Retaining key leaders to firing growth engines, Srinivas Pallia has work cut out as new Wipro CEO

Wipro's new CEO Srinivas Pallia, who took over the reins from Thierry Delaporte, has challenging tasks cut out in reviving the company's fortunes, retaining key leaders and restoring morale as he faces tough quarters, weak global cues and discerning shareholders at the USD 11 billion IT services firm, industry watchers say.

Some analysts believe that the outgoing CEO, Paris-based Delaporte whose five-year tenure came to an abrupt end with his resignation on Saturday, could not effectively address many operational and leadership issues at the multi-billion dollar IT powerhouse, that had been lagging peers on performance and operational metrics quarter-after-quarter.

"The morale has been sapped out of Wipro for a year now, and this change in leadership is at least six months overdue," Phil Fersht CEO of HFS Research said in a note.
Fersht noted that the new CEO will need to "nail down" his plans quickly, give the firm renewed direction, and convince key stakeholders he is the right choice as he looks to restoring the company's morale.

"After the failed experiment to make Wipro like a Big 4/Accenture-like firm, Wipro is going back to its Indian-centric 80-year heritage to deliver cost-efficiency, but with capabilities to support transformations, Cloud and GenAI (Wipro is performing well with several GenAI pilots and rollouts, for example). However, the firm has to play catch-up during the toughest time facing Indian-heritage outsourcing, and Pallia needs to weather more challenging quarters, impatient shareholders, and unrealistic expectations," Fersht wrote.

Nirmal Bang Institutional Equities consultant Research Analyst Girish Pai believes that Pallia will have to lead from the front when it comes to strengthening the top echelons and firing the company's growth engines, which were impacted by the exodus of senior executives.

"While Pallia has been appointed the Chief Executive Officer and Managing Director for a period of five years, he may have to focus on a quicker and faster turnaround, in a business environment that is subdued globally and in a company that has seen many senior-level exits," Pai said.

While scripting a fast turnaround is by all means a "tough task", more so for Wipro, Pallia does have one big advantage - that he is a Wipro insider and enjoys acceptability and familiarity, Pai pointed out.

Meanwhile, industry observers noted that during Delaporte's tenure, Wipro lost many senior-level executives and reliable hands - a gap that could not be plugged by expats brought from outside - and his preference to be based in Paris combined with the general top-level disquiet reinformed perceptions of disconnect for the Parisian.

The roster of senior-level exits just kept getting longer, overtime.

One of the high-profile and much-talked-about exits was of chief financial officer Jatin Dalal, who quit the company after a 21-year stint and was sued by Wipro for violating a non-compete clause after he joined rival Cognizant.

Over the years, Wipro saw many other senior-level departures as well, including chief growth officer Stephanie Trautman, chief operations officer Sanjeev Singh, and India head Satya Easwaran.

"While several external candidates were mooted, Rishad (Premji) has opted for a popular internal candidate based in New Jersey the heartland of IT services decision-making. Srini has the respect of the guys who built the firm (those who are still there) and well-liked by key partners Microsoft and SAP. He knows the company, he knows many of the key clients...," according to HFS' Fersht.

Industry analysts note that Wipro's performance in revenue has trailed the industry average over the past many quarters, and hence all eyes are on the new CEO and his big turnaround manoeuvre.

The grand IT earnings season opens this week with results of TCS on April 12, while Wipro is scheduled to announce its Q4 and full-year earnings for 2023-24 on April 19.

Wipro posted nearly 12 per cent decline in consolidated net profit at Rs 2,694.2 crore in the third quarter ended December 2023 amid a "cautious" demand environment and clients making conservative investments.

Rival Infosys posted a 7.3 per cent decline in net profit, while Tata Consultancy Services and HCL reported an 8.2 per cent and 6.2 per cent increase in consolidated profit in the December 2023 quarter.

The consolidated revenue from operations of Wipro also fell 4.4 per cent to Rs 22,205.1 crore during the December quarter, as against Rs 23,229 crore a year ago. This marked the fourth straight quarter when Wipro recorded a decline in its IT services revenue.

Wipro had said it expects de-growth or almost flat growth in revenue in the March quarter, thereby indicating a lower growth for the company for the fiscal on a year-on-year basis. Wipro had reported a profit of Rs 3,052.9 crore in the quarter ended December 31, 2022.