India's third-largest IT services provider Wipro -- which also has interests in consumer care and heavy engineering equipment businesses -- has managed to meet analyst expectations. More important, it has also given a strong positive outlook for the third quarter.
The company, despite the 1.5 per cent drop on the volume front, has seen a positive uptake in terms of client additions and revenues. Girish Paranjpe and Suresh Vaswani, the joint CEOs of the Bangalore-headquartered firm, speak to Bibhu Ranjan Mishra about the company's performance in the reporting quarter and the positive messages they are receiving in the ongoing quarter. Excerpts:
Your October-December quarter guidance for your IT services business is bullish. . .Vaswani: In the July-September quarter, we met the upper end of the guidance and have certainly done better than what the market expected. For the October-December (current) quarter, we have given a guidance of 2.5-4.5 per cent increase in our revenues from IT services, which is quite aggressive.
This is certainly based on the funnel and the deals we have in the past two quarters. After all, it's what we have done in the last six months that determines the guidance.
Do we interpret it as a sign of an uptake in demand?
Vaswani: There is a slow economic recovery which has started to take place. We have been fortunate to capitalise on that and have won quite a few transformational opportunities. And that's the reason we are giving this aggressive guidance.
Are you seeing any improvement in the deal conversion rate?
Paranjpe: We are not seeing much change on the deal conversion side. What we are experiencing is that, in existing accounts, organic growth has picked up now across the board. Earlier, we were depending upon just new deal closures to see growth, whereas, organically, the growth was very muted. So now we have two engines of growth -- new clients as well as existing accounts.
The projects which were in limbo are now getting approved. That's the reason why we are much more confident now.
Your headcount has reduced due to involuntary attrition. . .
Vaswani: Gross headcount increase is meaningless in today's context, when clients are becoming very demanding. The overall headcount (decrease) is a factor of utilisation.
This indicates how we have driven non-linearity (not just headcount-related). So, gross headcount is one parameter and billable headcount is another.
Paranjpe: Non-linearity has picked up really well. We have three-four initiatives around that. One is around the productivity gain, where we retain some of the productivity gains out of the fixed price contracts with the customers.
The other part is more of a shared services model wherein, instead of having a dedicated team and facility for each client, we are saying that we have a shared facility. There are two-three other ideas that we are evaluating.
Is that the reason why your involuntary attrition has risen this quarter?
Vaswani: Involuntary attrition has gone up but voluntary attrition, too, has risen in the reporting quarter as compared with the trailing quarter. We have strong performance-monitoring parameters. The market is changing and so is the demand environment.
We have to be fairly circumspect in terms of where the attrition is going and keep it at the level at which it has been in the last couple of quarters.
Any update on your NewLogic Centre in France?
Paranjpe: We had just 60 employees in NewLogic in France. We have come to a very amicable settlement with the workers' union in France, wherein we have offered something beyond the normal requirements which is substantially more.
Because it is a very technology-intensive belt, we offered the intellectual property that we jointly developed there, free of charge to employees who wish to pursue that further.
We are also offering them our space and equipment free of charge for one year. So, everybody is fairly satisfied with the outcome.
So you are not closing down the centre?
Paranjpe: We acquired this centre through the acquisition we did in December 2005. The centre had two businesses -- engineering services and building IP around wireless products, such as bluetooth.
We think the market for the second business has saturated, both in terms of supply as well as demand. So, we have decided not to pursue the wireless products business.