Wipro CEO’s Move To Reduce Strategic Business Units Gets Thumbs Up From Analysts: What’s Changing In Wipro?

Analysts have given a nod for Wipro’s new operating model. The new structure was put in place by Wipro’s CEO Theirry Delaporte.

Read on to learn more…

Wipro’s New Operating Model To Come Into Force From 2021?

Earlier in November, Wipro rolled out a new system that will be in position from the beginning next of 2021.

The company will have 4 geography-specific Strategic Market Units (SMUs), comprising of Americas 1, Americas 2, Europe, and Asia Pacific Middle East Africa (APMEA). 

The structure also comprised of two Global Business Lines (GBLs) focussed on digital and new-age businesses. One of them was iDEAS (Integrated Digital, Engineering & Application Services), including the service lines like Domain and Consulting, Applications & Data, Engineering and R&D, and Wipro Digital. The other one will be iCORE (Cloud Infrastructure, Digital Operations, Risk & Enterprise Cyber Security Services) which would include the CIS, DOP, and CRS service lines.

Last week, at Wipro’s analyst meeting, the company presented on how the tech transformation has geared up due to the COVID-19 pandemic which has bestowed an opportunity that aims at Wipro’s growth via some structural changes. 

Delaporte while providing insights to the analysts also demonstrated how the new structure will help the company grow at the industry’s average speed and offer sustained margin performance.

 The new strategic priority for the company is to concentrate on specific geographic regions and their market segment to ride the growth wheel.

What Do The Experts Have To Say?

Following the analyst meeting, Nomura said in its note, “In our view, this will cut red tape, avoid conflicts and allow Wipro to respond with agility and speed to customers’ requirements.”

According to a note by ICICI Direct, “The company’s focus on improving sales and higher investment to drive growth bodes well for revenue growth. Wipro aims to accelerate growth without compromising margins. This, coupled with healthy capital allocation policy, improving tech spends in digital, prompts us to be positive on the company.”  The research note also read that Wipro’s new CEO’s focus on geographies outside the US and large deals might be able to overcome the company’s past hurdle. 

Motilal Oswal’s note stated that Streamlining P&L to four SMUs (v/s 20 P&Ls earlier) should free up internal resources to invest in growth initiatives, which is positive. Furthermore, the formulation of a Global Account Executive (GAE) role would aid in the company’s persistent issue of client mining and retention.

While the other had something positive to say about Wipro’s new structure, Edelweiss research remained cautious. Edelweiss remarked that for more than 10 years,  Wipro has been an underperformer. Also, the fact that many changes in leadership have made more claims about assurance than delivery.

The note said, “An aggressive strategy in an upcycle affords more room to make bold decisions and, in this context, management’s focus on talent is encouraging. We are not changing our pecking order yet and would like to see management walk the talk first.”