,servicing and back up of bio-medical equipments. We have strong partnerships with leading bio-medical technology providers, wide geographic reach to support and service the equipments backed by focus on quality and innovation. Wipro Infrastructure Engineering. Wipro Infrastructure Engineering (formerly Wipro Fluid Power) provides solutions ranging from Precision Engineered Products to value added Services for customers in industries that serve the core infrastructure sector - ranging from Construction, Mining, Agriculture and Power to Steel Plants and Ports.Our product and service offerings include high precision hydraulic cylinders, valves, PTO's, complete tipping solutions and system solutions for a wide range of applications.We are the largest Indian provider of precision engineered hydraulic components and solutions. Wipro GE Medical Systems Ltd. Wipro GE Medical Systems is a joint venture between Wipro and General Electric Company. A part of GE Medical Systems South Asia, it caters to customer and patient needs with a commitment to uncompromising quality .Wipro GE is the market leader
with unmatched distribution and service reach in South Asia and is India’s largest exporter of medical systems. Wipro GE pioneered the manufacture of Ultrasound and Computed Tomography systems in India and is a supplier for all GE Medical Systems products and services in South Asia. Wipro and its success in handling outsourced information technology from U.S. businesses is detailed in Thomas L. Friedman's best-selling novel "The World Is Flat". Business
Wipro Technologies • • • • Wipro Infotech Ltd. IT Services Product Engineering Solutions Technology Infrastructure Services Business Process Outsourcing
• Consulting Services Notebooks Desktops Servers Enterprise Products Sun Servers IBM Servers Business Application and Development Data Warehousing Technology Integration Fast Moving Consumer Goods Construction, Mining, Agriculture, Ports Medical systems Specialty Products Life Sciences Diagnostic Medical Systems Managed Services
Wipro Consumer Care & Lightning Wipro Infrastructure Engineering Wipro GE Medical Systems Ltd. Wipro Biomed
1945: Incorporation of Western India Products Limited. 1947: An oil mill and hydrogenated cooking medium plant set up.
1966: Azim Premji takes over the leadership of Wipro at the age of 21. 1975: Wipro Fluid Power set up to manufacture hydraulic and pneumatic 1977: Name of the company changed to Wipro Products Limited. 1980: Information technology services for domestic market started. 1981: Hardware company is launched. 1982: Name of the company changed to Wipro Limited. 1984: Software products subsidiary - Wipro Systems Ltd. - established. 1985: Toilet soaps manufacture begins. 1988: Wipro BioMed, a new business unit to market and service bio1989: Joint venture with GE of US for medical systems, Wipro GE 1990: Product software business discontinued; software services begin. 1992: Lighting business and finance arm is established. 1994: Merger of subsidiaries Wipro Technologies Ltd. and Wipro Systems 1998: Relaunch of Wipro identity with Rainbow Flower and positioning 1999: Software business reaches SEI certification. 1999: Wipro Net set up by restructuring Wipro Ltd.'s communication 2000: Listing of Wipro Ltd.'s ADRs on New York Stock Exchange. 2000: Six Sigma initiative begun.
• • • • • • •
analytical and diagnostic instruments, is launched.
Medical Systems Ltd.
• • •
Ltd. with Wipro Ltd.
statement, "Applying Thought".
services business to address the Internet market.
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2001: Wipro becomes world's first PCMM Level 5 company. 2002: Wipro becomes CMMi. Acquires Raman Roy 's Spectramind for US$ 175 million to get into BPO space 2005: Wipro becomes a 4 billion $ company. 2006: Wipro becomes the world's largest R&D service provider. 2006: Wipro sees net profit for the three months to September rise 48% to $152m (£81m)
• • •
A survey conducted by Businessweek has ranked Wipro 23 in the top 100 of Information Technology. Coming off its strongest year since 2000, Wipro grew at 43% in 2004. The company has branched out from offerings such as software development, R&D, and applications maintenance to providing remote infrastructure management, financial services, and applications and product testing. All that while maintaining its position as the world’s largest third-party R&D provider. Wipro, which gets the majority of its revenue from the U.S., is pushing further in Europe and expects to make some acquisitions there this year. At home, the company’s back-office operation, Wipro BPO, got a jolt when Chief Executive Raman Roy quit in early June to start another business. The $150 million operation, mostly call-center work, will move into higher-end backoffice jobs such as insurance processes in order to achieve greater profitability and to stem the high employee attrition to new foreign players.
