“On deal wins, we are continuing to see a strong momentum in terms of the total contract value of bookings that we have had of 3.8 billion dollars,” says Aparna Iyer, CFO, Wipro.
“There are certain contractual obligations all of us have as an employer and as an employee, which we need to make sure we adhere to and we are trying to ensure that those are met,” says Saurabh Govil, CHRO, Wipro.
Good show in quarter three. Would you say that revenue decline has really bottomed out?
Thierry Delaporte: What I would say is that certainly the market conditions have not dramatically changed. I think it is still a little bit of a market where there is uncertainty. Some of the industries are in a bit of a waiting position. I think of industries such as financial services, technology or communications. However, what we are seeing is some green shoots. Some signs of a potential slight improvement and slight increase of the discretionary spend. One indication that could be important to follow for us is what is going on in the consulting space. As you know, we have made significant investments in consulting and strategic decisions to help us transform our organization.
We know that typically in a time of slowdown, consulting is a business that is often the first one to be impacted by reduction of discretionary spends. We are seeing green shoots again based on the performance in bookings of our consulting, in particular in Capco in quarter three visible improvement but possibly a slight positive sign that leads us to be more positive about the revenue trajectory.
A couple of your peers have pointed to BFSI turning around. Would you concur?
Thierry Delaporte: You know, typically January and February are very important in these industries for getting a feel for how the industry or how the market will turn in the calendar year. I am starting to have discussions to know how the budgets are from our clients. And, you know, I will get a better view but it is a possibility. Let us put it that way. We are not seeing the levels of slowdown that we were seeing in the past. So, again, with caution, I would say that probably the worst is more behind than ahead.
The margins were resilient this time. Give us a walkthrough of various tailwinds and headwinds in the quarter gone by.
Aparna Iyer: So we have started the quarter on the backdrop of a seasonal furlough quarter. That was one factor. We had salary increases that we rolled out effective first December. And we had certain one-offs that aided our margins in Q2. So we had to overcome all this for our margins to remain flat. And I am pleased to share that the margins have remained resilient at 16%. And this is on account of three factors; one, certainly the uptick that we saw in our revenue performance coming in at the top end that added nicely to the margins.
Second, it is an improving revenue environment. Secondly, we will have two incremental months of salary increases that we will have to absorb. But that said, we have taken several initiatives and some of that will continue to give us benefits in Q4. So that is why we feel that our margins will be in a narrow band.
Will the trend of headcount decline continue in the coming quarters too?
Saurabh Govil: We will have to look at the entire talent supply chain. As Aparna called out, where we are using technology, AI, productivity, pyramid optimisation, where we are having a good bench where we can manage that and the talent pool available. If you look at it and also the utilization which we have, we believe we have headspace to improve and we have been improving. You look at all this, yes, we see that we will continue to hire wherever required for certain skills. It will not be very-very high numbers. However, as the demand environment improves, you will see an uptick in hiring as well. So, you have to keep all the perspective in mind because we have been in a de-accelerated environment, not only able to hold our utilization only, but able to improve over the last few quarters. So, I think that is the way to look at it, that we had enough talent pool available within the organization for us to manage our business.
Also, could you shed some light on the legal tussle that is going on with Cognizant and the reasons for the same?
Saurabh Govil: There are certain contractual obligations all of us have as an employer and as an employee, which we need to make sure we adhere to and we are trying to ensure that those are met. That is all. We have no issue against any individual, any leader wanting to have any career aspirations joining anywhere. So, it is not anything personal. It is an industry practice which we want to ensure that going forward, like any employee would do, an employer would request for people to have obligations being met as per contract.
A slew of leadership exits have happened. What are you doing to really augment the leadership team?
Saurabh Govil: First of all, as Thierrycalled out, there is no credence to that. Everybody is focused on what job is to be done here but I must also tell you that succession planning is good for all organizations at every level in the organization. So, for me or for Aparna, even if she is new. So, good organizations do that and we are doing that. And organizations like ours have to continuously keep working on building this talent pool, both internally and externally.
Europe and manufacturing have been weak for you while the rest of the peers have outperformed. Why is that?
Thierry Delaporte: There is always a little bit of a limit to the exercise of looking at a trend per industry, per quarter, per region. The reality is that for many reasons, sometimes you may have a project that is coming to an end or another starting or just a new contract of a new client being acquired. What I would say from a sector standpoint is that certainly we are seeing inside manufacturing, the automotive sector really doing well and we are making significant strides in this space whether it is in Europe, by the way, or in America. From a sector standpoint, I consider that this sector will continue to grow as well as sectors such as healthcare, as energy and utilities. You talked about banking and financial services, let us see how this sector turns but possibly we might have bottomed out there as well. So that is how I look at every sector in each region. From a regional standpoint, just trying to respond to a question you have not asked me, I would say that interestingly enough, we have seen Europe resisting pretty well when America was suffering a few quarters ago. We are actually seeing now a little bit of a change with a little bit of a softness in Europe and America getting stronger and so that is what we are seeing. Having said that, we believe that in Europe as well there are no fundamental elements that would lead us to believe that what we are seeing here with a slowdown will last more than a few months.
Give us a sense of the overall deal and the pricing environment then.
Aparna Iyer: So on deal wins, like you rightly said, we are continuing to see a strong momentum in terms of the total contract value of bookings that we have had of 3.8 billion dollars. Even if you look at large deals, it has shown a certain level of maturity and consistency. If you look at our performance over the last several quarters, we have continuously improved. So our win rates are going up. We are pivoting into newer age service lines. A lot of our pipeline is now driven through our key strategic partnership alliances and it is all headed in the right direction. Your point on pricing, overall, the environment is very stable. Yes, there will be some competitive pressure that we will see on certain renewal deals or infrastructure services or BOP. But overall, I do think there is enough and more opportunity as we pivot towards the new age service offerings. There is a premium to be gained and that value that we are generating. So when I take both of this together, the pricing environment is stable and good, neutral.