A MUST READ FOR ALL NEW INDIAN ADMINISTRATIVE SERVICE (IAS) OFFICER EXAMINATION CANDIDATES
Saturday, September 13, 2014
INDIA's "SECULAR" TECH KING KNOWS ISMAILIs HAVE ALWAYS BEEN BETTER TREATED IN INDIA THAN IN PAKISTAN, AND PREMJI IS AN INDIAN AT HEART
India's Tech King
At 4:30 a.m., a light switches on in Azim H. Premji's spacious stone bungalow in the southern Indian city of Bangalore. The 57-year-old chairman of software-services provider Wipro Ltd. (WIT) is awake, fueling up on coffee and bombarding company managers on four continents with e-mails about everything from geopolitics to contract details. At 7, Premji walks the 250 meters to his office on Wipro's five-hectare campus. There, he has breakfast of scrambled eggs and toast with visiting customers or government officials. That's followed by meetings where he focuses on the minutiae of the business -- the cost of airline tickets or whether frequent-traveling Wipro salespeople should have permanent cubicles. Before the sun is overhead at noon, Premji has already worked seven hours, with another seven to go. Frequently, Premji ends his day on a commercial flight -- there is no corporate jet -- to Bombay, San Francisco, London -- anywhere his sales team needs a boost.
An exhausting routine, followed day after day, year after year. And Premji doesn't need to do a bit of it. He owns 84% of Wipro, giving him a net worth of $5.3 billion. That makes him the richest person in India -- and one of the wealthiest on the planet. But he's not even thinking of buying a jet, or even a new car. True, Wipro, with its blue-chip roster of customers such as Microsoft (MSFT), Sony (SNE), and Nokia (NOK), is one of India's top companies. The fastidiously frugal chairman, however, figures those accounts must be zealously guarded, every minute. With competition heating up as never before, top managers have to "get off their asses and get into the field," says Premji.
"EYEBALL TO EYEBALL". That's why, for all his success, Premji seems focused on just one goal: even more success. Wipro has grown from a small producer of cooking oil founded by his father in 1945 to a colossus by Indian standards: 23,000 employees, $902 million in revenues, and $170 million in profits for the fiscal year ended in March. Sales have increased by an average of 25% a year and earnings by 52% annually over the past four years.
Premji isn't slowing down, either. Just a few years ago, Wipro did software coding and systems maintenance. Now it's expanding into more ambitious areas such as high-end research, and helping customers design their IT systems. Consulting today represents 7% of Wipro's revenues, up from zero two years ago. The firm has added 8,000 new employees in the past year, expanding its call-center services and beefing up software expertise in health care, retail, and energy. Premji has bought three companies, and he's extending his global reach, especially to countries in the Middle East, where U.S. outfits are less welcome these days.
Over the years, Premji has impressed business leaders worldwide with his honesty, financial discipline, and ability to attract top professionals. "He does business straight, eyeball to eyeball," says former General Electric Co. (GE) chairman and CEO John F. "Jack" Welch, who has worked with Premji as a part- ner and customer for the past decade.
For the growing number of white-collar workers from Silicon Valley to Sydney worried about losing their jobs to low-wage software experts in India, the ambitious billionaire is a serious threat. Yet this IT mogul faces the challenge of being too successful. With the U.S. caught in a jobless recovery, the issue of outsourcing to low-cost destinations is becoming ever-more controversial. American politicians are calling for restrictions designed to make it harder for companies like Wipro to win business. On Oct. 1, the number of U.S. visas available to foreign professionals fell by 66%, to 65,000. The move will hit Indian companies such as Wipro especially hard, since they often dispatch engineers from Bangalore to their U.S. customers' offices.
BEYOND BANGALORE. Yet Premji isn't scaling back his plans. His goal is to turn Wipro into one of the Top 10 IT-service companies in the world. To make the vision a reality, Premji must go beyond Bangalore. Four years ago, he moved Wipro's tech headquarters to Santa Clara, Calif., closer to the company's customers, and hired Vivek Paul, a former GE Medical Systems manager, as chief executive. He has adopted the rigorous processes of Six Sigma quality standards to stay nimble as the company grows.
Now he's on the prowl for deals that will arm Wipro with expertise in the sophisticated and lucrative tech consulting business, so it can take on the likes of IBM and Aaccenture. In July, 2002, Wipro paid $90 million for India's top call-center operator, Spectramind. Last November, Wipro became the first indian IT company to make a major U.S. acquisition, buying the 100-person energy practice of Boston-based tech consultant American Management Systems Inc. for $24 million. And this May the company bought NerveWire Inc., a financial-services consultant in Newton, Mass., for $19 million. "I want Wipro to play a big role in the global IT services arena," Premji says. That's starting to happen: In April, Wipro beat out Oracle Corp. to provide tech services to Scandinavian telco TeliaSonera. "The Indian companies are getting very involved in these big deals, so there's huge pricing pressure," gripes Oracle CEO Lawrence J. Ellison.