VALUE CHAIN ANALYSIS OF WIPRO LTD.
Human Resources Wipro Technologies is a global services provider delivering technology-driven business solutions that meet the strategic objectives of our clients. Wipro has 38 ‘Centers of Excellence’ that create solutions around specific needs of industries. Wipro delivers unmatched business value to customers through a combination of process excellence, quality frameworks and service delivery innovation. Wipro is the World's first CMMi Level 5 certified software services company and the first outside USA to receive the IEEE Software Process Award. Employee Feedback & Communication: Wipro as an organization believes in Connecting and Listening to people.
Channel W the employee portal, has been creating a de facto ‘Wipro community’ by allowing Wiproites to interact, disseminate information on things they most cherish. The intranet ensures that the entire organization is wired and there is meaningful exchange of information / views across domains and geographies. Key sections encourage employee participation and communication through bulletin boards and chat rooms among other things. Employee feedback and continuous improvement is a cornerstone of our progress. We believe that the most worthwhile inputs for betterment of people practices come from employees themselves, as they are the customers. We have various processes in place, which ensure that employee feedback reaches senior management.
W10 is a dipstick survey with 10 questions which checks the satisfaction level on issues, which affect the health of the workplace and supervisory effectiveness. The feedback given by employees is shared with management through scorecards.
Employee Perception Survey: We conduct employee satisfaction surveys every two years. Employees are encouraged to give comments and rank the organization on certain areas /satisfaction drivers. Top management then prepares a timely
action plan to address the areas of concern and task forces are created to focus on improvement areas and implement action.
Action plan (Meet your people program) - The W10 scores provide the trigger to managers /supervisors to meet their teams and resolve issues which create dissatisfaction in the workplace.
Skip Level: We believe that team feedback is an important parameter of leadership development as well as team cohesiveness. A Skip level meeting is a formal team feedback session facilitated by HR as well as the supervisor’s supervisor. This is an institutionalized process in Wipro and managers see great merit in it as they get feedback from the team that affects team performance and can make mid-course corrections to improve effectiveness at work.
New Managers Assimilation Program (NMA): Since teamwork is highly valued, assimilation of a new manager in team play is a very critical part of his/her induction to the company. It enhances team bonding and aims at consensus and collation of concerns, the challenges ahead, "must-know-about-manager" etc. from the team.
Corporate Culture Everyday at Wipro is challenging and thought-provoking. What is tested is your drive, enthusiasm and initiative. New ideas are appreciated and innovation is encouraged- if you have a suggestion and a plan to take it forward- you will get all the necessary support to transform it into action. • Beyond Work
There is a whole lot that Wiproites do beyond the job per se. We ensure that you get an opportunity to ‘express’ and ‘enjoy’ yourself at the workplace! We engage in activities with great energy, free spirit, and commitment to human values and this has played a significant role in our success story so far. Active, unhindered participation brings us closer to each other and to ourselves and making work fun and meaningful.
There are numerous events, which are organized for our people throughout the year. These span our people’s interests, the festivals that they celebrate and the fun we ensure they have! Whether it is the Dandiya festivities, the World Environment Day celebrations or a chat with Sri Sri Ravishankar on our employee portal Channel W- it is all happening at Wipro! Workplace Diversity Wipro seeks to build a climate that welcomes, celebrates, and promotes respect for the entire human race. In our commitment to diversity, we welcome people from all backgrounds and seek to include knowledge and values from various cultures. The concept and dimensions of diversity are advanced and incorporated into every aspect of the organization. Dimensions of diversity include, but are not limited to, the following: race, ethnicity, religious belief, sexual orientation, sex/gender, disability, socioeconomic status, cultural orientation, national origin, and age. The implementation of the commitment to Diversity rests with the organization as a whole. However, in addition to this personal commitment and involvement, we have instituted a Diversity Committee to implement effectively the philosophy and intent of the organization with respect to diversity. Business Level Program Wipro Leaders’ Qualities Survey Wipro Leaders’ Qualities Survey, which started in 1992, is one of our oldest leadership development initiatives. It has successfully contributed in our endeavor to nurture top class business leaders in Wipro. We have 8 Wipro Leadership Qualities, which are based on Wipro vision, values and business strategy. In order to identify and help leaders develop these competencies we adopt a 360-degree survey process. This is an end-to-end program, which starts with the obtaining of feedback from relevant respondents and ends with each leader drawing up a Personal Development Plan (PDP) based on the feedback
received. The PDP is developed through “Winds of Change” which is a seven-step program that helps in identifying strengths and improvement areas, and determining the action steps. Leadership Lifecycle Programs Wipro has developed an approach for Life Cycle Stage Development Plan. Training and development programs at various stages have been designed by mapping the competencies to specific roles. Competencies specify the specific success behaviors at every role.
