The IT Network will also be able to keep a tab on financing of terrorist organisations as well as money laundering trail in the country.

FIU-IND is the government arm which keeps a tab on all financial transactions in the country. About 10,000 financial organisations, including the stock exchanges are enlisted with it.

Infosys, TCS, erstwhile Satyam and Wipro had bid for the contract last year, out of which all except Satyam were shortlisted for final bidding. The contract was awarded to Wipro last month. The contract is estimated to be in the range of Rs 60-70 crore, though Wipro refused to confirm the size.

The Financial Intelligence Network (FINNet) will be connected FIUs of other countries and also to other departments like CBI, Income Tax and all banks in the country. Insurance companies and non banking financial institutions will also be mandated to report all irregular financial behaviour of consumers in the network.

Wipro will implement FINnet, which will involve development of a portal, datawarehousing, analytical and business intelligence applications and ERP implementation for the FIU.

An inhouse data centre will also be set up along with a disaster recovery unit. The project is scheduled to be completed in 24 months in different phases with a further service period of 36 months.

Arun Goyal, director FIU India, said: “FINnet will enhance our capabilities to collect financial information, analyse it and disseminate actionable information to various law enforcement and intelligence agencies.”

The project assumes significance in the light of growing economic crimes within the country and the government’s efforts to arrest it.

The employee had been working with the company for the past three years in the ‘controllership’ division within the finance department. This cell is responsible for keeping the company’s financial books and also has powers to authorise payments whenever needed. The employee is believed to have embezzled about $4 million by stealing a password and transferring money from Wipro’s account at a bank.

Suresh C Senapaty, Wipro’s CFO, confirmed the incident. “This has been a case of embezzlement, which we discovered in December, and it’s very unfortunate that this person succumbed to this,” Mr Senapaty said. “The company has carried out an investigation and is undertaking actions with respect to stricter adherence to processes.”

Wipro has since disbanded the controllership unit. The fraud is believed to have cost the company about $4 million. Wipro officials have succeeded in recovering about half the money, but will still face a loss of about $2 million.

Mr Senapaty said the incident did not involve more than one Wipro staffer. “Our investigations have revealed that only this employee was involved, and nobody else in the team had any clue,” Mr Senapaty said.

The amount involved is not large, but the incident has upset people at the helm of India’s the IT major. Wipro has always taken pride in the sound work ethics of its employees and in the strictness of its controls. “We have to be more alert in monitoring, and we need to tighten the processes for ensuring an early warning system and make it tougher,” Mr Senapaty said.

Among other measures being considered by Wipro, employees working in sensitive functions within the finance department may be rotated more frequently. Currently, employees in such functions spend around three years before a transfer. Going forward, Wipro also plans to make it mandatory for employees working in the finance division and elsewhere, to sign an undertaking about sharing of passwords and any unauthorised transactions.

Wipro officials discovered the fraud after receiving an alert about ‘overdraft’ transaction, even when the company’s accounts had sufficient balance according to the official records. The employee, whose name cannot be made public, siphoned off the company’s money to his personal savings accounts in multiple transactions worth anywhere between Rs 1 lakh to Rs 1.2 crore, and used the money to acquire jewellery, apart from making other investments, including buying land.

“The employee stole password from a colleague and used it to transfer money to his and his family members’ personal accounts,” an official told Neytri on condition of anonymity. While the company continues to believe that it was a fraudulent act committed by the employee, the issue raises questions about information security policies.

An interim report on the incident was presented to the management, board members and other authorities concerned, including disclosure and audit committees. “We have recovered more than half of the amount, and it’s not substantial enough. However, we have kept all the stakeholders posted in an interim report submitted recently,” Mr Senapaty added.

Mr Senapaty, according to several people who spoke with Neytri on condition of anonymity, had to face some tough questions from the management, and he had to act swiftly in terms of restructuring the entire division.

Wipro handed out salary increments to all its employees. With effect from February 1, employees got a pay hike in the 8% to 12% range with some even getting a 15% increase.

