Scholarly article on topic 'Innovation and internationalisation in the Indian software industry: Wipro – Going forward'

Innovation and internationalisation in the Indian software industry: Wipro – Going forward Academic research paper on "Economics and business"

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{Innovation / Internationalisation / "Indian software industry" / Strategy / Intrapreneurship / "Minority investments"}

Abstract of research paper on Economics and business, author of scientific article — Chirantan Chatterjee

Abstract This interview documents how the Indian software industry is trying to transform itself in the growing need to remain competitive through innovation and internationalisation. In a free-wheeling conversation, Wipro Chief Strategy Officer Mr. Rishad Premji discusses macro and micro issues in this transformational path outlining efforts on the part of Wipro to acquire strategic agility and remain competitive globally with an ever changing external environment.

Academic research paper on topic "Innovation and internationalisation in the Indian software industry: Wipro – Going forward"

IIMB Management Review (2014) 26, 59-64

available at www.sciencedirect.com

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journal homepage: www.elsevier.com/locate/iimb

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INTERVIEW

Innovation and internationalisation in the Indian software industry: Wipro — Going forward Interview with Rishad Premji, Chief Strategy Officer, Wipro Limited

Chirantan Chatterjee

Corporate Strategy and Policy, Indian Institute of Management Bangalore, Bannerghatta Road, Bangalore 560076, India

KEYWORDS

Innovation;

Internationalisation;

Indian software

industry;

Strategy;

Intrapreneurship;

Minority investments

Abstract This interview documents how the Indian software industry is trying to transform itself in the growing need to remain competitive through innovation and internationalisation. In a free-wheeling conversation, Wipro Chief Strategy Officer Mr. Rishad Premji discusses macro and micro issues in this transformational path outlining efforts on the part of Wipro to acquire strategic agility and remain competitive globally with an ever changing external environment.

Introductory note

In their book "From Underdogs to Tigers: The Rise and Growth of the Software Industry in Brazil, China, India, Ireland and Israel",1 noted management scholars Ashish

E-mail addresses: chirantan.chatterjee@IIMB.ERNET.IN, chirantan@ gmail.com

Peer-review under responsibility of Indian Institute of Management Bangalore

1 "From Underdogs to Tigers: The Rise and Growth of the Software Industry in Brazil, China, India, Ireland and Israel", 2005, Ashish Arora and Alfonso Gambardella, Oxford University Press.

Arora and Alfonso Gambardella document how from being practically non-existent in the 1980s, the Indian software industry took wing in the 1990s, and argue thereafter whether that necessitates new thinking for a fresh model of economic development. A few decades later, some companies like Infosys in India took these developments one step forward, launching version 3.0 in 2011 to augment innovation coming out from the sector. Yet, as 2014 unfolds (and at the time this note is written), Infosys is planning to spin off its new generation business (Infosys 3.0) into a separate subsidiary.2 The Indian software industry also faces tremendous other headwinds. A lot of

2 "Infosys 3.0 to be separate subsidiary; Sanjay Purohit to be named CEO, Samson David COO", Indu Nandakumar, ET Bureau | Jan 6, 2014, http://timesofindia.indiatimes.com/articleshow/ 28475149.cms.

http://dx.doi.org/10.10167j.iimb.2014.01.009

this relates to failed starts in product innovation within the boundary of larger companies. Which is why, last year also saw the National Association of Software & Services Companies (NASSCOM) and Confederation of Indian Industries initiating the 10,000 start-ups program to tap into the paradigm of open innovation and augment product development from smaller firms rather than their bigger industry peers. But it is not only in augmenting innovation that the industry is facing challenges. Even the contours of the industry boundary are changing with transformational events shaping newer product markets like in social media and big-data related analytics. Even immigration is acquiring a protectionist hue in countries where Indian software exports have traditionally reached over the last two decades.

Given these changes, how the Indian software industry will transition into the next big leap globally is a key consideration. Will Indian software firms be able to play in the products space from being mere service providers in the global value chain? How can they co-create value for their customers? What are the necessary ways through which firms are considering disrupting their internal boundaries to engage in more meaningful innovation with accompanying strategic agility?