Entry-level program (ELP) - The program covers the junior management employees with the objective of developing managerial qualities in the employee. The target group is campus hires and lateral hires at junior level.
New Leaders’ Program (NLP) - It is popularly known as NLP and aims at developing potential people managers, who have taken such roles or are likely to get into those roles in the near future.
Wipro Leaders’ Program (WLP) - This program is for middle level leader with people, process, business development and project management responsibilities. These leaders are like the flag bearers of Wipro values and Wipro way of doing business. They not only walk the value talk but they also have a responsibility of assimilating new leaders with the Wipro culture.
Business Leaders’ Program (BLP) - This is for senior leaders with business responsibility. At this level, people are trained up for revenue generation; and Profit & Loss responsibilities. The program covers commercial orientation, client relationship development, and team building and performance management responsibilities among other things.
Strategic Leaders’ Program (SLP) - This program covers top management employees. The focus is on Vision, Values, Strategy, Global Thinking and Acting, Customer Focus and Building Star Performers. Wipro ties up with leading business schools of international repute to conduct this program for Wipro leaders.
The Leadership Development Framework
The Wipro philosophy has a clear thrust on performance enhancement. We have a systematic and robust process for planning, implementing, reviewing, and evaluating performance of our employees. The entire process is online, which ensures scalability and standardization. We ensure that employees receive periodical feedback and that the Development Plan forms a significant part of the entire performance management process. Reward Philosophy Exemplary performance is unquestionably rewarded at Wipro. There are various awards and recognition programs, which have been institutionalized across businesses. We also constantly endeavor to enhance our reward program to align it with changes in employee motivators and business drivers.
RESEARCH & DEVELOPMENT
Sudip Nandy is responsible for setting and driving the strategic direction of Wipro Technologies globally. His responsibilities include mergers and acquisitions for Wipro as well as strategic partnerships to expand Wipro’s footprint. Inorganic growth has been a key driver in Wipro for getting deeper domain-expertise, adding new service-lines and fuelling rapid growth. In addition to the above he is also responsible for the Microsoft Business Unit, a group that works across all verticals to implement leading edge technologies from Micrososft. In the 1990s the BPO Business model was such that most of the U.S. and European companies began to do much of their work in India. Then came another phase of innovation in the BPO [business process operations] industry where the Indian companies now account for almost 20% of India's exports. The third wave is where the companies are setting up R&D centers in India. Morgan Stanley (MS) has set up a large center in Mumbai where they are doing significant mathematical modeling in terms of equity interpretation, risk assessment, risk management. Wipro's R&D business is over $550 million and represents nearly one-third of total revenues.
At Wipro there is an innovation council consisting of the champions from different technology domains, practices, and vertical business units, which essentially sets strategy and direction and approve funding. They also have centers of excellence in each of the verticals, such as retailing and manufacturing. Wipro has roughly between 900 and 1,000 employees working in innovation. In terms of total value, the combined innovation revenue last year was about 5%, and our target is 10% over a three-year period. Azim Premji believes that making R&D free of accountability is the biggest mistake committed. Eventually, R&D has to be linked to business profit. R&D has got to get routed into deliverables. Not being diverse is another mistake. The composition of human resources in R&D, especially male-female ratios, is important. The breakthrough innovation of low-cost flexi-packs for consumer goods [such as shampoo] was really pioneered in India by a team of women. Having a certain portfolio of projects is also very important. Wipro has taken on six projects this year, which are being called as quantum
innovation, of significant size and risk, which will probably start showing results in 12 to 24 months. An Indian engineer from a good university costs between $8,000 and $9,000 a year compared with $45,000 in the U.S. or Europe. Indian salaries are rising about 12% a year and American salaries are going up at 3% a year, so it would take more than 30 years for the two to converge. The key issue is supply, not cost. Wipro is increasing the basket of talent available to them by digging down into the second- and third- and fourth-level universities to retrain engineers and make them into successful software engineers. They are lending faculty and offering e-learning courses to students.The Company follows processes and sticks to quality matrix. For years companies have made profits almost solely on the basis that their labor has been cheaper and more fluent in English than the rest of the world. With demand for labor and thus its cost rising quickly in India, however, it is clear to most that this formerly lucrative business model is quickly coming to an end. A number of larger outsourcing firms are as a result attempting to move up the outsourcing food chain by offering higher level services. One of the highest is research and development, which requires innovative thinking and technology. If Indian companies are able to gain a stronger foothold in this arena they will begin to complete the transition of creating an economy not based on cheap labor alone but on competitive advantages that yield a higher margin return. EE Times UK Reports:
FINANCIALS IN WIPRO LTD.
