Managing Organizations – Case Study – Wipro Technologies

November 2009

Submitted to Prof. V Anand Ram

PGSEM 2009

Indian Institute of Management, Bangalore

Pramod Mukkamala 2009034

Rajeev Batra 2009048

Subhra Jyoti Saha 2009066

Utkarsh Maheshwari 2009075

Vishnu Bhavaraju 2009080

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Table of Contents

1. INTRODUCTION.......................................................................................................1

1.1. INTRODUCTION OF WIPRO LIMITED........................................................................1

1.2. SCOPE OF THE DOCUMENT...................................................................................1

2. WIPRO’S PROFILE...................................................................................................2

2.1. A BRIEF BACKGROUND.........................................................................................2

2.2. BUSINESS AREAS.................................................................................................2

2.3. THE PORTFOLIO...................................................................................................3

2.3.1. Vertical Distribution....................................................................................3

2.3.2. Geographical Distribution...........................................................................4

2.3.3. Service Line Distribution............................................................................4

3. THE ENVIRONMENT................................................................................................5

4. EVOLUTION OF ORGANIZATION STRUCTURE....................................................6

4.1. GROWTH ROAD – “THE VISION”............................................................................6

4.2. STRATEGY FOR 4X4.............................................................................................6

4.3. FORMAL MATRIX ORGANIZATION STRUCTURE.......................................................6

4.4. STRATEGIC BUSINESS UNITS................................................................................8

4.5. CONTINGENCY APPROACH....................................................................................9

4.6. JOINT CEO STRATEGY.......................................................................................11

5. WIPRO GROWTH STRATEGY AND GROWTH CYCLE.......................................12

5.1. GROWTH STRATEGY..........................................................................................12

5.2. GROWTH CYCLE................................................................................................12

6. ROAD AHEAD.........................................................................................................13

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1. Introduction

1.1. Introduction of Wipro LimitedWipro, initially Western India Vegetable Oil Products, limited a family owned

company producing consumer goods is taken over by Azim H Premji after his father’s demise in 1966.

In 1975, Wipro entered into hydraulic and pneumatic cylinder manufacturing. Later in 1977-79 entered into computer hardware re-selling. In1980, Wipro moved into software development of customized packages and since 1992 Wipro has began to grow its roots off to United States and in the year 2000 Wipro Ltd was listed in NYSE:WIT. Today Wipro is one of the largest IT services company in India.

1.2. Scope of the DocumentThe purpose of this report is to study the effect of environment on the structure of a

company. Our endeavor is to understand the transition the company has undergone in its organizational structure and the methodologies it adopted to remain competitive.

We chose Wipro Technologies as the company of study to apply the concepts of Organizational design and structure.

Contingency approach suggests that there is no universal design of organization which will be appropriate in all situations. Wipro Technologies is a living example for contingency approach to organizational design. With a background of manufacturing and R&D, Wipro has transformed itself into a highly innovative global IT giant while going through several organizational restructurings. Wipro has managed this transformation very well under able and visionary leadership.

The aim of this report is to study this phenomenal growth and transformation in the context of organization structural changes (planned or unplanned).

The data and other information required for this report are taken from publicly available documents such as company’s annual reports, director’s reports, investor reports etc. Along with this published sources of information, we also have conducted multiple interviews with some senior managers of Wipro to understand the current structure of the organization and its evolution.

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2. Wipro’s Profile

2.1. A Brief BackgroundThe transformation of small Indian FMCG Company, started in 1947, to a globally respected IT major is no mean task. The transformation came through slow and gradual changes initially and then rapid changes in past decade.

The first cosmetic change came into being when the erstwhile Western India Vegetable Products Ltd., was shortened to now famous ‘Wipro’, a much lighter and modern brand name. That was 1979.

Along with the branding, came a slew of diversification effort. It started with hydraulic engineering and slowly moved into high- tech domain of computer hardware and software.