A key aspect in this discussion is the idea of a firm, small or large, and its ability to strategically pivot and change trajectories. A recent paper by MIT and Wharton academicians3 raises this issue especially with regard to technology commercialisation. In this conversation, with Mr. Rishad Premji, Chief Strategy Officer, Wipro Technologies, we try to understand these issues, especially with respect to Wipro's goals related to innovation and internationalisation to remain prominent during its next big leap. Mr. Rishad Premji engages in a free-wheeling assessment of the transforming-Wipro, talking about minority investments becoming more important in the organisation along with an awareness to be of value in an increasingly outcome-driven global software industry. He also outlines Wipro's efforts in promoting intrapreneurship and external innovation with his thoughts on participatory models in the crowd-innovation eco-system. The article highlights how Indian software companies are rejigging their firm routines at the micro and macro level and are pivoting strategically to regain their competitive advantage over the next decade.

Mr. Rishad Premji here in the interview sets the benchmark for the industry, offering progressive thinking and out of the box strategies for peer firms to contemplate and emulate from the industry cohort. Wipro's evolution also documents how a 70-year-old firm can get invigorated with new leadership and attempt to be nimble in changing times. This resonates consistently with recent literature on the role of leaders and leadership style on corporate performance of firms (Bertrand & Schoar 2003).4

3 http://www.management.wharton.upenn.edu/hsu/inc/doc/ papers/david-hsu-tcspivot.pdf.

4 http://faculty.chicagobooth.edu/marianne.bertrand/research/ papers/managing_style_qje.pdf.

Interview with Rishad Premji, Chief Strategy Officer, Wipro Limited

Rishad Premji is responsible for the Global Strategy of Wipro Ltd. He joined Wipro in 2007 as the Business Head for Special Projects in the Banking and Financial Services Vertical where he was responsible for driving Wipro's entry, as an end to end provider of Mortgage Solutions into the Origination and Loan Servicing space.

He later moved to another role as the Head of Wipro Investor Relations, working for the Corporate Treasurer where he helped significantly scale up the systems, processes and interactions with both internal and external stakeholders.

Prior to joining Wipro, Rishad Premji worked with Bain & Co in London, where he worked on assignments across Consumer Products, Automobiles, Telecom and Insurance. He also worked with GE Capital in the US across several businesses throughout the Insurance and Consumer Lending space and is a graduate of GE's Financial Management Program (FMP). Rishad Premji has an MBA from Harvard Business School (HBS) and graduated with a BA in Economics from Wesleyan University in the US. He has also spent a year at the London School of Economics where he was part of the General Course Program. He is on the Board of the Azim Premji Foundation, Wipro GE and Wipro Enterprises Ltd.

Chirantan Chatterjee (CC): Thank you for giving us this opportunity to speak to you on the theme of Innovation and Internationalisation at Wipro — Going Forward. That is the broad mandate and may be we can drill down a little bit on the micro incentives, team structures, the challenges in terms of regulation, and so on.

Let us begin with your interests. I understand that you are interested in music and movies. What do you learn from the movies? Do you ever try to implement or think of implementing things from movies in your daily workings in Wipro?

Rishad Premji (RP): I usually watch movies to unwind a little bit. I also occasionally like to watch movies that make you think, that leave you with unanswered questions. that are open ended ...

CC: Is that something you would like to see in the new Wipro — where, as the organisation takes the next big leap, the employees, particularly the new generation, ask questions some of which could result in failures whereas some could result in success — is that something that you are planning to operationalise as things move forward in Wipro? Is there a shift in culture, in team structures and so on? Your thoughts on that.

RP: We have over 140,000 people now and the reality is that we are a large IT services company. So, a large element of IT services work focused around billability and utilisation exists and continues. However, both business models and opportunities are changing. One is moving more and more towards outcome based models. One is moving into newer areas of technology. There is a lot of talk around the SMAC

(Social, Mobile, Analytics and Cloud) technologies, and the intersection of all of these. We have a relatively new service line called the Advanced Technologies Group which is focused on this.

