Wipro at Crossroads: The Failed Dual CEO Structure
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Case Code: BSTR433 Case Length: 28 Pages Period: 2000-2013 Pub Date: 2013 Teaching Note: Not Available |
Price: Rs.500 Organization: Wipro Limited Industry: Information Technology and Consulting Countries: India Themes: Management Structure, Turnaround strategy, Organizational Restructuring, Managing external and internal challenges |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
The Dual CEO Structure
The organizational structure at Wipro was complex. In functional terms, the company operated with a matrix structure comprising three verticals and two horizontals. The verticals included the technology business – product engineering and the telecom service; the enterprise business – manufacturing, retail, healthcare, etc; and the financial services business. The two horizontals comprised the global practices business and the BPO. The IT business had two organizations – Wipro Technologies and Wipro Infotech. These verticals and horizontals were headed by executives who were expected to be roped in as CEOs after the then CEO Vivek Paul's departure...
The Problems
Though Vaswani and Paranjpe were entrusted with the responsibility of driving growth and bringing the company on a par with its peers during the global economic slowdown, they could not adopt strategies that could drive growth at the company.
One of the major challenges with the dual CEO structure, according to Wipro insiders, was that its dual reporting structures made it cumbersome. The agility of the company was affected. They also felt that the dual CEO structure prolonged the decision-making process and led to contradictory viewpoints being expressed.
Some industry insiders said that both the CEOs had shied away from adopting an aggressive approach during the economic slowdown, preferring to focus instead on freezing of new hires, etc. Since the BFSI vertical was the most affected due to the global financial crisis and subsequent bankruptcy of many banks in the US, the IT sector in India was hit the hardest. It was reported that by 2008, the BFSI vertical accounted for 40 percent of the IT industry's revenues. Other verticals such as retail and certain manufacturing sectors were also affected to some extent...
Enters Kurien
Agreeing that the dual CEO structure did not help Wipro, Premji said “We have underperformed relative to the competition and as a company. What we are trying to do is significantly improve performance going forward. But the whole cycle of decision-making got delayed. We lost time.” He also said that the financial services, healthcare, and energy businesses did not yield impressive results. Analysts felt that this spoke volumes about the faulty nature of the dual CEO structure since Paranjpe was responsible for the financial services, communication, media, telecom and technology verticals whereas Vaswani was responsible for healthcare, energy, utilities, manufacturing, retail, BPO, Enterprise applications, etc. Thus, both the CEOs missed out on those verticals that drove revenues at TCS and CTS...
The Turnaround Plan
In April 2011, Kurien took over as CEO. As part of the turnaround plan, he felt that Wipro needed a cultural change and had to become bolder and leaner. He said that the company's problems stemmed from its inability to garner a bigger share of business and the complex nature of the organization. Thus he planned to focus on verticals that yielded growth and to restructure the organization to make it nimble...
The Results
Having restructured the organization, Kurien said that the results would be reflected in two to three quarters. "In any organizational restructuring, it is unlikely that you will see the result in the short run. This is a longer play for us because by doing this (restructuring) we are positioning ourselves for future growth. It is difficult to put a timeframe to it (outcome of organizational rehaul) but any cultural change or organizational change would not yield result before three quarters," he added...
Focusing on Thriving Segments
Since the company's turnaround efforts did not yield much result, Wipro decided to focus on thriving segments such as analytics and consulting. The company started focusing on telecom and analytics and offered mobile broadband-related services to operators after the telecom segment revenues had decreased from 17 percent in 2011 to 15.7 percent in 2012. It was reported that the telecom equipment vendors were reducing their expenditure on research and development (R&D) activities as the global economic environment became more challenging. Consequently, Wipro was not able to garner substantial business from the product re-engineering area. It therefore decided to shift its focus from product re-engineering services to telecom vendors. The company restructured its telecom vertical to focus on offerings in domains such as telecom analytics, system integration, mobile broadband, customer experience management, and network optimization, in addition to making hardware interoperable across platforms...
Will Wipro Regain Lost Momentum?
After beating Wipro in terms of revenues in the quarter of June 2011, CTS continued its success story by garnering revenues of US$ 6,121 million for the FY ended 2012 compared to Wipro's revenues of US$ 5,921 million for the same period. Thus, in a bid to get back to its coveted position in the tier of top three Indian IT players, Wipro planned to demerge its IT business from consumer business to concentrate on its core IT business. Wipro had announced in November 2012 that it would demerge its non-IT businesses such as consumer care and lighting into a new company called Wipro Enterprises. According to Kurien, the demerger would “accelerate investments necessary to capitalize on market growth opportunities.” The company pointed out that the demerger would provide a fresh impetus to both Wipro and Wipro Enterprises to pursue their individual growth strategies. The demerger was also a move to enhance the competitiveness in the respective markets...
Exhibits
Exhibit I: Wipro Milestones
Exhibit II: Wipro's Four Year Financial Summary (in US$ million)
Exhibit III: Wipro's Segment Growth Compared to other Indian IT Players
Exhibit IV(A): Wipro's Revenues Comparison during the Three Phases
Exhibit IV(B): Wipro's Revenue Growth Comparison during the Three Phases
Exhibit IV(C): Wipro's Profit Growth Comparison during the Three Phases
Exhibit IV(D): Wipro's Market Capitalization Comparison during the Three Phases
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