TCS CEO and MD N Chandrasekaran said, “China is a tough market for IT firms and the company was seeing business opportunity in Europe.” The company is currently seeing an 8-10% growth in revenue from domestic operations and is eyeing a double-digit growth in the next two years.

Chandrasekaran said the company had signed a few large deals as well as a number of smaller ones.
“The financial services sector will drive growth. We expect good growth from retail, pharma and utilities,” he said.

The company, however, expects a lesser growth from verticals such as telecom and manufacturing.

Chandrasekaran said the company will hike salaries of its employees in the coming fiscal, but did not give details. TCS, has not hiked wages in the current fiscal, but employees have received 150 per cent VA payouts in two consecutive quarters — Q2 and Q3 of FY’10.

“We are on a path to hire 1,000 people. We have already hired 300,” he said, replying to a query on hiring plans for the current fiscal. In Q3 of FY-10, TCS had made 7,692 net additions, compared with a net addition of 320 in the previous quarter.

Asked about the extent to which India would be affected by the US move to slash tax-breaks to outsourcers, Chandrasekaran said the matter is not an immediate concern.

US president Barack Obama last month had said his administration would “slash the tax-breaks for companies that ship our jobs overseas” and instead “give those tax-breaks to companies that create jobs in the country,” which sent shivers down the industry’s spine.

This is because the US accounts for almost 60 per cent of the IT exports from the country are to that market.

“The regulatory changes with regard to employment and outsourcing in any part of the world is something that we have to watch every day. You need to see how to align to that, but because of this, if you ask me if there is an immediate concern, then the answer is no,” Chandrasekaran said.

Such a hike comes after a long dark tunnel — of 12 to 18 months — when employees went through a difficult period of layoffs, uncertainty, additional work loads, and salary freeze. A Wipro employee said she received the increment letter which indicated a 12% increase in salary. Several other employees also said they had received increment mails.

A couple of mid-tier Wipro executives said the hike is a morale booster. “I was seriously exploring a job change. Now that I’m getting a hike close to 15%, I guess I should stay back,” a senior project manager said.

Infosys had given a single-digit increment in October. It had announced an across-the-board raise and promotions with effect from October 1, 2009. Domestic salaries went up by 8% while onsite pay rose by 2%. “During the October-December quarter, our variable pay has been 100%, against 92% in the previous quarter. We’ll be thinking of a further salary hike only in April 2010,” said its HR head T V Mohandas Pai.

New York-listed Wipro expects its IT services revenue to rise 3.6-5.4 percent in January-March from the preceding quarter to $1.16-$1.18 billion, after it posted a 4.9 percent sequential rise in the latest quarter. “We have seen a positive demand environment,” Chairman Azim Premji said in a statement.

“In 2010, we expect IT budgets to be flat to marginally positive,” he said. Shares in Wipro rose as much as 2.1 percent in opening deals to Rs 753, their highest since April 2000. A global economy on the mend, recent deal wins, and stable prices have brightened the outlook for Indian IT companies such as Wipro, Tata Consultancy and Infosys, after the world recession put a lid on the sector’s scorching pace of growth.

Research firm Forrester said in a report last week IT sector would see a recovery in 2010 as businesses and governments in the United States and around the world began spending again on technology. In 2010, global spending on IT will rise 8.1 percent to more than $1.6 trillion after falling 8.9 percent last year, it said.

The rupee, which rose 3.4 percent in October-December, the higher salaries and tough competition from firms such as IBM and Accenture are key risks for a sector that earns more than half its revenue from the United States. Wipro, which integrates IT systems, develops software applications and manages call centres, said October-December net profit rose to Rs 1,203 crore ($263 million) under international accounting rules, from Rs 1,010 crore a year ago.

A Reuters poll had forecast a net profit of Rs 1,159 crore for Wipro, which counts Citigroup, Cisco, General Motors and Credit Suisse among its clients.

Revenue rose 5.6 percent to Rs 6,977 crore, as it added 31 clients for its IT services business. Tata Consultancy and Infosys, the top two software exporters, both beat quarterly profit estimates last week, and forecast a positive outlook on hopes of an increase in outsourcing demand from western clients.