We have a large number of service lines — from infrastructure services, applications, to BPO — that are focused on executing and generating what would be considered our core business. We then have the Advanced Technologies service line, which is looking at operationalising commercial opportunities for a slightly more long term — may be from a zero to a three-year time frame. These are the things which may not generate revenues for us today but are likely to yield value over a three-year period.

Then we have the Chief Technology Office (CTO). While in many organisations the CTO Office is a part of the strategy group, at Wipro it is distinct and the focus is to explore technologies and opportunities that can generate revenues in three to five years. These technologies may not necessarily be commercialisable, today or in the next 3 years, but have the potential from a long term perspective. The approach is how do you identify key areas that you want to develop for the future, that you want to focus on and experiment with, and how do you drive that?

We also have what we call Centres of Excellence (COE). We have these groups within our core verticals and service lines. These are key investments and are focused on developing cutting edge, implementable, actionable, unique solutions for that particular service line or vertical (vertical represents an industry sector and service lines are our horizontal offerings/lines of business).

The fourth initiative is the External Innovation group, which also exists within the CTO office and their mandate is to connect with the external eco-system. They would drive aspects such as: how do you interact with entrepreneurs and venture capitalists?; how do you interact with the academia?; monitoring the external eco-system and how best can Wipro participate in that innovation and development that could be very relevant to the company?; How do you participate much more actively in what is going on outside the organisation and help drive it? So, that's one thing that we have been focused on more systematically in our organisation in the last couple of years.

CC: How does your prior experience help here? What have you learnt before you joined Wipro formally in your various job stints, in your classroom courses, etc. that has brought about a change in these things that you have mentioned?

RP: My background is in financial services. I joined GE Capital after my undergrad school and was a part of the financial management program, where you move across multiple GE capital businesses and get an exposure to different elements of finance. I was based in North America and worked with them across businesses and geographies. Later, I joined a particular business of theirs in the bond insurance domain, which is a very different space.

I then went to business school and after that, moved into consulting. I was with Bain, based out of London. I think the biggest learning from consulting in particular, was the discipline of thinking. It structures your thinking, it forces you to approach any problem, any question, very systematically. I would say it is sub-conscious training. Oftentimes you approach an issue with a hypothesis, with an answer

first and you think about how this can potentially be the solution; how your different assumptions can validate the hypothesis. And that's where the consulting stint helps.

For example, it is important to understand that not everything needs to be built inside the organization. There is so much cutting edge work happening outside and we need to leverage these capabilities.

On the other hand, when you become a large organisation, in some cases you may actually destroy a lot of these smaller companies if you acquire them because they have a very unique rhythm; they tick differently. You are larger, you are more complex, you can be more process oriented which is not a bad thing; it is a good thing in an organisation of our size. But sometimes you want to let these very small organisations run and participate with them and leverage their strengths but not change their rhythm.

CC: Any particular examples that come to your mind?

RP: In my role, I also drive strategy and the M&A piece. Mergers and acquisitions to me is the execution element of strategy. Traditionally, we at Wipro have looked at mergers and acquisitions in the conventional sense. Today, we are looking at minority investments more seriously.

The reason being, we want to understand how we can participate in the eco-system, without actually buying an entire company. For one, they may not be willing to sell and secondly, we may not be able to manage it most optimally, internally. With minority investments, we could build deep strategic partnerships so that we can take the best of Wipro and the best of these companies to market.

We recently invested USD 30 million in a US-based analytics company called Opera Solutions, arguably one of the companies that have the largest number of data scientists in the world. They have a presence in India in Gurgaon, in China, and in the US. We have invested USD 5 million in another smaller company, Axeda, in the machine to machine space. That is a huge focus area for us with the increasing potential for hyper connectivity and the opportunity to build the analytics on top of that. We are looking at more such opportunities.

CC: You are not giving the money for free to an Opera or an Axeda. As a minority investor, how would you push these companies towards doing things that you would tomorrow want to integrate into Wipro's overall requirements, but at the same time let them be a little more free and tick independently?