Significant accounting policies Basis of preparation of financial statements The accompanying financial statements are prepared and presented under historical cost convention on accrual basis of accounting, in accordance with Indian Generally Accepted Accounting Principles (Indian GAAP) and accounting standards issued by the Institute of Chartered Accountants of India (ICAI). Principle of consolidation The consolidated financial statements include the financial statements of Wipro and all its subsidiaries, which are more than 50%owned or controlled. The financial statements of the parent Company and its majority owned and controlled subsidiaries have been combined on a line by line basis by adding together the book values of all items of assets, liabilities, incomes and expenses after eliminating intercompany balances/transactions and resulting unrealised gain/loss. The consolidated financial statements are prepared using uniform accounting policies for similar transactions and other events in similar circumstances. Use of estimates The preparation of consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities on the date of the consolidated financial statements and reported amounts of revenues and expenses during the period reported. Actual results could differ from those estimates. Revenue recognition Revenue from software development services comprises revenue from time and material and fixed-price contracts. Revenue from time and material contracts are recognised as related services are performed. Revenue from fixed-price, fixed-time frame contracts is recognized in accordance with the percentage of completion method. Revenues from BPO services are derived from both time-based and unit-priced contracts. Revenue is recognized as the related services are performed, in accordance with the specific terms of the contract with the customers. Maintenance revenue is considered on acceptance of the contract and is accrued over the period of the contract. Revenue from customer training, support and other services is recognised as the related services are performed. Provision for estimated losses, if any, on incomplete contracts are recorded in the period in which such losses become probable based on the current contract estimates.
‘Unbilled revenues’ included in loans and advances represent cost and earnings in excess of billings as at the balance sheet date. ‘Unearned revenues’ included in current liabilities represent billing in excess of revenue recognised. Revenue from sale of products is recognised, in accordance with the sales contract, on dispatch from the factories/warehouse of theCompany. Revenues from product sales are shown as net of excise duty, sales tax separately charged and applicable discounts. Agency commission is accrued when shipment of consignment is dispatched by the principal. Profit on sale of investments is recorded upon transfer of title by the Company and is determined as the difference between the sales price and the then carrying value of the investment. Interest is recognised using the time-proportion method, based on rates implicit in the transaction. Export incentives are accounted on accrual basis and include estimated realizable values/benefits from special import licenses andadvance licenses. Other income is recognised on accrual basis. Other income includes unrealised losses on short-term investments. Warranty cost The Company accrues the estimated cost of warranties at the time when the revenue is recognised. The accruals are based on the Company’s historical experience of material usage and service delivery costs. Fixed assets, intangible assets and work-in-progress Fixed assets are stated at historical cost less accumulated depreciation. Interest on borrowed money allocated to and utilised for fixed assets, pertaining to the period up to the date of capitalization is capitalized. Assets acquired on direct finance lease are capitalized at the gross value and interest thereon is charged to profit and loss account. Intangible assets are stated at the consideration paid for acquisition less accumulated amortisation. Advances paid towards the acquisition of fixed assets outstanding as of each balance sheet date and the cost of fixed assets not ready for use before such date are disclosed under capital work-in-progress. Lease payments under operating lease are recognised as an expense in the profit and loss account. Goodwill
Goodwill arising on consolidation/acquisition of assets is not amortised. It is tested for impairment on a periodic basis and written-off if found impaired. Depreciation and amortization Depreciation is provided on straight line method at rates not lower than rates specified in Schedule XIV to the Companies Act, 1956. Assets under capital lease are amortised over their estimated useful life or the lease term, whichever is lower. Intangible assets are amortised over their estimated useful life. Estimated useful life is usually less than 10 years. For certain brands acquired by the Company, based on the performance of various comparable brands in the market, the Company estimated the useful life of those brands to be 20 to 25 years. Accordingly, such intangible assets are being amortized over 20 to 25 years. Investments Long term investments (other than investments in affiliates) are stated at cost less provision for diminution in the value of such investments. Diminution in value is provided for where the management is of the opinion that the diminution is of other than temporary nature. Short term investments are valued at lower of cost and net realizable value. Investments in affiliates are accounted under the equity method. Inventories Finished goods are valued at cost or net realisable value, whichever is lower. Other inventories are valued at cost less provision for obsolescence. Small value tools and consumables are charged to consumption on purchase. Cost is determined using weighted average method. Provision for retirement benefits Gratuity - In accordance with applicable Indian laws, the Company provides for gratuity, a defined benefit retirement plan (Gratuity Plan). The Gratuity Plan provides a lump sum payment to vested employees, at retirement or termination of employment, an amount based on the respective employee’s last drawn salary and the years of employment with the Company. The Company contributes to the group gratuity scheme of Life Insurance Corporation of India (LIC). Superannuation - Apart from being covered under the Gratuity Plan described above, the senior officers of the Company also participate in a defined contribution plan maintained by the Company. This plan is administered by the LIC. The Company makes annual contributions based on a specified percentage of each covered employee’s salary. The Company has no further obligations under the plan beyond its annual contributions.
