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Wipro Plans to Cut Costs by $300 Million in FY16

Wipro_4 Members_ITVoiceAt a recent Wipro executive meet in Coimbatore, CEO TK Kurien articulated an ambitious plan to reduce $300 million from the company’s cost of operations in the current fiscal.

Ensuring that objective is achieved is the responsibility of new COO Abid Ali Neemuchwala. And the scale of the task indicates the sense of urgency within the company to embrace automation and artificial intelligence (AI) tools to reduce the number of people required for a particular project.

The figure of $300-million represents 5% to 6% of Wipro’s costs. And that’s a significant level of cost cutting that the company is attempting.

Asked about the Coimbatore discussion, Kurien said, “I won’t deny the fact that there was a number like that. The biggest opportunity we have is the NextGen initiative. Fundamentally, what we are doing is taking the artificial intelligence platforms, putting them together and actually reducing the amount of labour that is supplied for a job.”

Kurien said the company is building a whole host of AI platforms that is now being deployed under its integrated managed services offering – the ServiceNXT umbrella. These are meant to take out costs from delivery. “We are also consolidating our back office operations to make them more efficient. And we are looking at our entire procurement cost,” said Kurien, speaking to TOI exclusively after announcing the company’s fourth quarter results.

At a recent investor meet in the US, Kurien spoke about hyper-automation reducing the cost of operations significantly. “In three years, people deployment will come down by 35% for the same scope of work,” he said. Wipro calls this “the factory model of delivery.”

Peter Bendor-Samuel, CEO of Everest Group, believes that given the increasing pricing pressures, the $300-million target is modest, and given the size of Wipro, Neemuchwala should be able to take out more than $300 million. “Wipro will need to increase its cost base in the US and EU, offsetting many of the savings. Driving further into the factory model has both advantages and challenges; the factory model holds the promise of lower cost,” he said.

Phil Fersht, CEO of US-based HfS Research, said the austerity measure comes at a time when IT services is at an inflection point, focused on delinking headcount from revenue to increase profitability. “Clients are moving to a new “As-a-Service” phase of services that is more software-platform focused, with smarter automation and real time analytics,” he said.

Though many analysts believe Wipro’s hyper-automation drive would lead to some redundancies, Kurien has ruled out layoffs. “If you look at the 15%-16% attrition on a base of 1.5 lakh people, that’s 22,500 people leaving every year just by attrition alone. We don’t have to fire people to get our base down. We have to manage attrition, and our attrition will manage our headcount. But the reality is, there is no layoff planned,” Kurien said.

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