RP: I would put it the other way round. I would say that they are focussing on areas that are cutting edge and very relevant in terms of where we want to evolve. We invest in these companies because we want to show our commitment; we believe in these companies. So, there is a return to be made on our investments. But that is not the main driver for us. The main driver is how we leverage the capabilities of these companies; how do we build potential growth and revenue opportunities for Wipro and for these companies, going jointly to market. Typically, we would like to have a dedicated profit and loss owner and a dedicated sales person from both sides. In many instances, there would be a joint business plan for the year. So, it is a very deep partnership. We think this is the right model for us to explore, going forward. It does not mean that it will off-set other models but it means that this is a good model to take forward particularly with smaller companies.

CC: Why not try this inside Wipro?

RP: That's a great point, but it already exists today, in many forms. One of them is the Centres of Excellence that I talked about. The other thing that we do from a central strategy office is a program called Horizon 2 — Horizon 3 program. Essentially, we function like a venture capitalist. We fund ideas that may not necessarily generate revenues today but would generate revenues from a Horizon 2, Horizon 3 time frame — four to six quarters out. The idea is to nurture unique solutions and ideas that can generate sizeable, substantial revenue going forward.

CC: How successful has this been?

RP: This has been quite successful. On an average, we fund about 10—12 ideas a year. A key objective is to help them get off the ground. We effectively exit in two years and so it's typically a two year cycle. We don't necessarily see them scale. Our goal is to see how many ideas we can seed and fund, and that we believe can create traction. We also kill ideas — ideas that are not likely to take off in that two year time frame.

CC: Is it easy for an employee who has been working in Wipro for the last 20 years to suddenly transition into this entrepreneurial culture that we are hearing strains of in these last couple of minutes, and put on that hat of an ideator and an innovator and take it forward, even though money and company support exist? Is it easy for the employee to re-tool him/herself and switch mindsets? What's your sense of that at the micro level employee?

RP: It's a great question; that mindset switch is not always easy. I don't know whether the system necessarily makes it easier. It is interesting that you asked this question because we had a big debate very recently with our CTO group on our IP strategy — on how we could proactively create an eco-system and a mindset to drive that. The idea oftentimes comes out of necessity, from customers or it could come out of changes that we are seeing in the ecosystem. Once the idea is discovered, it is actioned. If there is a potential commercialization opportunity, then we drive that as well.

CC: Continuing with that train of thought, are you changing your hiring strategy?

RP: I go back to the point I made earlier about being a large organisation. We are a large organisation with over 140,000 people, and a large core part of the organisation will continue to drive the conventional IT services piece, and the hiring in these areas will continue to happen, in pockets. But what we are talking about is a much smaller sliver — it is not about quantum, it is about impact, and that continues. The investments into COEs, CTO organisations, are all investments for the future. Those will continue, and will function on a different rhythm.

CC: Talking about rhythms, what kind of a rhythm do you envision Wipro getting into in the next decade? What is your sense of the rhythm of Wipro from the previous decade to take forward?

RP: Ten years is a long time. With things changing so rapidly, it becomes a little bit of an academic answer. In a three to five year time frame, the core business will still be critical. By the core business, I mean the core services that we offer around infrastructure, BPO, and engineering. Those will continue to be relevant and will be the drivers. I think a couple of things will evolve; one is focus on the

domain side. So far the story has been more about efficiency and quality and is changing very rapidly into value, in terms of how we understand the rhythm of our customer's business. Building deep domain competency will become an important driver as we move forward. We are already seeing that.

A couple of years ago, we bought the Global Oil and Gas Information Technology practice of a company. It created huge traction for us and significantly differentiated our positioning in the market place in terms of where we play and how we play and whom we compete against. I think that rhythm will continue to be more broad-based, both organically and inorganically.

The second big area is the focus on the newer technologies. Take for instance, the mobility space. Our historic focus has been on devices where we focused a lot on embedded software. Our focus is now moving more towards the enterprise and things like apps and using mobility as a vehicle for process disruption.

