Wipro's IT services revenue grew 12 percent year on year in US dollar terms in the quarter ended 31 December 2011, but its growth lags behind Indian outsourcing peers such as Tata Consultancy Services (TCS).
The overall macroeconomic sentiment continues to be uncertain, company chairman Azim Premji said Friday, while announcing the company's results for the quarter.
Wipro's revenue from IT services was a little over £969 million (US$1.5 billion) for the quarter. Revenue growth was higher in rupee terms at 28 percent, mainly because of the depreciation of the rupee against the U.S. dollar. The results are stated in accordance with International Financial Reporting Standards (IFRS).
The company has other businesses in consumer care and lighting, and does not break out the profit from its IT business. Wipro's net profit for all activities in its third fiscal quarter rose by 10 percent in rupee terms, with overall revenue rising 28 percent, the same rate as for the IT business alone.
TCS has adapted to the changing market
TCS, India's largest outsourcer, said earlier this week that its revenue for the quarter was £1.7 billion ($2.6 billion), up by 20.6 percent on the same quarter a year earlier, with net profit up 9.1 percent at £367 million ($568 million).
Infosys, the second-largest outsourcer in India, said last week that revenue for its third fiscal quarter was $1.8 billion, up about 14 percent on a year earlier, with net profit up 15.4 percent at $458 million. However, the company reduced its revenue growth forecast for the fiscal year ending March 31, citing the debt crisis in Europe and an uncertain market.
The business environment is challenging and the market is growing slowly, but Indian outsourcers such as TCS have performed better because they have been able to adapt to the changed market situation and better meet customers' needs, said Sudin Apte, principal analyst and CEO of Offshore Insights, a research and advisory firm in Pune, India.
If earlier Indian outsourcers rose or fell together, after around 2008, customers have started distinguishing among their Indian suppliers which were earlier generally seen as primarily low-cost providers, Apte said. "Indian companies were all selling the India story at that time," he added.
Wipro is perceived by customers as a cost cutter that is strong on technology, but it is not highly regarded for its knowledge of customers' businesses or its domain expertise, Apte said.
Wipro now focusing on vertical markets
The company has lagged behind its Indian competitors, which led the company to reorganise and focus around some vertical markets, said Amneet Singh, vice president for global sourcing at Everest Group. "It may be too soon to expect too much from Wipro," he added.
Wipro's IT services business, which accounted for 76 percent of the company's revenue, had 136,734 employees at the end of the quarter, after adding 5,004 staff during the quarter. It added 39 new customers in the quarter.
The company said it expects revenue from its IT services business in the current quarter to be up to $1.55 billion, a sequential growth of up to 3 percent.
Wipro, like other top Indian outsourcers, gets most of its IT services revenue from the US and Europe, which together accounted for about 81 percent of revenue in the quarter. Most of the company's staff are still in India, although the company has been expanding its presence in the US and other markets both through acquisitions and local hires.