Shares in Wipro, majority-owned by billionaire Chairman Azim Premji, rose 13 percent in the quarter, in line with the sector index and more than a 2 percent in the main index. The stock nearly tripled in 2009.

ECGC officials confirmed the development while the companies declined to comment as their quarterly results are scheduled this month.

ECGC’s executive director CA S Prabhakaran said: “Six-seven companies are in talks with us for export credit cover and we are receiving enquiries from many others.” However, he declined to name the companies. ECGC, the world’s fifth-largest export credit risk insurer in terms of coverage of national exports, already provides such cover to some small IT service providers such as Tata Elexi, Sasken Communication and Prithvi Information Solutions.

This is the first time that large IT firms are seeking credit insurance in such large numbers. According to the ECGC officials, these companies could be offered some specialised products that will cover their export receivables. “The product could be customised in line with the customers requirement, depending on their terms of payment with buyers, the importing country and letter of credits,” said an ECGC official. ECGC, which is an specialised credit risk insurance institution that guarantees export credits against buyers payment risks, currently have 3-4 products that could serve to the needs of IT companies, he added.

The chase for export credit cover assumes significance as none of the IT companies’ buyers in west are backed by letters of credit or bank guarantees. Many of the US buyers were highly rated and were also having extremely low credit risks earlier. But, the payment default and rise in bankruptcies in the last one year has increased the necessity of credit risk cover. Apart from this, the US has bankruptcy protection law, which is also one of the major reasons for the service providers to begin looking for export credit cover. Under US Chapter 11 bankruptcy code, there is an automatic stay on creditors.

Earlier, export credit cover products were popular among the exporters of engineering goods, clothing, pharmaceuticals and gems & jewellery. But, now it seems these covers are also required to the most rich service sector companies in the country after the recession impact. ECGC enjoys 90% market share in this segment. However, some private players like New India Assurance, Bajaj Allianz, ICICI Lombard, Tata AIG and Iffco Tokyo provide credit cover in collaboration with foreign associates.

At a time when India’s top tech firms Tata Consultancy Services (TCS), Info0sys and Wipro are redefining their positioning as global services providers by growing their presence in the emerging markets of Latin America, Eastern Europe and Asia, they face stiff competition from these newer rivals.

“For many customers who already have significant presence in offshore locations like India, it’s a risk diversification,” said Jimit Arora, research director of outsourcing advisory firm Everest Group. “Some customers having 70-80 per cent of their offshore resources in India are realising that they need to look at the third category of suppliers that are local and niche,” he added.

Over the past two years, companies such as CPM Braxis, EPAM Systems, Ness Technologies, Softtek, Merchants and Spi Global have emerged as stronger rivals for Indian tech firms, especially while bidding for an outsourcing contract being fleshed out by a ‘first-time outsourcer’.

“When it comes to new business from the first-time outsourcers, these local suppliers may be gaining at the expense of multinational and offshore rivals,” added Amneet Singh, vice-president, global sourcing at the Everest Group. Mr Singh, along with Mr Arora, researched the six emerging suppliers and found that they have been growing at an average compounded growth of around 25% annually during the past few years.

Brazilian firm CPM Braxis, for instance, which counts GE, ABN Amro and Whirlpool as clients, reported revenues of around $567 million in 2008. One of the top four Brazilian banks, Bradesco, is also among the biggest customers for the company.

“Some customers, including Bradesco, would rather work with a local supplier, there’s nothing wrong. For large MNC customers, offshoring continues to be a priority,” said a senior executive at one of the top Indian tech firms. He requested anonymity because his company is currently in a financial silent period.

While these emerging outsourcing rivals are not yet in the big league of mega, multi-year contracts, they are still able to gain business because of their niche and local market expertise. On an average, these companies are able to win contracts worth $2-5 million in annual contract value.

Meanwhile, for Indian tech firms seeking to grow their base outside their home country, these emerging companies also offer potential M&A opportunities.