Whenever a new market opportunity beckoned Wipro group did not waste much time to tap the market. The example lies in its diversification into baby care products, lighting solutions and Medicare (as a shareholding partner of GE healthcare India) business and entry into Computer Industry when IBM was asked to leave India in 1977.

Wipro is a pioneer among Indian companies when acquisition comes into focus. To tap a booming market or to create a footprint into niche fields Wipro acquired a slew of companies like Spectramind (BPO), Nervewire (financial consultancy), etc.

Wipro’s sudden burst into prominence was led by Wipro Technologies (the focus of this study).Wipro Technologies is one company which morphs itself to adapt the rapidly changing technology business.

2.2. Business AreasWipro Technologies deals in following businesses -

IT Services: Wipro provides complete range of IT Services to the organization. The range of services extends from Enterprise Application Services (CRM, ERP, e-Procurement and SCM) to e-Business solutions. Wipro's enterprise solutions serve a host of industries such as Energy and Utilities, Finance, Telecom, and Media and Entertainment.

Product Engineering Solutions: Wipro is the largest independent provider of R&D services in the world. Using "Extended Engineering" model for leveraging R&D investment and accessing new knowledge and experience across the globe, people and technical infrastructure, Wipro enables firms to introduce new products rapidly.

Technology Infrastructure Service: Wipro's Technology Infrastructure Services (TIS) is the largest Indian IT infrastructure service provider in terms of revenue, people and customers with more than 200 customers in US, Europe, Japan and over 650 customers in India.

Business Process Outsourcing: Wipro provides business process outsourcing services in areas Finance & Accounting, Procurement, HR Services, Loyalty Services

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and Knowledge Services. In 2002, Wipro acquiring Spectramind and became one of the largest BPO service players.

Consulting Services: Wipro offers services in Business Consulting, Process Consulting, Quality Consulting, and Technology Consulting.

Apart from IT and IT Enabled Services, the parent company (Wipro Limited) is diversified into following businesses as well –

Infrastructure Engineering: It has emerged as the leader in the hydraulic cylinders and truck tipping systems market in India.

Consumer Care & Lighting: It manufactures and markets the Wipro brand of luminaries. Wipro Lighting offers lighting solutions across various application areas such as commercial lighting for modern work spaces, manufacturing and pharmaceutical companies, designer petrol pumps and outdoor architecture.

IT Services contribute 75% of Wipro’s revenues, IT Products contribute 14% and Non-IT businesses contribute 12% of revenues.

2.3. The PortfolioThe following graphics depict Wipro Technologies’ wide portfolio in multiple industries, geographies and service lines –

2.3.1. Vertical Distribution

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2.3.2. Geographical Distribution

2.3.3. Service Line Distribution

Despite such a huge differentiation where each service line, geographical unit or vertical division has its own growth strategy and requires its own organizational structure, Wipro has successfully integrated these multiple subsystems into a focused organization with common vision. The rest of the document describes what Organization Structural elements helped Wipro successfully manage this integration under differentiation.

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3. The EnvironmentFollowing are various environmental factors that had influence on Wipro’s strategy in early 1990s –

Market Pressure – Wipro's reputation for quality and customer service made it the first choice for many customers in India. But 1990s saw a dramatic decline in branded hardware market.

Government Policies – Economic reforms of 1991 changed the business landscape completely in India and organizations had both challenges from global competitors as well as opportunities to expand into global businesses.

Technology Changes – Phenomenal changes in computer processing power and advent of fourth generation computers, need software experts grew gradually. In 1980s, several Indian companies established joint venture with overseas hardware technology leaders for exporting software services. But as the need for English speaking skilled software experts grew rapidly, the Indian counter parts of joint ventures couldn’t expand into and capitalize the market quickly as it was not a win-win situation for their technology counter parts. This paved the way for companies which were pursuing software independently to tap into this rapidly expanding market.

