Six months into his tenure as CEO, Paglia has quietly engineered Wipro’s transformation

From strengthening India’s leadership, which includes shedding the company’s image as a nerve centre with its Paris office, to prioritising operating margins, Srinivaspaliya has embarked on a series of changes to turn around the company since taking over as Wipro CEO about six months ago.

Paglia took over as Wipro CEO on April 6, replacing Frenchman Thierry Delaporte before his term ended.

Srini, as he is known, aims to bring back the Delaporte days to India’s fourth-largest software exporter. Unlike his predecessor who relied on wholesale changes, Paglia is relying on fundamentals, including imposing cost discipline and engaging in more open and transparent dialogue with the company’s rank and file, according to at least six senior officials Mint spoke to on condition of anonymity.

Earlier this month, a three-day meeting was held at the Prestige Golfshire Hotel in northern Bangalore, where more than 180 vice presidents and above gathered to discuss the company’s business and future development direction.

Under Thierry, the meetings would be held at luxury hotels in Paris, Dubai and London. A key takeaway from the meetings was Pallia’s commitment to making Wipro financially prudent, not spending as lavishly as it had in the past, and prioritizing operating margins.

Wipro’s travel expenses increased slightly last year. The IT services company spent ₹Last year, the company’s travel expenditure was Rs 15.1 billion, accounting for 2% of its total expenditure.

Executive leadership meetings and team outings, while still common, are moving to virtual mode. Under former CEO Dela Porte, Wipro’s executive committee and board executives used to meet abroad every quarter.

On the profit front, Wipro is now prioritizing profitability. Generally, the company will not sign or renew new deals below profitability. “The company will consider deals on a case-by-case basis instead of taking a one-size-fits-all approach,” said a company official.

“Sreeni has been committed to driving growth, especially profitable growth, since he assumed office. There is more motivation to have a consultation-led dialogue than just responding to project proposals,” said another official.

While the company wants to improve margins, it won’t be at the expense of growth.

“Of course, one of the reasons why we think margins will remain in a tight range with an upward trend is also because we want to make sure that we have enough headroom to invest for growth, you can be assured. We are not going to cut back on investments for growth, that remains our priority,” Wipro CFO Aparna Iyer said in a post-earnings interaction with analysts on July 19.

Wipro’s revenue for the three months ended June 2024 was $2.64 billion, down 1.1% sequentially. Its operating margin rose 10 basis points to 16.5%.

Another adjustment is to move away from the Paris office’s image as the company’s nerve center. Mint has learned from at least two company officials with knowledge of the matter that the Paris office has been relocated to a smaller space. In addition, at least a dozen executives based overseas have been called back.

“Currently, operations in the Paris office have been moved to a shared office space and many of the Indian sales staff who worked closely with Thierry in Paris have been called back,” said a third person familiar with the matter.

Wipro has not only called back employees from Paris and elsewhere, but has also strengthened its leadership in India as the company does not want executives who do not engage directly with clients and do not receive fees to be based outside client locations.

Soon after Paglia took over, Sanjeev Jain took over as the company’s chief operating officer, who is based in Bengaluru. Wipro’s former COO Amit Chaudhary was based in New York until the beginning of this year. The company’s chief strategy and transformation officer Ajay Bhaskar has also been asked to return to India, having been based in Paris.

Analysts are cautiously optimistic about Pallia’s move

Analysts are cautiously optimistic about Pallia’s moves to restructure the company.

“In Wipro’s case, the steps Pallia is taking are exactly what the company needed. The key is to tap into the talent that built the company over the years, which was stifled by the outsiders brought in by Thierry Delaporte. This is a great template for a company that needs to get back to its roots,” said Phil Fersht, CEO of HFS Research.

Still, Fisht remains cautious.

“These changes will only be effective if the company returns to revenue growth and maintains solid profit margins,” Fisht said.

Then, even recruiting has changed. Under Pallia, the business lines have more autonomy in how they recruit people.

Wipro will send global business line (GBL) heads and technical team members from these GBLs along with the HR team to recruit fresh graduates from campuses.“Earlier, Wipro would recruit as a unit, but now, the GBLs have a bigger say in the talent required by their respective business lines,” said an executive aware of the developments.

Wipro has had eight CEOs over the past 20 years, each with his own vision, but what’s different this time is that Paglia has been at the company longer than any of his predecessors and has refrained from making wholesale changes, focusing instead on fundamentals.

It is clear that veteran employees, including Srini, are not worried about being fired. When Thierry was CEO, at least 750 senior executives (managing director and above) left the company, many of whom were veterans. This exodus of employees made Wipro veterans fear that they would be asked to leave. Now, this fear is non-existent as Pallia maintains friendships with his colleagues, many of whom grew up with him in the company.

Paglia earned the trust and confidence of his employees, helping him to reshuffle the company’s top ranks and place his trusted lieutenants in leadership positions without causing anxiety in others.

Wipro has seen five changes in senior management since Pallia took over, the latest being Subha Tatavarti, who was brought in by Thierry and resigned as the company’s chief technology officer last month, and was subsequently replaced by Sandhya Arun.

However, the current situation is that it may take some time for Wipro to grow under the new helm. The start is encouraging, but how the company responds to disruptive technologies such as generative artificial intelligence (GenAI) and how it integrates AI seamlessly into its software products may determine its future growth. With major central banks such as the Federal Reserve cutting interest rates, customers are likely to increase their technology spending.

“Srini Pallia is a highly regarded leader at Wipro and is deal-focused. Strengthening execution is a key priority. Other key priorities include developing AI integrated solutions and achieving better integration of Capco and Rizing,” Kotak analysts Kawaljeet Saluja, Sathishkumar S and Vamshi Krishna wrote in a report on June 18.

“The company will try to increase prices of some products. Wipro will not reduce investments in sales and marketing,” Kotak analysts wrote.

Shareholders have responded favorably to the change, with the company’s shares up nearly 10% as of Friday’s close since Pallia took over on April 6.

In June 2024, the company signed a five-year, $500 million deal with an unnamed U.S. communications service provider to provide managed services for its products, which immediately boosted the company’s business.

Wipro was once larger than Infosys Ltd, India’s second-largest software services company, but now lags behind Noida-based HCL Technologies Ltd. Whether Pallia can once again shake up the Indian IT industry’s rankings will depend on whether he can capitalize on this strong start.