“Many emerging companies we spoke with believe they can become $1-billion company on their own. However, some admitted that they would be open to inorganic opportunities too,” said Mr Arora.

Indeed, emerging service providers in countries of Brazil, Argentina and Mexico such as Globant, which counts Adidas, Linked IN and Citi among its top customer and has around $100 million in revenues, are increasingly being approached by some Indian tech firms, officials told ET on condition of anonymity.

“We have had discussions with both Softtek and Globant, but I cannot comment any further,” said a senior executive at one of the tech firms exploring inorganic growth route for expansion in the emerging markets. Experts believe such fast-growing firms always make a good acquisition target.

“Given where these companies are in terms of their size and capabilities, they do make good acquisition targets for Indian companies,” agreed Mr Singh.

What makes these firms really attractive is their strong presence in some of the fastest-growing markets for software services. For instance, Ness generates about a third, or $170 million, of its revenues from Eastern European markets of Czech Republic, Slovakia, Hungary and Romania.

“One of the more interesting prospects in this region relates to government initiatives, particularly as it relates to a ‘digitisation’ grant for the EU worth more than 10 billion euro, with ‘must use’ clauses by 2013,” observed James Friedman, analyst at the financial broking firm Susquehanna International Group (SIG).

“Ness is competing actively for this work in a number of regions, and expects Eastern Europe may improve by H2 of 2010, still targeting $300 million from this region by 2012,” he added.

Beginning with employing foreign nationals for junior and mid-level positions, companies such as Tata Consultancy (TCS), Infosys and Wipro – together these three account for about a third of India’s IT exports – now have a number of foreigners in their top echelons.

“There’s a transition in mindset to grow out of the Indian mold and aspire to be like an Oracle , IBM, Accenture, SAP. Also, as Indian companies have gained scale they can tap the best foreign talent; earlier they had to settle for just about anyone,’’ says K Sudarshan, managing partner at executive search firm EMA Partners International.

In the past year, many of the top positions at Wipro Technologies have been filled by foreigners. American Martha Bejar left Microsoft to join India’s third largest software exporter as president, global sales and operations. Ralf Reich, a former Unisys executive in charge of strategic outsourcing in continental Europe, was appointed head of German operations. And Wipro’s centres in France and Japan are also headed by non-Indians.

Infosys’ German, French and Australian operations are managed by locals. Jackie Korhonen, ex-vice-president of managed business process services for IBM Australia and New Zealand, is now head of Infosys Australia.

“They want to be true multinationals. Besides, if you want to really penetrate a local market, bagging business from not only big companies but also small and medium, you better have a local face,’’ says Diptarup Chakraborti, principal research analyst, Gartner.

At TCS, India’s largest technology services company, foreign nationals comprise nearly 12% of the senior management. Among the key executives are John Lenzen, global head of marketing, Gabriel Rozman, global head of emerging markets and Carol Wilson, global business unit head, Hi-Tech solutions unit.

Amit Singh, head of the IT practice at Avendus Capital, says that Indian companies, used to expanding at 30%, are now seeing growth decline. “They want new avenues to maintain growth and hence the geographic expansion and local faces to drive it.’’

Indian software providers have also been expanding into new geographies in the past year. Infosys opened an office in Brazil in mid-December and in recent months Wipro started operations and ramped up investments in strategic development centres and near-shore centres like Atlanta (US), Bucharest (Romania), Wroclaw (Poland), Curitiba (Brazil), Chengdu (China) and Cebu (Philippines).

TCS, present in 42 countries, added its eighth delivery centre in Latin America in the Technology District of Buenos Aires in Argentina. Other new offices it opened overseas included in Mexico, Ohio and Cincinnati. “We leverage diversity as a key competence to enhance our global network delivery model. It also helps build our employer brand in overseas geographies,’’ says Ajoy Mukherjee, VP & head, Global HR, TCS. From about 4,000 foreign nationals in FY06, TCS had over 10,000 foreign nationals at the end of FY09.

