Enterprise Risk Management in Wipro's Software Services Division

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Case Details:

Case Code : ERMT-001
Case Length : 12 Pages
Period : 2003
Pub Date : 2003
Teaching Note :Not Available
Organization : Wipro
Industry : Information Technology
Countries : India

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Introduction

Wipro, one of the most admired IT companies in India was founded in 1945 by Mohamed Hussain Hasham Premji. Under the leadership of his son Azim Premji, the Rs 70 million company dealing mainly in vegetable oil fats had grown into a $736 million diversified corporation by 2002. The company was ranked 7th among the software services companies in the world . Wipro's software division served over 300 global leaders including Boeing, Ericsson, Toshiba, Cisco, Seagate, United Technologies, Digital, IBM, Microsoft, NCR, and Sony.

Overview of Major Risks

Wipro believed the following factors could affect its software business:

The size, timing and profitability of significant projects or product orders;
The proportion of services performed at clients'sites as opposed to offshore facilities;
Seasonal changes that affected the mix of services provided to clients or in the relative proportion of services and products;
Seasonal changes that affected purchasing patterns among consumers of computer peripherals, personal computers, consumer care and other products;
The effect of seasonal hiring patterns and the time required to train and productively utilize new employees;
Exchange rate fluctuations.

Wipro believed its business environment was becoming increasingly competitive. Wipro's competitors included software companies, large international accounting firms and their consulting affiliates, systems consulting and integration firms, other technology companies and in-house information services departments of clients.

Wipro's competitors were much bigger and had significantly larger financial, technical and marketing resources compared to Wipro. Wipro's ability to compete depended on the price at which competitors offered comparable services, and how effectively competitors responded to their clients'needs.

Approximately 59% of Wipro's total operating expenses in the Global IT Services and Products business, particularly personnel and facilities, were fixed in advance in a given quarter. As a result, unanticipated variations in the number and timing of projects or employee utilization rates would have an impact on operating results. Wipro believed that period-to-period comparisons of results of operations were not necessarily meaningful and should not be relied upon as indications of future performance...

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