Till then Wipro which was focused on other businesses including manufacturing hardware for Information technology, changed its focus to software services in 1992. This initiated major shift from manufacturing organization to technology organization.

With no or minimal entry to barriers, the software services market, in Mid 1990s, saw mushrooming of several software services companies (including Infosys). Y2K bug and the need for software experts to fix the bug paved the way for Indian software services companies expand into global market rapidly.

With ever increasing competition, bigger software companies had to focus on growing up the value chain and playing larger role as IT partners for global clients instead of mere service suppliers.

Keeping its lead in Indian software services market, Wipro expanded largely into software application services such as e-commerce, Web enabling, ERP Systems and Data Warehousing.

In late 1990s and early 2000, explosion of Internet and increased bandwidth through fiber optic networks made Indian software services market more lucrative to global companies leading to several companies getting away from mere body-shoppers tag to application service providers. Increasing competition from global competitors had forced Indian software services companies to forge into setting up specialized and focused verticals and getting themselves accredited with global quality certifications.

Wipro started setting up verticals such as Financial Services, Health Care, Retail, Transportation etc. More over this period also saw Wipro going for major quality certifications and increased focus on learning.

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4. Evolution of Organization Structure

4.1. Growth Road – “The Vision”Wipro’s growth story has got a big leap with Vivek Paul getting on board as Wipro’s CEO in July 1999.

Wipro has come up with its strategy statement unraveled in 2000 called Vision 4X4. This articulated the company's key goal -- to hit a turnover of $4 billion by 2004, of which $1.6 billion was expected through acquisitions and the rest via organic growth.

How would Wipro, with revenues of about $491 million and 9,993 employees in 2000-01, get to its audacious goal of $4 billion by 2004, barely four years away?

4.2. Strategy for 4X4In 2001, to proceed on this strategy, Wipro adopted geographic expansion setting up 21 offices in United States, Canada, Finland, Taiwan, France and United Kingdom with focus to expand in Americas, Asian and European markets in couple of years.

Getting into product expansion, Wipro got in contract with Japanese Telecom firm Bussan Systems Integration (BIS) setting up ODC in Hyderabad in exchange for marketing Wipro’s Telecom solutions in Japan.

In terms of volume expansion Wipro Tech increased its revenues from high-value R&D services in verticals like telecom and internetworking, embedded systems and Internet access devices and telecom and Internet service providers.

4.3. Formal Matrix Organization StructureThough the 1990s saw Wipro’s expansion into horizontal service lines and establishment of industry verticals, a structured Matrix Organization evolved in early 2000s to cater to the expansion strategy identified to achieve its vision.

Wipro adopted the concept of Industry verticals and Service lines to cater across various industry lines. In 2001, Finance, Manufacturing, Utilities and Retail Industry verticals were formulated under the umbrella of Enterprise solutions.

The basis was to group projects catering to specific industries under each of these industry verticals, leading to much of desired domain focus.

The technology services required to cater to projects in various verticals, are formulated as horizontal service lines.

This matrix structure enabled much of standardization as these Industry verticals started building the domain competence and horizontal service lines enabled specialization in rapidly evolving technologies.

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This chosen structure had acted as supporting framework and created flexibility for Wipro to build upon later years with the growth of the organization and helped to spread its presence across various industries. In later years from 2002-05, these verticals are further enhanced to Telecom, Enterprise Application services, Telecom Networking, Embedded Systems, Corporate, Financial services, Retail, Utilities and Manufacturing

As more projects have got added up from various industry verticals – the nature of the tasks and nature of the product and services provided lead the way for enhanced service lines cover Application Development and Maintenance (ADM), Consulting, Infrastructure outsourcing, package implementation, BPO services and R& D services.

This has led to highly accelerated ramp up of projects and capturing the industry demand. Skill sets of professionals are better utilized as in this type of organization emphasis was placed on authority of knowledge rather than rank of individual.