Wipro, says its senior vice-president for Talent Engagement & Development, Saurabh Govil, is proactively hiring local talent overseas. “Local talent works for us on several levels, like better knowledge of local markets, niche skills and availability of talent and very importantly, better knowledge of the customer.’’ Foreign nationals make up about a tenth of Wipro’s workforce and in offshore centres it’s as high as 25%. In offshore centres Wipro plans to expand its base of local employees to about 50% in the next few years.

Hiring foreigners as country heads and business unit heads is more common among technology companies than traditional product firms. IBM has about 80,000 Indians in its 400,000-plus global workforce. Nearly a third of employees at Microsoft are non-American workforce and HP has about 60,000 employees in India out of a total 320,000 staff.

Indian companies are globalising their workforce as they expand to new markets and try to win work from governments overseas, much like multinationals such as IBM and HP. Indian IT businesses are dependent on global markets, not local, and as companies grow they need to counter xenophobia to avoid a backlash.

“Job losses to outsourcing is an emotional issue and increased local hiring at onsite and near-shore centres helps counter that. Besides it adds local flavour to the sales effort,’’ says Gartner’s Mr Chakraborti.

You will find it hard to find a name more venerated than Wipro in information technology. It runs 54 development centres across the globe, and is the world’s largest independent provider of research & development services. It was the first information technology services company to use Six Sigma, has over 95,000 people on its rolls, and is the second-largest player in the domestic space. No small achievement.

What is not so well-known, possibly because of the scale and size of its information technology business, is that Wipro is the third-largest Indian-owned fast-moving consumer goods (FMCG) company after Nirma and Dabur — Wipro Consumer Care and Lighting, the FMCG and lighting products arm of the company, will likely end 2009-10 with sales revenue of Rs 2,500 crore.

FMCG, to be sure, has been in Wipro’s DNA from day one. It began life as Western India Vegetable Products Company in 1945 to make edible oils and soap. Information technology got added to its portfolio only in 1991, a full 23 years after Azim Premji took over the reins of the company. Its FMCG portfolio comprises personal care and skincare products. It also has a lighting products and furniture business. It has done several acquisitions to grow the business. Wipro owns brands like Santoor, Chandrika, Glucovita and Yardley (in some geographies of the world). Close to nine per cent of its turnover comes from these non-information technology businesses.

Why FMCG?
The question that begs an answer here is, why FMCG? Information technology and FMCG are as different as cheese and chalk — information technology does not have retail buyers, does not require a long supply chain and advertising support. Success in the former gives no guarantee for success in the other. And the FMCG market is crowded. There are multinational corporations like Hindustan Unilever, Procter & Gamble, Nestle and Colgate-Palmolive as well as homespun street fighters like Dabur, Marico, Godrej and Emami. Moreover, the profit margins in FMCG are thinner. For Wipro, the operating margins are 21 per cent in information technology but only 12.5 per cent in consumer care and lighting. (Investment analysts have calculated the return on capital employed for Wipro Consumer Care at 48 per cent.)

Sector experts say there could be two reasons. One, FMCG can be a hedge against any downturn in information technology. For long, Wipro and others have depended on overseas corporations for business. These customers can slash their information technology budgets at the first sign of nervousness. That’s why all big names in the business have turned to the domestic market in the last one or two years. FMCG, on the other hand, is stable. No matter what, people will never cease to buy soap, skincare products and so on, though they might down-trade in a slowdown and settle for cheaper brands.

There is also evidence that as Indians get richer, and more and more people sail past the poverty line, the demand for FMCG will grow. According to a recent McKinsey report, the number of households in the deprived segment is likely to drop from 101 million in 2005 to 74 million in 2015. That means 27 million households will have entered the market in the ten years to 2015 — the size of many a mid-size country’s population. AC Nielsen too estimates that India is amongst the fastest-growing FMCG markets in the world, with annual growth of 16 per cent in the non-food segment. Naturally, the consumer goods industry is poised for great leaps and Wipro wants a piece of this action.