There will be a huge focus on the analytics layer. Historically, our play in the analytics area was much more at the bottom of the stack. For example: how do you think about data, how do you think about data management, how do you think about basic dash boards, performance management and business intelligence that comes out of that data, and so on. The thinking is to move a lot more in the direction of what I call the 'consultative' layer of analytics — how do you become much more predictive, how do you provide much more intelligence, how do you provide more hyper-personalisation with data, how do you create an opportunity in terms of the machine to machine space, how do you create opportunity on the manufacturing side and so on. For example, in the Service lifecycle management, the more I understand my products through analytics, I can manage them better, I can do predictive maintenance around these products and significantly reduce my after sales service cost.

Apart from these opportunities on the analytics side, there are opportunities on the cloud side, both in terms of cloud enablement (how we enable cloud for our customers), and in terms of the on-cloud services that we can offer. So, a big space which we believe in and we will invest in more and more as we move forward is business process as a service. Consider this. A couple of years ago, we bought a mortgage platform on the loan origination side — the company was called Gallagher Financial Systems and the product was called NetOxygen. This was a classic product company which means it sold licenses; it sold the implementation of the product and followed the classic AMC (Annual Maintenance Contract) model. What we have done now is to offer this product as a service (Software as a Service — SaaS). So, people only pay as they consume the product. The objective is to combine this with our BPO capabilities to offer business process which is loan origination as a service. So, you invite the customer, a lender, and then say: — look, you identify the end customer and we will do all the back-end work for you. We will work with the title company, the appraisal company, the flood company, the insurance company, we will underwrite to your standards and, by the way, we will charge you on a per loan basis. I think it is a great proposition in a highly cyclical industry. And the proposition is that Wipro will not only

significantly help reduce the customer's fixed cost, but will help keep costs variable and flexible, based on the client's business. We will see more of this in specific vertical areas and also broad horizontal areas.

The third opportunity area is the eco-system play. The more we invest in the eco-system, the more it will help drive the other two elements — domain and the new technology stacks that I was referring to.

The other big area that we would focus on is how we would significantly help automate and simplify delivery, 'automate' being the key word. Automation leads to less dependence on people, and helps organizations move to a non-linear model. The IT services model historically has been very linear — you add people, you add revenue. If you look at the growth of the industry over the last 10 years, it's been fairly linear. So, we must now look at how this can change. For example, how do we become double our size by adding no people, or adding 50% of the people we would have added historically?

CC: How do you do that?

RP: You do that with your commercial constructs. So, if I am moving to a per loan model, I am not charging for people. Instead, I am charging per output. So, how do I capture the value that I have generated?

I will share an example. Today, a lot of large consumer product companies spend about 10—15% of their revenues on trade promotions with their customers. However, I don't think the focus behind the spend is very strategically thought through — particularly questions such as where do you invest, which products do you invest in, which geographies do you invest in, how do you create sustained increase in demand for your products through this spend? We saw market potential to address this need and acquired an Australia based company called Promax Applications Group (PAG), a leading player in trade promotion planning, management, and optimization solutions space, last year. Promax functioned as a classic product company which worked on a license (AMC) model.

What we have now done is to combine Promax's product offering with our analytics capability to create a new model. There could be a huge value in the model—a 10% reduction on something like 1.5 billion dollars amounts to 150 million dollars which is a sizeable amount of money. Traditionally, I would say, look I have provided you 20 people and we charge for that. But now the question is, how do we participate in the value we are creating there? Again this drives non-linearity because you are not charging for people, you are charging for the value you are creating.

CC: There is a notion in economics and also in strategy that you are only as good as your peer. How do you evaluate your peers in the industry today? Where is the industry going and do you have any concerns about where the peers are in competition with you? The work they are doing, is it disruptive? Are they on the same march together perhaps? And we could take this one level higher by talking about how the government, the regulatory space could actually enhance all of these three or four things that you mentioned in terms of where Wipro wants to be in the next three or five years.

RP: The market size for IT services is roughly USD 850 billion, globally. Today, out of that, what comes out of India is approximately USD 80 billion, so the potential is huge.

Our competition, in many instances, is our customers themselves. So the opportunity for growth is huge even though the market has slowed down over time. The industry growth rates between financial 2003 and 2008 were 30% plus, but the growth rate between 2008 and 2013 was about 14%. But, it is still a growth market, so you are not fighting for a finite pie; you also participate in a growing market. Specifically, this year, things are looking more optimistic. The United States economy is picking up.

