Wipro Ltd, India’s fourth largest IT services company, faced a challenging board meeting in late April to discuss its fourth-quarter results. This meeting was particularly significant for Thierry Delaporte, who took on the CEO role in July 2020. The company’s board expressed concerns over Wipro’s declining growth and profitability, prompting Delaporte to defend his performance. However, his response could have reassured the board members. This blog post delves into the challenges Wipro has faced under Delaporte’s leadership and explores the reasons behind the company’s current struggles.
Wipro’s Underwhelming Performance
In recent quarters, Wipro’s revenue growth has lagged behind its major competitors, including Tata Consultancy Services Ltd (TCS), Infosys Ltd, and HCL Technologies Ltd. The company expects a decline in revenue for the April-June quarter, raising concerns among executives and analysts about its prospects. Delaporte’s initial confidence in closing the revenue gap with HCL Tech has waned as macroeconomic challenges and internal issues hinder Wipro’s progress.
Profitability Concerns
In addition to sluggish growth, Wipro has been grappling with profitability challenges. Focussing on the operating margin of 15.7%, the company’s profitability is only marginally better than Cognizant Technology Solutions Corp., which has the lowest profitability among the top five IT services firms. Wipro’s profitability has significantly declined, with earnings before interest and tax (EBIT) margins shrinking by 350 basis points over the past three years. This trend has raised questions about the company’s ability to maintain its historically higher profitability than its peers.
Cultural Shifts and Employee Exodus
Wipro’s attempts to revitalize its performance under Delaporte have included a restructuring exercise that led to many senior leaders quitting. The company aimed to create a more future-ready workforce, but this strategy resulted in widespread unrest and a culture of fear and distrust. The influx of lateral hires, often offered higher salaries and promotions, further strained profitability. Meanwhile, clashes between the CEO’s office and other departments and unnecessary checks and power dynamics exacerbated the internal tensions.
Delaporte’s Leadership and Shareholder Concerns
Delaporte’s leadership style has received criticism as he continues to work from Paris instead of relocating to the US, Wipro’s largest market. Some executives question the CEO’s excessive involvement and unnecessary checks on presentations and numbers, leading to a lack of trust within the organization. Furthermore, Delaporte’s significant selling of Wipro shares has raised concerns among investors, questioning the CEO’s confidence in the company’s prospects.
Rishad Premji’s Role and Way Forward
Wipro’s chairman, Rishad Premji, has given full autonomy to Delaporte, avoiding interference in day-to-day affairs. However, as the company’s largest shareholder, Premji’s silence raises concerns about the lack of active oversight. Wipro faces a significant challenge in rebounding from its current state, as it needs a strong bench of experienced leaders. The company has experienced a high turnover of executives, and a weak leadership pipeline may hinder its recovery efforts.
Summary
Wipro’s struggles under Thierry Delaporte’s leadership have been evident in its declining growth, profitability, and internal challenges. The company’s attempts at revitalization through restructuring and increased lateral hiring have strained profitability further and created a culture of fear and distrust. Delaporte’s leadership style and significant selling of Wipro shares have raised shareholder concerns. As Wipro navigates these difficulties, all eyes are on Rishad Premji to provide a concrete pathway ahead.
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