Two, FMCG gives Wipro the space to build assets in the form of brands. Wipro has spent large sums of money to put together a brand portfolio. In 2003, it acquired Glucovita from Hindustan Unilever for about Rs 5 crore. The next year it bought ayurvedic soap brand Chandrika for Rs 31 crore. Then, in May 2006, it acquired North West Switches for Rs 102 crore. The big move came in 2007 when Wipro forked out Rs 1,000 crore for Singapore-based personal care maker Unza Holdings. And earlier this year, it snapped up Yardley from the UK-based Lornamead Group for Rs 210 crore for Asia, Asia-Pacific and North Africa.

Conversely, KPMG analyst Anand Ramanathan says the high brand recall of Wipro in information technology will have a positive rub-off on its FMCG business. “A lot of operational synergies can be achieved through the proper use of information technology. This gives Wipro advantages in its supply chain management, which help enhance its margins and improve the cost structure.”

At the moment, Wipro seems to be outperforming its FMCG rivals. “The industry is growing at the rate of 16 to 17 per cent (per annum), while we are growing at almost 30 per cent,” says Wipro Consumer Care and Lighting President Vineet Agrawal. At present, almost half the company’s top-line comes from Santoor and Chandrika, the two soap brands. Another Rs 800 crore comes from Unza, while the rest is brought in by Wipro’s lighting and furniture business.

Value for money
So far, Wipro’s strategy has focused on the bottom of the pyramid. Santoor has grown at 29 per cent per annum for the last three years. (Chandrika has grown 18 per cent.) It is the third-largest brand in the Rs 7,500-crore market after Hindustan Unilever’s Lifebuoy and Lux. It leads the pack in the southern market. More than half of its sale volumes come from the rural markets.

Wipro, in fact, realised the worth of the rural markets pretty early. As early as the 1990s, it had introduced small 50-gram packs that were priced at Rs 5. The contours of the soap market began to change in the slowdown that happened some ten years ago. There was a global meltdown as the dotcom bubble went bust and the stock markets tanked. For the first time perhaps, consumers began to down-trade heavily on FMCG products. Brands that were competitively priced were in great demand. This worked in favour of brands like Santoor. To this day, Santoor continues to have value packs priced at Rs 6 and Rs 10.

The early-mover advantage has helped Wipro spread its reach across 1.3 million outlets in the country. Rough estimates suggest there are about 6 million grocery stores in the country. So, Santoor reaches over 20 per cent of the sale points. The gaps are in the north. Though Santoor lords over 21 per cent of the rural market in the south, it has not really set the northern states on fire. “We just got better-accepted in the south because we had a better distribution sense there,” claims Agarwal. Wipro Vice-President (sales and marketing) Anil Chugh feels that the demand for sub-popular soaps is stronger in the north where Wipro has no product. Meanwhile, 56 per cent of consumers go for popular soap brands in south India. “Naturally, that makes for a bigger play for us,” he says.

Launched in 1984, Santoor was first positioned as the soap with “natural ingredients” in a market that was already overcrowded with several brands, many of which were positioned along similar lines. Keen to make its mark, Wipro conducted an extensive study after which it positioned itself as the soap for “younger-looking skin”. It has since stuck to that ground. “To beat competition we had to ensure that our communication was effective,” says Chugh.

Better spread
This is not to say that Wipro has pushed the upper end of the market out of its strategic vision. It has launched variants of Santoor like Santoor White and Santoor Glycerine that cost approximately Rs 20 for 75 grams, and has extended the brand to emerging categories like hand wash and face wash. And now Wipro hopes to cater to the premium segment with its range of Yardley products including body sprays, soaps, talcum powder and other toiletries. While Santoor costs approximately Rs 18 for 100 grams, Yardley will be priced at Rs 40 for a similar pack. In talcum powder, Yardley will be priced at Rs 60, while other brands cost approximately Rs 35.

As for distribution, Yardley will be sold across cosmetic counters and modern trade. “Historically, Yardley has been an exclusive brand that has come to consumers through the grey channel. We are going to unlock its latent brand equity in the country,” says Agarwal. This acquisition, he hopes, will help the company do business worth $30 million in the West Asian market where the beauty and wellness industry is booming.