I think that it is important to have competition as it brings out the best in you. Our approach has been that while it is important to keep an eye on competition, it is also important to run your own race. It becomes very difficult to run a race, while constantly looking over your shoulder! You have got to focus on what you are driving and the objective is to benchmark ultimately against the industry.

CC: Is the external environment influencing Wipro's strategic trajectory?

RP: I am not saying that we are letting the external ecosystem determine our strategy. I am saying we are participating in what the external eco-system is driving. Given that it matches with our priorities, we want to accelerate our drive towards a more participative mindset across the eco-system rather than a classic, traditional, not-invented-here mindset. There are great cutting edge companies doing great stuff out there, that we can work with and create unique propositions jointly for our customers.

CC: To be honest, one cannot really keep oneself aloof in the world we live in from the external environment...

RP: There are a couple of aspects when it comes to the environment. One is what we can control within the ecosystem, and that which is within Wipro. You create areas where people can ideate, can be innovative, and can build solutions and take them to market. We will continue to drive that.

In the last five or seven years, the venture capital money that is coming into India, is also encouraging the ecosystem much more holistically. In fact, we can explore deeper engagement with venture capitalists. There are two approaches here. One is that we could become a limited partner of a venture capitalist, get access to their portfolios of companies, work with them and see what we can potentially partner and invest in. It could be a win—win situation because oftentimes smaller companies are looking for a large go-to-market arm. They have great ideas that they are unable to get to market while we are able to get them to market. So, option one is a more formalised role through investment strategy and engagement with venture capitalists.

There is a second approach to participating much more in the eco-system. For example, NASSCOM is driving 10,000 start-ups and we are participating in that. So this is the other approach to encouraging the eco-system and supporting these ventures.

CC: I want to round up this conversation asking you what you expect out of Indian academia. I come from an IIM, and there are IITs and there are NIITs, and we are all in a state of flux. So how do you expect us to walk the talk along with the industry in a more meaningful way, not just by contributing students but also in being more

innovative in India as part of the overall environment? What are your expectations there?

RP: I think there can be much more participation across industries and academia. I talked about Wipro's External Innovation group and one of the mandates of this group is to figure out how we can participate in academia so that there can be a win—win situation. We will look into some of the things that academia is talking about as well as the reverse of that — the trends that the industry is experiencing and the industry's needs. We would like to match the two and bring them together.

When I went to business school there was limited talk about social media. Facebook had just been launched and was not a topic of discussion. But today, it is a very relevant piece of functioning in the world. Organisations that were dismissive of it five years ago consider it to be a critical resource, today, in terms of social reputation and brand management. Today, one of the relevant questions for both academia and the industry is: How do I leverage social media to make it a go-to-market engine, for feedback and input into product development? From our perspective, organizations like ours require both insights and the talent to prepare for the future. Academia has a key role here as they can provide us with insights into the road ahead.

Venture capital too plays a similar role. There can be much more interaction and may be it already exists to a great extent. But as an organisation we must participate much more actively than I think we do today.

CC: Any departing thoughts? You might want to use this forum to urge academia to do more, or anything else that you might have missed out in this conversation.

RP: The only point I would like to make, as a Liberal Arts major, is that academia should encourage 'off the beaten track' thinking which I think encourages innovation. Sometimes the word innovation is overused. Someone gave me an example where a man took his donkey to a pond to drink and the donkey wouldn't get into the water because he thought it was very deep. So the man thought about it and then picked up a bunch of stones and put them into the water so that the donkey could see the stones, see that the water wasn't deep, and then stand on them to drink. That's innovation. It doesn't have to be very complex. It is about doing things differently and encouraging people to do things differently and think off the beaten track.

You see this even in schools today where we try more and more to move away from rote learning to challenging oneself. I grew up in a system of rote learning and my children are hopefully growing up in an environment where they are being challenged much more to think outside the box, and not think status quo. I think that is ultimately going to drive disruptive thinking, drive innovation, allow people to be creative and ultimately that's where innovation comes from.

CC: Thank you, Mr. Rishad Premji for the great conversation. It has been a pleasure interacting with you.