The following graphic depicts the Matrix Organizational structure adopted by Wipro –

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4.4. Strategic Business UnitsUnder the Matrix Organizational structure, business verticals expanded rapidly and were responsible for more than 500 USD Million each (some responsible for more than 1000 USD Million each). The differentiation in multiple verticals helped Wipro achieve focused growth into several industries.

Though each vertical catered well to respective industries the definition was more from the perspective of Wipro. Customers in the industry usually have a different perspective of categorization of services. For instance Wipro serves Manufacturing and Pharma industries through two different verticals. But a Pharmaceutical Manufacturer would require services from both the verticals. This Customer oriented definition of service categorization led to creation of Strategic Business Units.

Each Strategic Business Unit has its own business strategy and objectives. Some of the strategic business units created in Wipro are – “Retail, Consumer Goods & Transportation”, “Media & Communications”, “Energy & Utilities” etc.

Another key Business Unit is Wipro Technologies is Wipro InfoTech. This fully owned subsidiary caters to India and Middle East operations of Wipro Technologies and also caters to development of IT hardware products such as laptops, storage solutions etc.

Wipro is aiming for sustained high growth by providing higher autonomy to each Business Unit and enabling each BU to restructure and realign itself in highly dynamic environment.

The following graphic depicts Wipro Technologies’’ recent organizational structure at a high level.

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4.5. Contingency ApproachAs we have seen, the changing business landscapes lead to major structural changes at Wipro Technologies over past two decades. Though the Matrix Organization and Strategic Business Units structures look dominant in their respective periods, the entire organization had never gone into any specific exclusive structure.

The reason to this can be explained using contingency approach which suggests that there is no universal design of organization which will be appropriate in all situations. The structure of organization or its units will depend on their purpose and nature of environment in which they operate.

For instance we had seen above that for specific growth focus areas, Wipro Technologies has created Strategic Business Units which are self sustainable in achieving their business objectives. But to cater to businesses which are not catered to by any of the SBUs, the horizontal structure of service lines is still retained as depicted in the following graphic.

The above structures are highly suitable for service delivery and operations where the nature of services are similar across geographies and can be delivered globally from remote locations as well. So an SBU head operating out of one geographic location can oversee entire SBUs operations across multiple geographies.

In contrast, certain operations are territory or geographic specific and cannot be best handled by above structures. Sales are one such function where the operations should be dealt with using geographic divisions. Wipro uses a geographic divisional structure to effectively cater to sales function –

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There are certain other operations which are not only common to various SBUs, Service Lines and Geographic Divisions; they are also common to other Wipro business as well. These operations such as Finance and Human Resources functions are handled using functional structure as depicted in the following graphic –

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With ever increasing number of employees and increasing standardization & formalization of processes and procedures, we can see a tall bureaucratic structure emerging in delivery operations –

Thus we can see that the design of the organization or its units depend on situational variables and they evolve as a function of their respective environments.

4.6. Joint CEO StrategyAnother interesting experimentation that Wipro has done is Joint CEOs for a single company i.e., Wipro Technologies. The following graphic depicts the Join CEO structure of the organization –

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The idea is to group the SBUs as per focus area of each CEO. Though Wipro managed to grow under this strategy, we believe that there are several risks in this model. The major risk being that it leads to dual reporting which results in confusion and highly political environment. The other major risk is that the model is highly individual dependent where the inter relations between the two CEOs would have significant impact on strategic decisions that are common to entire organizations.

Going further, where lot more significant changes in the business landscape are expected, it is better to go with single CEO strategy.

5. Wipro Growth Strategy and Growth Cycle

5.1. Growth StrategyWipro’s growth strategy has been to expand into new markets and domains while maintaining their internal operational efficiency. Wipro has not been a pioneer of to adopt new markets or grow into new industries. But we have seen that Wipro has always responded quickly to the market leads – joining the software services market in early 90s, expanding into business application services in mid 90s, getting into newly expanding industrial segments in late 90s. Based on the observations we can easily identify the growth strategy of Wipro as “Analyzer Strategy”.