Wipro needs to strengthen Yardley’s distribution network. India accounts for only 20 per cent of Yardley’s revenues. The plan is to increase its presence from 20,000 stores to over 50,000. Analysts observe that Yardley will work for Wipro if the former’s profit margins are preserved. While Yardley’s revenue growth rates hover between 20 and 25 per cent, Agrawal notes that its gross margins are good and won’t lessen Wipro’s 13 per cent operating margin. Agrawal is confident that maintaining manufacturing efficiencies will safeguard margins. For now, Wipro will opt for a mix of outsourcing (which Yardley currently does) and manufacturing some products in-house.

With Unza, Wipro has gained instant access to China and markets in southeast Asia such as Indonesia, Vietnam and Malaysia. Unza is southeast Asia’s largest maker of personal care products. Wipro forked out 1.5 times the revenues to buy Unza. The gamble seems to have paid off. It has seen volume growth of 13 per cent this year. “The acquisition gives Wipro access to target segments that are richer, and also access to related extensions beyond the soap category,” says KPMG’s Ramanathan.

On the flip side, Unza brands such as Enchanteur and Romano have seen limited success in India. “We had launched it in modern trade but at that time there was a churn and our plans were derailed. But now that modern trade is back on track, we expect things to look up,” says Agarwal. Accordingly, Yardley and the Unza range will be restricted to the top 100 towns to begin with. Rivals say building Unza brands from scratch will be an uphill task for Agarwal and his team. So, Unza may give Wipro limited leverage in the Indian market.

But Unza will come in handy in another way. It will promote Wipro’s consumer products globally, with special thrust on Santoor. It will use Unza’s expertise in selling through big retail chains like Carrefour and Walmart. In acquiring Unza, Wipro outbid large companies like Dabur, Emami, Godrej, Unilever, Colgate Palmolive and Sara Lee. It will thus make every effort to maximise its advantage from the purchase.

Some rivals are still to be convinced of the Wipro strategy — products at different price points, brand acquisitions and global spread. The product categories it has chosen, they say, are those in which multinational corporations have a strong presence. They are doubtful if Wipro can match their firepower. (The norm in FMCG is to spend 13 to 14 per cent of a brand’s turnover in advertising.) Indian FMCG players like Marico, Dabur and Bajaj Consumer Products have focused their energies in categories like hair oil, digestive candies and so on, in which multinational corporations do not have much interest. These are uniquely Indian categories which do not fit into their global strategies. Wipro, in contrast, has waded into the territory where multinational corporations rule the roost. Success, if it comes to Wipro, will be hard-earned.

BEYOND FMCG

Apart from FMCG, Wipro has taken strides in niche segments. Take, for example, its foray into the furniture business, which the company feels fits in well with its institutional lighting business set up in 1992. According to Wipro Vice-President Parag Kulkarni, who heads Wipro Furniture, the business started after conversations with architects and designers, which indicated that the company could sell furniture to the same customers.

Since then, the company has come out with an entire range comprising popular, premium and super-premium furniture that targets companies in the information technology and information technology-enabled services space. Of late, the impetus has been on the premium end which is largely serviced by international furniture makers. Wipro has teamed up with top international designers including London-based Tim Wallace, New York’s Eric Chan and Toronto-based Conrad Marini to bring world-class premium furniture to the country.

At the time of its launch in 2004, the modular furniture market was worth about Rs 550 crore. But it has grown 20 per cent per annum since then to get close to Rs 1,500 crore now. “We’re ahead of the pack, growing at 50 per cent,” says Kulkarni. Wipro faces stiff competition from Godrej’s furniture, which claims to have a 22 per cent market share. “Godrej Interio products are targeted at medium to premium price points, and in the last six months we have launched 11 products,” says Godrej Interio Chief Operating Officer Anil S Mathur. Wipro also claims its market share is in double digits and is among the top three companies in this space.