Provident fund In addition to the above benefits, employees receive benefits from a provident fund, a defined contribution plan. The employee and employer each make monthly contributions to the plan equal to 12% of the covered employee’s salary. A portion of the contribution is made to the provident fund trust managed by the Company, while the remainder of the contribution is made to the Government’s provident fund. The Government mandates the annual yield to be provided to the employees on their corpus. The Company has an obligation to make good the shortfall, if any, between the yield on the investments of trust and the yield mandated by the Government. Foreign currency transactions The Company is exposed to currency fluctuations on foreign currency transactions. With a view to minimise the volatility arising from fluctuations in the currency rates, the Company follows established risk management policies, including the use of foreign exchange forward contracts and other derivative instruments. As a part of the Risk Management Policies, the forward contracts are designated as hedge of highly probable forecasted transactions. The Accounting Standard (AS 11) on “The Effects of Changes on Foreign Exchange Rates”, amended with effect from April 1, 2004 provides guidance on accounting for forward contracts. In respect of forward contracts entered into to hedge foreign exchange risk of highly probable forecasted transactions, the ICAI has clarified that AS 11 is not applicable to exchange differences arising from such forward contracts. The premium or discount of such contracts is amortised over the life of the contract in accordance with AS 11 (revised).Foreign currency transactions are recorded at the average rate for the month. Period-end balances of monetary foreign currency assets and liabilities are restated at the closing rate. The exchange difference arising from restatement or settlement is recognised in the profit and loss account. In respect of forward contracts assigned to the foreign currency assets as on the balance sheet date, the proportionate premium/discount for the period upto the date of balance sheet is recognised in the profit and loss account. The exchange difference measured by the change in exchange rate between inception of forward contract and the date of balance sheet is applied on the foreign currency amount of the forward contract and recognised in the profit and loss account. Exchange differences, including gains/losses on intermediary roll over/cancellation, of forward contracts designated as hedge of highly probable forecasted transactions are recognised in the profit and loss account in the period in which the forecasted transaction occurs. Realised/unrealised gains and losses on forward contracts and options not designated as hedges of forecasted transactions are accounted in the profit and loss account for the period. In respect of non-integral operations, assets and liabilities are translated at the exchange rate prevailing at the date of the balance sheet. The items in the profit & loss account are
translated at the average exchange rate during the period. The differences arising out of the translation are transferred to translation reserve. Employee stock options The Company measures the compensation cost relating to employee stock options using the intrinsic value method. The compensation cost is amortized on a straight line basis over the total vesting period of the stock options. Fringe benefit tax Consequent to the introduction of Fringe Benefit Tax (FBT) effective 1 April, 2005, in accordance with the guidance note on accounting for fringe benefits tax issued by the ICAI, the Company has made provision for FBT under income taxes. Earnings per share The number of shares used in computing basic earnings per share is the weighted average number of shares outstanding during the period. The number of shares used in computing diluted earnings per share comprises the weighted average shares considered for deriving basic earnings per share, and also the weighted average number of equity shares that could have been issued on the conversion of all dilutive potential equity shares. The dilution is determined using the treasury stock method. Dilutive potential equity shares are deemed converted as of the beginning of the period, unless issued at a later date. The number of shares and potentially dilutive equity shares are adjusted for any stock splits and bonus shares issues. Cash flow statement Cash flows are reported using indirect method, whereby net profits before tax is adjusted for the effects of transactions of a non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from regular revenue generating, investing and financing activities of the Company are segregated. Provisions and contingent liabilities The Company creates a provision when there is a present obligation as a result of an obligating event that probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. Where there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.