Wipro’s tryst with Matrix Organization structure can be stated as one of the key enablers in this Analyzer Strategy. In order to maintain higher operating efficiencies, Analyzers should have done significant routinization and standardization in various functional activities. By establishing horizontal service lines with specializations in various key technologies, Wipro could achieve higher productivity leading to cost optimization.

The industry verticals structure enabled Wipro to expand into newer but tested market segments. The strategy adopted by Wipro in this scenario has been to initially constitute an industry vertical with few domain experts and enter a specific new segment. After initial success, the vertical would expand further in the specific segment. This approach enabled Wipro to respond quickly to newer industry markets.

5.2. Growth CycleIn its growth path Wipro has seen certain evolution and revolution phases.

Growth Phase –

This is the phase when Wipro started expanding into software services market in 1990s. The focus was mostly to expand into newer geographies and newer industry verticals. Azim Premji, the founder of Wipro Technologies, with assistance from the then Vice Chairman could successfully expand Wipro into technology industry. But Wipro needed a strong leader, acceptable to the founder, who can give a direction to the company’s growth.

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Direction Phase –

Azim Premji appointed Vivek Paul, a dynamic and charismatic personality, as CEO of Wipro. At the onset Vivek Paul set a direction to company’s growth by defining the 4X4 vision for Wipro. Later he introduced formal Matrix Organization structure to enable Wipro’s growth into multiple service lines and multiple industry verticals. Wipro successfully achieved its vision. But then arise a phase of uncertainty when Vivek Paul left the organization.

Delegation Phase –

To get back to sustainable growth phase, Wipro undertook organizational restructuring –

Wipro went for higher empowerment of industry verticals and making them accountable for their own growth & profits. Tall vertical layers between Chairman and the industry vertical heads were removed making the organization more decentralized and flatter.

With higher delegation and empowerment, the decision making became faster and industry verticals grew rapidly each generating about 300 USD Million.

Coordination Phase –

For further expansion and growth, better coordination between multiple verticals was required and this lead to creation of Strategic Business Units which grouped multiple verticals into key focus areas of expansion. Though the individual vertical heads retained much decision making responsibility, they were also now responsible for efficient usage of limited resources within a specific business unit and were also accountable for better coordinated efforts across verticals.

We have also noticed bureaucratic structure developing within the line organizations (i.e. the delivery organizations).

We believe that at present Wipro is in this Coordination Phase and yet to see the red-tape crisis in its path to growth.

6. Road AheadWith the recent acquisitions and mergers we notice a trend of big IT companies going for an end-to-end capabilities strategy – IT Servers, Personal Computing Machines, Software Products and Software Services. This is an indication of growing customer need to have IT partners who can manage not only their IT services but the entire IT infrastructure. The Software as a Service (SaaS), Platform as a Service (PaaS), outsourced IT departments etc have evolved to cater to the businesses’ need to have IT partners with end-to-end capabilities.

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In this environment Wipro – with its hardware, software, products and R&D capabilities - is best placed among all Indian IT companies to compete with global giants such as IBM, HP etc.

With a good balance of stable and flexible organizational design and its capability to integrate multiple differentiating divisions and with its proven Analyzer strategy, Wipro is certainly capable to tap into new market trend.

Being in the coordination phase, Wipro should prepare itself today to deal with the red-tape crisis and establish strategies for collaboration phase when it would have to get into end-to-end IT partnerships with its domestic and global customers.

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References:

1) Wipro Annual Reports, Investor Reports, Director’s Reports2) Wikipedia3) www.wipro.com 4) Interview with senior management in Wipro5) Bangalore Tiger – by Steve Hamm

Disclaimer:

The statements or graphics regarding organizational structure in this report do not directly represent any Wipro employee’s opinion. The views and content presented in this report are completely based on this report authors’ understanding from above sources of information and so may not give completely accurate depiction of actual organization structure of Wipro.

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