In 2006, the company entered switches — another niche category that is growing at about 25 per cent — when it acquired North West. And now it has forayed into security products like close-circuit TVs, intrusion panels, intrusion alarms, access control, video door phones and gas & fire detectors. While Agarwal’s team has not chalked out any strategy yet, he feels Wipro is poised to do well in the segment because of its experience in the lighting and furniture market.

Wipro is keen on tapping niches in the health and wellness space too. Thus, it acquired glucose supplement Glucovita from Hindustan Lever in 2003 where it claims to have beaten industry growth rates. The company followed that up two years later with the launch of Sanjeevani Honey to compete in the Rs 125-crore category. Recently, it entered the artificial sweetener market with Wipro Sweet and Healthy. The rationale has been the growing health consciousness in the country. India has more than 50 million diabetics — the highest number in the world. That’s already a significant consumer base to start with. The sweetener which was test-marketed in Andhra Pradesh has managed to gain 25 per cent market share in the region. Wipro now wants to launch it in other markets.

The top 15 vendors analysed by research firm Forrester in a recent report provided remote and onsite services for about 16.7 million desktops, 1.7 million servers and 23.4 million users globally. These vendors, including IBM, HP-EDS, CSC and some Indian tech firms including HCL delivered $83.9 billion worth of infrastructure services last year.

By outsourcing the management of their desktops, computer servers, storage and communication infrastructure, customers such as Nokia, Xerox and Citigroup plan to have leaner balance sheets, reduce their operational expenses by upto 40% and focus better on their core business.

At least three outsourcing consultants involved with helping customers outsource infrastructure management said nearly $30 billion of such contracts are up for renewal in 2010, and almost quarter of these contracts will go to new suppliers, with the rest to be renewed with incumbents IBM and HP-EDS. “In last two years we have demonstrated our capability to take over from incumbent providers,” said Anant Gupta, president of HCL’s infrastructure services division. “Despite remote infrastructure becoming popular, there were doubts about whether we can provide global support — our recent wins have proved that we can,” he added.

Among large outsourcing contracts for infrastructure management, HCL signed $350 million seven year deal with Readers Digest earlier this year, apart from similar deals with Nokia and Xerox. On its part, domestic rival Wipro acquired Citi Technology Services for around $127 million in December last year, which came with Citigroup’s commitment to outsource all future infrastructure management contracts to Wipro, potentially worth almost $1 billion over six years.

Large multinational rivals such as IBM and HP have traditionally been strong in delivering multi-year management contracts because these companies are able to bundle services with their hardware products and even offer lucrative finance and credit options to customers.

“There’s no way we would ever get into financing such deals, but we are aligning with hardware divisions of some of our competitors for offering newer delivery models such as pay-per-use,” said a senior executive at one of the top Indian tech firms. He requested anonymity because his company is in a financial silent period before announcement of financial results.

“Some clients clearly will require the scope only an IBM or HP can deliver, but many don’t,” said Dr Paul Roehrig, principal analyst at Forrester Research. “All of the India-centric firms included in the study — Cognizant, HCL Technologies, Infosys, TCS, and Wipro — have excellent forward-looking strategies for the infrastructure business,” he added.

Experts such as Diptarup Chakraborti, principal research analyst at Gartner say that Indian tech firms have already become multinationals by hiring more local workers, which will help them gain large contracts.

“With large domestic deals in Infrastructure management, Indian IT companies have already proved that they possess the relevant skill sets. Wipro’s deal with Uninor for about $500 million (about Rs 2500 crore), this year is comparable to any large international deal,” said Mr Chakraborti.

Meanwhile, multinational rivals create barriers for any new service provider by owning large data centres on behalf of the customers.

“Some customers plan to derisk from this ‘lock-in’ by attempting to buy back the data centres,” said Mr Gupta. “Large customers are looking to outsource contracts worth $500-800 million,” he added.

Although dwarfed in size by the legacy global service provider firms, “India-centric firms — including Cognizant, HCL Technologies, Infosys, and TCS — also landed among the Leaders by showing good delivery capability and generally strong forward-looking strategies for the global infrastructure services business,” Dr Roehrig of Forrester added.