Impairment of assets The Company assesses at each balance sheet date whether there is any indication that an asset including goodwill may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset or the recoverable amount of the cash generating unit to which the asset belongs to is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognised in the profit and loss account. If at the balance sheet date there is an indication that if a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciated historical cost. In respect of goodwill the impairment loss will be reversed only when it was caused by specific external events and their effects have been reversed by subsequent external events.
Notes to Segment Report The segment report of Wipro Limited and its consolidated subsidiaries and associates has been prepared in accordance with the Accounting Standard 17 “Segment Reporting” issued by The Institute of Chartered Accountants of India. Segment revenue includes exchange differences which are reported in other income in the financial statements. c) PBIT for the quarter and year ended March 31, 2006 is after considering restricted stock unit amortisation of Rs. 154 Million (2005 : Rs. 177 Million) & Rs. 633 Million (2005 : Rs. 346 Million) respectively. PBIT of Global IT Services and Products for the quarter and year ended March 31, 2006 is after considering restricted stock unit amortisation of Rs. 131 Million (2005 : Rs. 159 Million) and Rs. 544 Million (2005 : Rs. 310 Million) respectively. d) Capital employed of segments include current liabilities –
e) Capital employed of ‘Others’ includes cash and cash equivalents including liquid mutual funds of Rs. 29,817 Million (2005 : Rs. 22,784 Million). f) The Company has four geographic segments : India, USA, Europe and Rest of the World. Significant portion of the segment assets are in India. Revenue from geographic segments based on domicile of the customers is outlined below :
g) For the purpose of reporting, business segments are considered as primary segments and geographic segments are considered as secondary segment. h) Until June 30, 2005, the Company reported IT services and BPO services as an integrated business segment - Global IT Services and Products. Effective July 2005, the Company reorganized the management structure of Global IT Services and Products
Segment, the segment reporting format has been changed accordingly. Revenues, operating profits and capital employed of Global IT Services business are now segregated into IT Services and BPO services. i) As at March 31, 2006, revenues, operating profits and capital employed (including goodwill) of mPower and New Logic are reported separately under ‘Acquisitions’. j) In August 2005, the Company issued bonus shares in the ratio of one additional equity share for every equity share or ADS held. k) a) In accordance with Accounting Standard 21 “Consolidated Financial Statements” issued by The Institute of Chartered Accountants of India, the consolidated financial statements of Wipro Limited include the financial statements of all subsidiaries which are more than 50% owned and controlled. b) The Company has a 49% equity interest in Wipro GE Medical Systems Private Limited (Wipro GE), an entity in which General Electric, USA holds the majority equity interest. The shareholders agreement provides specific rights to the two shareholders. Management believes that these specific rights do not confer joint control as defined in Accounting Standard 27 “Financial Reporting of Interest in Joint Venture”. Consequently, WGE is not considered as a joint venture and consolidation of financial statements are carried out as per equity method in terms of Accounting Standard 23 “Accounting for Investments in Associates in Consolidated Financial statements”. c) In accordance with the guidance provided in Accounting Standard 23 “Accounting for Investments in Associates in Consolidated Financial Statements” WeP Peripherals have been accounted for by equity method of accounting.
WIPRO MARKETS ITSELF
Wipro focuses largely on "pull" marketing initiatives, targeting prospective clients while they are searching for relevant IT information. Mostly this means Web-based marketing with four key components: Search engine promotion Thought leadership content on leading IT portals and directories Web seminars and events Website content Wipro's own Website is the fulcrum of the entire lead-generation program. The marketing team has invested heavily in creating a wide range of material to showcase company capabilities and successes, demonstrate thought leadership, and provide interactive opportunities for prospective clients to sample Wipro's wares. Wipro uses special offers and more than 400 case studies to get visitors to demonstrate and register their specific interests. Comprehensive Web monitoring provides regular analysis of what is and is not working and what role the Web is playing in lead generation and relationship development. Building on the "pull" elements, Wipro uses permission marketing to strengthen relationships and move prospects along the sales cycle. Specific initiatives include telesales, direct mail, and industry-based newsletters. In all cases, the marketing team relies on the prospect database to create carefully targeted lists based on incoming traffic, client profiles, and ongoing Web activity. This helps create the greatest possible impact from the limited "push" activities. Typical marketing campaigns today target as few as 30 to 50 accounts.
