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Wipro, Infosys and others see riches in consulting services
On a July morning, a dozen engineers from Wipro, India's third-biggest software exporter, gather at their desks. Vinod Jayaraman is enjoying the sunshine: In a few months, temperatures will plunge as low as minus 27 degrees Celsius, or about minus 17 degrees Fahrenheit, and his cricket matches will give way to the national passion: ice hockey.
Jayaraman, 33, is what Wipro calls an on-site coordinator. He has been transported 170 kilometers, or 105 miles, north of Helsinki to Nokia, the world's biggest mobile phone maker.
"Our people can work in any part of the world," Jayaraman says. "It all depends on what the client wants."
After years of cut-rate computer coding and running call centers that fill catalog orders, India's biggest software services companies - Infosys Technologies, Tata Consultancy Services and Wipro - want more. Wipro's chairman, Azim Premji, calls his company "a global lab on hire" that can build the guts of a cellphone, design a semiconductor or run a client's computer system for as little as one-fifth of the price that a U.S. company would charge.
For two years, Jayaraman has kept Wipro workers in Tampere, Finland, in-sync with 100 programmers in Hyderabad, India. He says he has learned to like the potatoes and fish of the local cuisine, though he misses the spices of his native Bangalore. On this day, his team is designing software for Nokia that lets phone companies manage cellular networks from one location.
As debate about outsourcing plays out in the United States, Wipro and Infosys have already moved on. They are pursuing lucrative contracts for computer services and technology consulting outside India that were once the exclusive domain of Accenture, Electronic Data Systems and International Business Machines.
"There's a collision of sorts going on," says Craig Franklin, executive vice president for global technology development at BearingPoint, formerly KPMG Consulting. "The Indian companies are trying to move upstream."
Premji is betting that as Wipro increases its 5,000 engineers, who are scattered from Australia to Canada, and adds to the 190 consultants it gained with two U.S. acquisitions, the low-cost strategy that worked for programming and call centers will grab new consulting customers and keep them for decades.
"The economic compulsions are so enormous that you cannot ignore the India model," Premji says at Wipro headquarters in Bangalore, a city of 4.5 million people in southern India, where workers pour onto Silicon Valley-style campuses via potholed roads jammed with buses, motor scooters and the occasional cow.
Premji, India's richest individual, with an 84 percent stake in Wipro valued at $7 billion, drives a 1996 Ford Escort. His business strategy is winning investors. Wipro's American depositary receipts, which were listed on the New York stock exchange in 2000, more than doubled to $17 in the 12 months that ended Friday. Each Wipro ADR represents one ordinary share.
The ADRs of Infosys, Wipro's neighbor in Bangalore and India's No.2 software exporter, rose 82 percent in that time, to $49.36.
In August, Tata Consultancy, which is based in Mumbai and is India's No.1 software exporter, raised 54.2 billion rupees, or $1.17 billion, from its initial public offering, the biggest by a nongovernment-owned Indian company.
Premji has always found his niche. He took Western India Vegetable Products, the business his father started as a maker of cooking oil in 1945, and built a technology company with $1.35 billion in annual sales that has survived the nation's upheavals.
In 1977, when the government of Prime Minister Morarji Desai forced foreign corporations out of India to strengthen the nation's companies, Premji, who studied electrical engineering at Stanford University, saw that the absence of companies such as IBM would create a market for Indian vendors of computers and software.
Premji hired engineers and built his first minicomputer in 1982. A year later, he released Wipro 456, a spreadsheet program similar to Lotus 123, a top seller in the United States at the time. He followed up with Wipro's first personal computer in 1986.
When the government of Prime Minister P.V. Narasimha Rao opened the Indian economy in 1991, Premji changed again. Wipro's software was no longer protected by 325 percent duties, so he put his battalion of programmers to work for the corporations that were streaming back into India.
Premji's foray into consulting may prove to be his biggest challenge. Consulting encompasses everything from advising customers on software to corporate overhauls that can take years.
"Consulting is a different model," says James Sims, chief executive of the Boston-based technology consulting firm Gen3 Partners, whose clients include Procter Gamble and Ralston Purina. "Indian companies are going to spend a lot of money to go after markets that are being served."
Last year, worldwide revenue from information technology consulting rose slightly to $43.08 billion from $43.03 billion in 2002, according to Gartner, the U.S. market research firm. That means more companies are fighting over a stagnant pool of money.
Subhash Valanju, chief information officer at Johnson Controls, which is based in Milwaukee and is the world's second-largest maker of car interiors, says he is skeptical that Wipro or Infosys will take business from IBM or Accenture in consulting.
"Indians may know the technology and have the functional knowledge," says Valanju, who hired Infosys to replace software from Novell this year. "But they may fall short on the style and polish required for consulting."
What Indian companies may lack in polish, they are trying to gain through acquisitions. Wipro has bought seven companies since 2000, according to data compiled by Bloomberg. In April 2003, it paid $18.7 million for NerveWire in Newton, Massachusetts, to add consulting to the work that it does for banks.
Bloomberg News
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