The acquisition strategy, though, is risky. Competition from multinationals is heating up, global tech spending is down, and customers for IT services want to pay less for them. Wipro's acquisition of NerveWire and AMS's energy unit cut operating margins to about 24%, from 30% in the past year. That has taken some of the sheen off Wipro's stock price, which is down 24% since January in trading on the Bombay Stock Exchange.
The workaholic chairman doesn't lose much sleep over share price. He has borne the ups and downs of India's restrictive business environment for years. And Premji's dominant stake in the company lets him execute strategy without worrying about pleasing shareholders. "The company is run to deliver its long-term and short-term goals, not with any view of the stock price," says Premji. Many analysts think he's right not to fret. "Though Premji's vision of acquisitions entails some transitional pain, it will build a full-service tech firm that can become the model for India's tech future," says Ajay Sondhi, vice-chairman of Kotak Mahindra Capital Co., a Bombay investment bank.
Premji's track record suggests no one should doubt his ability to fulfill his strategic vision. He was dispatched by his father to Stanford University, where Premji -- the youngest of four children -- studied engineering in anticipation of taking over the family business, Western India Vegetable Products Ltd., or Wipro. In 1966, while Premji was in his senior year, his father died. So the 21-year-old undergrad returned home to the dreary task of marketing cooking oil to tiny retailers. But Premji immediately began to professionalize the company, hiring MBAs and letting them run things as they saw fit. Gradually, Premji diversified into toilet soaps, competing with giants such as Hindustan Lever.
ATTRACTING THE BEST BRAINS. Wipro made good money, but Premji became restless. Then, in 1977, India's socialist government booted out IBM, creating an opening for locals to get into computer hardware. Premji leaped at the opportunity. In 1979, he began developing his own computer and in 1981 started selling the finished machine -- the first in a string of products that would make Wipro India's top-selling computer maker for two decades. Wipro soon became known on India's engineering campuses as a company that did original research and was able to attract the best brains. In 1984, Wipro jumped into software with a spreadsheet and word-processing package. It failed but gave Premji his first taste of the software world. "I don't agonize over failures. One must learn from them," he says.
Even as Wipro has grown into a software-services giant, it remains true to its roots. Software services contributes 85% of Wipro's profits, but there's still a $178 million computer-hardware unit, a light-bulb business, a 12-year-old joint venture with GE Medical Systems to make diagnostic equipment, and, yes, a soap and cooking oil division. Together, they produce 35% of Wipro's sales -- and Premji fully intends to keep them. They're largely profitable operations that don't require much of his time, and he says they keep the Wipro brand in the public eye.
Premji himself, though, seems to have little interest in publicity. He stands out among the arriviste engineers who dominate the tech industry, combining aristocratic reserve with a merchant's frugality and the obsessive drive of an entrepreneur. He is rarely seen on the cocktail circuit with other corporate chieftains in India, instead spending his rare free time trekking in the mountains around Bangalore. Although he is an art connoisseur and collects sculpture, Premji prefers shop talk to small talk. "Azim eats, breathes, and lives Wipro," says Vinod Momaya, a fellow art collector and old friend from Bombay.
Premji works in a minimalist but elegant, sculpture-lined office -- an isolated room on the rooftop terrace of a three-story building. From his bare desk, topped with just a notebook PC -- as befits someone who spends more than a third of the year on the road -- Premji can gaze out over Wipro's sprawling campus. Despite this segregation, Premji is an engaged manager. T.K. Kurien, a former GE Medical Systems exec who runs Wipro's health-care tech-services unit, says Premji is a patient listener, asks lots of questions, and is eager to help out. "He's both hands-on and hands-off," says Kurien.
DEMANDING RUPEE-PINCHER. Employees say Premji is often better prepared for meetings than they are. He grills executives with tough questions but welcomes feedback and dissenting opinions. While Premji can be curt, he rarely raises his voice, instead expressing displeasure through calm, public observations about where and how managers have failed. "I demand of others only what I demand of myself," Premji says. Premji has a respectful relationship with Chief Executive Vivek Paul. "We both speak our mind, candidly and frequently," says Paul. It was Paul's nudging, for instance, that persuaded Premji to acquire Spectramind. Although Premji has no immediate plans to retire, he says he has a succession plan in place. He won't, however, say whether his successor will be one of his two sons (both of whom are still studying) or Paul or someone else. "Wipro has always been run by the ablest hands," Premji says. "Parental lineage has never been a discriminating factor for or against anyone."