Many firms talk of a single view of the customer, yet just as many are saddled with disparate databases and uncoordinated marketing and sales activities. The common result is that some prospects are bombarded with conflicting messages through different channels while others simply fall through the cracks. Wipro faced exactly that challenge several years ago and invested in the creation of a single prospect intelligence database that provides a complete view of all marketing and sales interactions with prospect companies as well as extensive profile information. The database now includes detailed data on multiple contacts from almost every company in the Fortune 1,000 and more than 17,500 senior management contacts in all. The database is so effective that Wipro no longer buys lists of any kind to support its marketing efforts. Results from Wipro's integrated lead-generation program have greatly exceeded expectations and created an extremely high return on marketing investment. Along with a surge in qualified leads has come a greatly accelerated sales cycle. The typical six- to nine-month sales cycle has been shortened to 30 days in some cases. Leads are converted to sales far more quickly because the targeted approach is more personalized and focused. The particular tactics at the heart of Wipro's program are well known, if not always well developed. No doubt Wipro has done a great job in improving its Website, developing newsletter and Web events, and targeting the right prospects. And it is certainly helped by being in a growing market. Yet the great power and the most important lessons of the program lie in its integrated nature and its disciplined execution.
INBOUND & OUTBOUND
Global Data Synchronization for Distributors As a critical link in the supply chain, distributors today need to be aware of the industrywide developments in the area of Global Data Synchronization, determine the business case for its adoption and finally chart out a roadmap for implementation. Achieving Data Synchronization
Internal It Systems Integration Cleanse data in catalogs Make systems GTIN and GLN compliant Implement a Product Information Management system
External Data Synchronization Establish a messaging system and a data pool compliant to EAN.UCC standards Synchronize basic item data with enterprise master catalog with manufacturers and retailers Syndicate the relationship dependent pricing and promotion data with retailers Data Analytics Build a Data Analytics and Decision Support System to provide A consolidated view of inventory Measurement of inbound & outbound logistics metrics Performance measure of promotional activities MYTH 1: GDS is only for retailers and manufacturers. GDS is equally important for distributors. Aligning internal party and product data with upstream and downstream trading partners is essential for avoiding losses due to lack of accurate and timely product and party information. MYTH 2: GDS only means basic item data synchronization with external trading partners. Internal synchronization of all IT systems is a necessary step before going for external synchronization. MYTH 3: Internal synchronization of item and party information is important only for retailers and manufacturers. As a distributor you serve as a hub for many-to-many relationships between manufacturers and retailers (and hence you need to maintain information about both manufacturers and retailers). This is why your internal synchronization is extremely important for ensuring efficiency in logistics operations. MYTH 4: Distributors should go for only promotion and pricing synchronization. It is true that promotion and pricing data are relationship dependent and hence needs to be synchronized between distributors and retailers. However, in order to sync these data, distributors should have access to updated and accurate basic item data which adhere to global standards as espoused by EAN and UCC. This requires that the distributors’ internal systems be in sync with those of the manufacturers’ and retailers’ data. Wipro Service Offerings
Theme Story Distributors among Top 10 outsourcing players A large number of Wholesale distributors like Aramark, Sodexho Alliance and Ikon office solutions figured in the list of Outstanding Outsourcing service providers released by The International Association of Outsourcing Professionals (IAOP). The changing revenue mix and widening portfolio of services is redefining the role of distributors like never before. Wholesale food distributors want to emerge as supply chain specialists managing all the core functions like warehousing, fulfillment, in bound logistics and store design for their customers. Food service distributors offer the broadest spectrum of services ranging from facilities management for big institutional clients to recipe management for independent restaurants. Electronic component distributors play a crucial role in the components supply chain by complementing their line card with other value added services like component selection, materials management, Vendor managed inventory, programming, environmental compliance and design services. Similarly building material suppliers offer project management and pre fabrication support to professional contractors thus playing a key role in areas that were traditionally owned by the construction company. The success of many distributors in offering these value added services can be attributed to one or more of the following reasons:
Distributors have the opportunity to leverage traditional strengths in order fulfillment and logistics management to offer a host of supply chain services. Customers are increasingly willing to outsource non core activities to distributors. Distributors are uniquely positioned to know supplier innovation and also understand customer demand providing them with the ability to offer several demand generation, product installation and support services. Technology can play a key role in helping distributors to offer several other value added services or scale up these services with greater confidence. Sometimes a distributors IT investment for internal process efficiency/ data accuracy can also enable him to offer a value added service. For example an electronic component distributor’s Product Information management investments also empowers the company to offer component information service as a fee based service to OEMs, contract manufacturers or Electronic Manufacturing Service (EMS) providers. Technology investments can also empower a distribution company to accomplish the following: • • • Provide Global Data Synchronization ( GDS ) as a value added service to customers Support VMI schemes serving as the single point of contact and contract compliance for big suppliers Compete with 3 PL players to provide order fulfillment and in bound logistics services Distribution Framework Common Product Catalog Wipro can commission a pilot implementation on a pre agreed scope involving a few product categories, SKUs or operating companies and then engineer a full scale roll out. Reverse logistics Our reverse logistics solutions help seamless collaboration between retailers and suppliers by providing complete visibility and thus increasing reverse logistics velocity and consumer satisfaction. Wipro’s ‘ready to implement portal solution’ encompasses efficient processes that aid in drastic reduction of inventory levels, minimize operational costs in real-time through automated workflow and improved inventory and resource utilization. Centers of Excellence (CoE) Wipro’s ability to provide business-focused solutions stems from the fact that Wipro’s delivery organization is supported by "Centers of Excellence" comprising of a dedicated team of domain experts and functional architects. This enables us to provide winning business solutions for the unique problems faced by Wipro’s clients and help them proactively respond to industry trends.
The CoE helps build Point Solutions and Frameworks with reusable plug and play components that help in developing high performance solutions to enable faster deployment and end-to-end verification & validation before final roll-out. In Store In Store CoE helps retail organizations stream line their store operations and benefit by improve customer retention and reducing shrinkage. The CoE offers its domain expertise in Point of Sale (POS) systems, Loss prevention, Global Data Synchronization and Customer Loyalty management. The CoE possesses expertise to help customers make build versus buy decisions and has developed frameworks and prototypes that streamline and standardize implementation processes. Supply Chain Wipro’s Supply Chain activities encompass business consulting, end-to-end business process re-engineering, product evaluation and implementation. The CoE has competencies in Process Assessment, Contract Management, Supplier Management, CPFR, Demand Forecasting, Compliance (such as Sarbanes Oxley Compliance), Warehousing, Global Sourcing and Transportation.
Merchandising & Pricing The areas of expertise of the Merchandizing & Pricing CoE include technology, domain and process consulting in merchandize planning, category management, price and markdown management and retailer-supplier collaboration. RFID Wipro RFID Competence centre provides a comprehensive portfolio of EPC/RFID solutions and services to meet the retailers mandate and to automate the business operations of CPG companies looking beyond compliance. Wipro’s services span the compete progression through building business case, RFID roadmap, integration and deployment. Business Analytics The Business Analytics CoE is focused on leveraging cutting edge analytical tools & technologies to facilitate better decision making across the complete value chain of CPG organizations. Wipro develops business cases and data models, leverages on in-house analytical expertise and builds best practices to measure and improve performance. Trade Promotion Management The TPM CoE offers a comprehensive approach for trade promotion business process assessment, gap identification and recommendations for improvement. Wipro’s services span from Trade Promotion Technology solution evaluation, enablement, deployment and help consumer goods companies reduce cost by managing Trade Promotion Administration and Analytics. Manufacturing Execution Systems The Manufacturing CoE has developed competence on ERP tools such as SAP, Oracle, JDE, Lawson, etc, and concentrate on building seamless integration of ERP with critical shop floor systems. As part of its offerings, it also provides Analytics and Reporting solutions focusing on area such as Manufacturing Intelligence and Dashboards.
FUTURE OF WIPRO LTD.
Future of Wipro Ltd. Amongst top ten IT companies in the World. Concentration and acquisitions in Germany Biggest challenge to maintain the culture.
BIBLIOGRAPHY www.wipro.com www.wipro.in www.nasscom.org Annual Reports –Wipro Ltd & Infosys Ltd. Banglore Tiger Steve Hamm, Tata Mc-Graw Hill Publication
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