Can Srini Pallia Rescue Wipro's Unstable Ship?
Pallia, who embarked on his Wipro journey immediately after college, faces a formidable challenge ahead as the company’s CEO three decades later
The IT industry’s ongoing season of CEO leadership changes witnessed yet another unexpected twist as Wipro CEO Thierry Delaporte yielded his position, paving the way for longtime company veteran Srini Pallia to take the reins late last week.
Delaporte’s departure, following four years of service at Wipro, marks a huge pivot in the company’s business strategy. Despite widespread challenges across the IT sector, the company has been perceived as trailing behind its industry counterparts. And perhaps the change was long due.
This is the first time since T K Kurien's appointment in 2011 that an internal candidate has been chosen to lead Wipro.
Most industry observers that BW Businessworld spoke to opined that Pallia's experience and his "Americas 1" leadership along with evident Wipro loyalty would have him standing at a better position than Delaporte to lead the organisation.
Deepak H, Partner at Strategy3, a management consulting firm under Ipsos India, said that Pallia's selection as CEO seems to be in line with Wipro's strategic goals for several reasons. He said, “Firstly, Pallia's extensive experience of over three decades at the organisation including key positions such as CEO of Americas 1 and President of Wipro’s Consumer Business Unit, positions him well to lead the company through technological advancements, aligning his leadership skills with the objectives of growth and transition in the technology sector.”
Under Delaporte, the Wipro leadership has also seen high-profile leadership exits, including the recent storied exit of ex-CFO Jatin Dalal, who was replaced recently by Apana C Iyer. With Srini, it is being anticipated that the leadership will stablise and help employee morale which seems to be at a low-level.
"... Pallia's appointment is expected to boost employee morale and bring stability to the organisation," Startegy3's Deepak added.
Ramesh Alluri Reddy, CEO at TeamLease Degree Apprenticeship says the new CEO at Wipro will be responsible for nurturing and investing in internal talent to groom the future generation of leaders, enabling the necessary transformation for the organisation.
Wipro has been continuously working towards strengthening its position among the top four technology companies in India, competing with Infosys, HCLTech and TCS. In fact, it was the leading IT company until Ashok Soota's tenure till 1999. But other players have evidently done better since then.
The appointment of Thierry Delaporte as CEO during the pandemic was aimed at accelerating the company's performance. In fact, under Delaporte's leadership, Pallia utilised his remote "Americas" advantage to rally the company together, engaging with a wide range of clients and offering strategic direction, especially with the bold move of acquiring financial services consulting powerhouse Capco. However, Delaporte rarely left his Paris base, which could be a reason possibly contributing to his struggles in managing a business with Indian roots amidst challenging economic conditions, pointed out HFS Research CEO Phil Fersht in his blog.
"You can’t run an Indian-heritage business during tough economic times when you’re not physically present to boost morale and represent the firm. Being seen at Davos and not rallying the leadership while the revenues are tanking is not a good look," Fersht wrote.
Wipro’s Underperformance
The third quarter of fiscal year 2024 posed a significant financial challenge for Wipro, with a reported 11.9 per cent year-on-year (YoY) drop in consolidated net profit. The consolidated net profit for Q3 was Rs 2,700 crore, compared to Rs 3,065 crore in the same quarter of the previous year.
Consolidated sales for the quarter were reported at Rs 22,205 crore, indicating a decrease from Rs 23,229 crore in the corresponding quarter of the previous year. The gross revenue reached Rs 22,210 crore, reflecting a 1.4 per cent decrease quarter-on-quarter. But the woes have not been merely a near-term one.
Source: HFS Research
Mrinal Rai, Assistant Director and Principal Analyst at ISG, highlighted the underwhelming performance of Wipro. He pointed out that approximately two-thirds of Wipro's revenue comes from America, while the remaining one-third is derived from the BFSI sector. Both of these segments are currently facing significant challenges. In light of this, Rai said he believes that the new CEO will need to swiftly identify strategies to expand not only in industries where Wipro already has a strong foothold but also in sectors experiencing growth, such as energy and healthcare.
Further, Rai added Wipro's leadership has been acknowledged by ISG recently in their research reports for various service areas concerning IT infrastructure, hyperscalers ecosystems, application services, specific industries and certain BPO service lines. He said that the recognition highlights ISG's confidence in Wipro's capabilities.
"The appointment is seen as a positive development, as Pallia is expected to bring a unique approach to leveraging AI technology in a competitive market with evolving macroeconomic conditions" - Mrinal Rai, Assistant Director and Principal Analyst at ISG
The Influence Of Leadership Change On Market's Performance
One of the standout numbers during Delaporte's tenure at Wipro was the company's stock performance, which rose by as much as over 115 per cent, propelling the company's market cap to Rs 1.36 lakh crore.
Markets were evidently taken by surprise with the news of Delaporte's exit and this reflected on the company's stock performance on Monday, resulting in a decrease of approximately 1 per cent on the BSE. The stock closed at Rs 480.25 at 16.00 IST.
Despite the decline, Neeti Sharma, CEO at TeamLease Digital, remains confident that appointing an internal leader as the new CEO has successfully communicated positive messages to all stakeholders. There are high expectations for significant positive outcomes in terms of Wipro's market position and efficiency, improved relationships within the industry, and advancements that will benefit employees, investors and other industry partners.
"Despite the obstacles that accompany transitions, stakeholders are ready for initiatives that can enhance internal talent, elevate executive capabilities, and refine leadership structures" - Neeti Sharma, CEO at TeamLease Digital
Strategy3's Deepak H felt that investors, clients and employees are expected to view and respond favourably to the new appointment. With Pallia being an insider and an Indian executive, his appointment is anticipated to boost the company across many parameters. Additionally, having an long-term insight into the successes and failures of his predecessor's initiatives, Pallia can capitalise on the positives and rectify the negatives.
Arvind Pandit, Founder & Managing Partner, Ishwa Consulting said that under Pallia's leadership, Wipro had the potential to adopt a more assertive approach in the market. "Given his extensive background in securing high-value clients, he is well-equipped to drive strategic changes within Wipro, ultimately resulting in improved organisational performance," he said.
Pallia, who embarked on his Wipro journey immediately after college, faces a formidable challenge ahead as the company’s CEO three decades later. But buoyed by the industry’s positive reception of his appointment, the direction Wipro takes after Delaporte officially steps down on 31 May 2024, will be intriguing to watch.
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