Enterprise Risk Management in Wipro's Software Services Division
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Details
Themes: -
Period : 2003
Organization : Wipro
Pub Date : 2003
Countries : India
Industry : Information Technology
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Case Code : ERMT-001
Case Length : 13 Pages
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Enterprise Risk Management in Wipro's Software Services Division: Introduction
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Wipro, one of the most admired IT companies in India was founded in 1945 by Mohamed Hussain Hasham Premji. Under the leadership of his son Azim Premji, the Rs 70 million1 company dealing mainly in vegetable oil fats had grown into a $736 million diversified corporation by 2002. The company was ranked 7th among the software services companies in the world2. Wipro's software division served over 300 global leaders including Boeing, Ericsson, Toshiba, Cisco, Seagate, United Technologies, Digital, IBM, Microsoft, NCR, and Sony. Overview of Major Risks
Wipro believed the following factors could affect its software business: |
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» seasonal changes that affected purchasing patterns among consumers of computer peripherals, personal computers, consumer care and other products;
» the effect of seasonal hiring patterns and the time required to train and productively utilize new employees;
» exchange rate fluctuations.
Wipro believed its business environment was becoming increasingly competitive. Wipro's competitors included software companies, large international accounting firms and their consulting affiliates, systems consulting and integration firms, other technology companies and in-house information services departments of clients. Wipro's competitors were much bigger and had significantly larger financial, technical and marketing resources compared to Wipro. Wipro's ability to compete depended on the price at which competitors offered comparable services, and how effectively competitors responded to their clients' needs.
Approximately 59% of Wipro's total operating expenses in the Global IT Services and Products business, particularly personnel and facilities, were fixed in advance in a given quarter. As a result, unanticipated variations in the number and timing of projects or employee utilization rates would have an impact on operating results. Wipro believed that period-to-period comparisons of results of operations were not necessarily meaningful and should not be relied upon as indications of future performance.
Wipro's software business had been growing rapidly. This growth would place significant demands on management and other resources. Operational, financial and other internal controls, both in India and elsewhere would have to be improved. If Wipro was unable to manage its growth effectively, the quality of its services and products would decline. Then its ability to attract clients and skilled personnel would be negatively affected, slowing down the growth of the business.