Whoever takes over, he or she isn't likely to be as fanatical about costs as Premji is. "Premji makes Uncle Scrooge look like Santa Claus," remarks a Bangalore tech executive. He monitors the number of toilet-paper rolls used in Wipro facilities and demands that employees switch off the lights when leaving their offices; Premji himself makes random checks to see that the lights are out at the end of the day. There are no limos awaiting Premji or Wipro staffers when they arrive at an airport. They take taxis or trains. Premji often takes a three-wheel auto rickshaw from the Bangalore airport when returning from his travels. His only car is a 1996 Ford (F) Escort. While on the road he does his own laundry and stays in three-star hotels -- and requires his employees to do the same. His wife of 29 years, Yasmeen, often drives herself in a tiny Fiat when she visits her family in Bombay, shocking the city's snobby social set.
While shareholders applaud Premji's rupee-pinching, employees are less interested in roughing it. Tech workers are India's elite, and they like to live the good life. Wipro employees, though, have few of the perks of their peers: Managers answer their own mail, don't have secretaries, and there are no reserved parking spaces. Some Wipro employees have adopted Premji's tightwad ways like a badge of honor, but others, especially overseas staff, chafe at the parsimonious culture, and sometimes bolt for more comfortable sinecures elsewhere. Premji points out that vacancies are quickly filled but admits that the intense pace at Wipro is a cause of attrition.
Workers might be more willing to make sacrifices if they felt they were benefiting from the company's growth. While Premji has transformed Wipro into an IT power by hiring smart people and empowering them, some of those managers say he should be more willing to share the wealth. Almost nobody else in management has any stake in the company, and stock options are limited. That's one reason employees leave Wipro to work for rivals or launch startups. "People will do what they are asked, but maybe not more," says a Wipro executive. "They feel it's a low-return job. If you create, you don't get the upside."
Still, even rivals admit that Premji has always been able to attract quality professionals. That's because of his own reputation for integrity and hard work and the fact that he gives his managers a free hand. Wipro is a "good competitor, and [full of] decent people," says N. Narayanamurthy, chairman of tech-services rival Infosys Technologies Ltd. "I would give Azim Premji the credit for [the company's] value system."
Premji's stinginess, though, also hurts outside of Wipro. Bangaloreans complain that he takes little interest in civic affairs and that it took years for him to donate any significant money to charity. Finally, in 2000, amid soft but persistent grumbling in India's business community, he transferred shares then valued at $45 million to a new foundation focused on achieving universal elementary education for India. But it doesn't donate money to schools; instead the foundation develops models for better teaching methods, then helps the government incorporate these into the system. Education "is the most important national priority," Premji says.
A CITIZEN OF WIPRO. If being budget-minded is a matter of principle with Premji, so is being secular. Premji is an Ismaili, perhaps Islam's most liberal branch, and he is keenly aware of the role he can play as an ambassador for a moderate, tolerant brand of Islam. Early this year, on a trip to the U.S., Premji was selected for a random search each time he boarded an airline flight. He doesn't blame the U.S. government for being singled out but says the experience still hurt. Nonetheless, he has resisted calls to take a more active role leading India's 120 million Muslims, even as they are targeted by increasingly powerful Hindu fundamentalists. "I see myself as an Indian first, and only after that as a member of any other kind of community -- Muslim or Bangalorean or Stanford alumni," he says.
Mostly, though, Premji seems to see himself as a citizen of Wipro. Competing with rivals that have long-standing, clubby, boardroom-level relationships with top U.S. and European companies is a tough game. Premji knows what he has to do: move quickly into the lucrative consulting area and try very, very hard to win business. "I've learned to overrespect the competition," he says. "You have to build some paranoia into your system."
The competition, meanwhile, seems to have learned to respect Wipro -- and is taking a page from its success. Global tech-services firms have awakened to the new, low-cost, high-quality IT services India offers. Accenture, IBM, and Electronic Data Systems are moving into India aggressively. Together, the three companies have hired 4,000 new staff over the past year and are renting prime office space on Premji's own turf in Bangalore and elsewhere. That will allow them to offer the benefits of India's lower costs to customers, just as Wipro does.
Analysts say Indian companies' lower overhead, smaller size, and greater agility will give them a fighting chance. If they don't succeed, though, Indian enterprises such as Wipro could end up being just coding-contract factories for the West. As long as that threat remains, Premji is likely to remain sleepless in Bangalore -- or wherever he happens to be doing his laundry that night. By Manjeet Kripalani and Bruce Einhorn in Bangalore