After six months as CEO, Pallia quietly plots a turnaround for Wipro

Pallia took over as Wipro’s CEO on April 6, replacing Frenchman Thierry Delaporte before the end of his term.

Srini, as he is popularly known, aims to take the country’s fourth-largest software exporter into the pre-Delaporte era. Unlike his predecessors, who relied on big-bang changes, Pallia is sticking to the basics, including adopting cost discipline and having much more open and transparent conversations with the company’s rank-and-file, said at least six senior officials who spoke to Mint on condition of anonymity.

Earlier this month, Wipro hosted a three-day executive meet at the Prestige Golfshire, a hotel in north Bengaluru, where over 180 leaders – vice presidents and above – met to discuss the company’s business and future plans.

Under Thierry, these meetings would take place in branded hotels in Paris, Dubai and London. A key takeaway from the meeting is Pallia’s drive to make Wipro financially prudent, one that doesn’t spend as much as the company has in the past, and to prioritize operating margin.

Wipro’s travel costs rose slightly last year, with the IT services firm issuing ₹Last year, travel expenditure stood at Rs 1,510 crore, which is 2% of the total expenditure.

Executive meetings and out-of-office trips, while still common, are moving to virtual modes. Under former CEO Delaporte, Wipro’s executive council and board met in foreign locations quarterly.

On the margin front, Wipro is now focusing on profitability. The company is not looking to sign or renew new deals below profitability in general. “The company will look at deals on a case-by-case basis and will not adopt a ‘one size fits all’ approach,” said a company official quoted earlier.

“Since taking over, Srini has tried to drive growth as well as revenue growth. There is a greater need for consultative discussions rather than simply responding to project proposals,” said a second official.

While the company is seeking to increase margins, it will not do so at the expense of growth.

“Of course, one of the reasons why we think we will keep margins in a narrow band with an upward trend is also because we want to make sure that we have enough headroom to invest in growth, and you can be sure of that. We will not hold back on investing in growth, that remains our number one priority,” Wipro CFO Aparna Iyer told analysts after the July 19 earnings call.

Wipro ended the three months to June 2024 with revenue of $2.64 billion, down 1.1% sequentially. The company’s operating margins rose 10 basis points to 16.5%.

Another reorganization involves shedding the image of the Paris office as the company’s command center. Mint has learned from at least two company officials with knowledge of the matter that the Paris office has been moved to a smaller space. In addition, at least a dozen executives stationed abroad have been dismissed.

“The Paris office has been moved to a co-working space and many Indian traders who were supposed to work closely with Thierry in Paris have been recalled,” said a third official with knowledge of the matter.

Wipro is not only recalling employees from Paris and other locations, but is also beefing up its management team in India as the company does not want executives who do not have customer contact and do not receive bills to work away from client sites.

Sanjeev Jain, who took over as the company’s COO shortly after Pallia took over, is based in Bengaluru. Until the beginning of the calendar year, former Wipro COO Amit Choudhary was based in New York. Ajay Bhaskar, the company’s chief strategy and transformation officer, who was based in Paris, has also been asked to return to India.

Analysts are cautiously optimistic about Pallia’s moves

Analysts are cautiously optimistic about Pallia’s efforts to reorganize the company.

“In Wipro’s case, the Pallia measures are exactly what the company needs. The key was to unearth talent that had spent many years building a company that had been stifled by outsiders brought in by Thierry Delaporte. For a company that needs to get back to its roots, this is a great template for a relaunch,” said Phil Fersht, CEO of HFS Research.

Fersht, however, remained cautious.

“These changes will only be effective once the company returns to revenue growth and maintains stable margins,” Fersht said.

Then there were changes even in the hiring of new people. Under Pallia, business lines have more autonomy over the staff they want to hire.

Wipro is sending global business line heads (GBLs) and technical panelists from these GBLs along with the HR team to hire new employees from the campuses. “Earlier, Wipro used to hire as a single entity, but now GBLs have more of a say in the talent they need for their business lines,” said a fourth executive with knowledge of the matter.

Wipro has had eight CEO changes in the past two decades, with each CEO coming up with his own vision. But this time is different because Pallia, who has been with the company longer than any CEO before him, has stayed away from big changes and instead focused on the basics.

It is clear that the old hands, and Srini is one of them, do not live in fear of being fired. When Thierry was CEO, at least 750 senior executives, from the CEO and above, many of whom were old hands at the company, left the company. This exodus created fear among the old Wipro employees that they would be asked to leave. That fear is gone now, as Pallia maintains a collegial relationship with his peers, many of whom grew up in the organization with him.

Pallia managed to gain the trust of his employees, which helped him manage the company and place trusted people in management positions without causing concern among others.

There have been five changes in Wipro’s senior management team since Pallia took over, the latest being Subha Tatavarti, who was hired by Thierry and resigned as the company’s chief technology officer last month, to be succeeded by Sandhya Arun.

However, the story for now is that Wipro may need some time to grow with a new boss at the helm. The start is encouraging, but how the company negotiates disruptive technologies like generative AI (GenAI) and how seamlessly it integrates AI into its software offerings will potentially dictate its future growth. And with major central banks like the US Fed cutting interest rates, customers are likely to increase their spending on technology.

“Srini Pallia is a valued leader in Wipro and is transaction-oriented. Strengthening execution is a key priority. Other key priorities include developing integrated AI solutions and achieving better integration of Capco and Rizing,” Kotak analysts Kawaljeet Saluja, Sathishkumar S and Vamshi Krishna wrote in a June 18 note.

“The company will pursue price hikes in pockets. Wipro will not reduce investment in sales and marketing,” Kotak analysts wrote.

Shareholders have responded positively to this changing of the guard. Since Pallia took over on April 6, the company’s shares have gained almost 10% through Friday’s close.

The company immediately gained value when it signed a five-year, $500 million deal in June 2024 with an unnamed US communications service provider to provide managed services for its products.

Wipro was once bigger than its city-based peer Infosys Ltd, which is India’s second-largest software services company, but is now behind Noida-based HCL Technologies Ltd. Whether Pallia orchestrates another shake-up in India’s IT hierarchy will depend on whether it builds on its strong start.