Wipro IT Service business has failed to expand revenue at a pace consistent with TCS and Infosys despite their larger scale, according to research firm TBR.
Wipro yesterday said its IT services revenue was $7,704.5 million (+4.9 percent) in fiscal 2017 with profit of $1.5 billion (–2.2 percent) and 18 percent margin.
Wipro’s IT services revenue was $1,954.6 million (+3.9 percent) $390 million (+0.4 percent) profit and 18.3 percent margin in Q4 fiscal 2017.
TBR said Wipro ITS will be leveraging its HOLMES (heuristics and ontology-based learning machines and experiential systems) automation platform to reduce internal costs.
“We continue to maintain our focus on operational improvements and productivity enhancements,” said Jatin Dalal, chief financial officer of Wipro. “We sustained strong cash generation in FY17 even as the currency environment remained highly volatile.”
While contributions from Appirio are likely to accelerate throughout 2017, the cannibalization of legacy revenue streams will limit the company’s ability to generate growth above 5 percent.
Ryan Blanchard, analyst at TBR, said there was a significant uptick in M&A activity among services vendors such as CSC, HPE, NTT DATA and Cognizant, which are looking to accelerate their business transformations and identify their roles in the digital marketplace.
Since 2015, Wipro ITS has conducted five acquisitions (Designit, Cellent AG, HealthPlan Services, Appirio and Infoserver), compared to the four purchases the company made between 2010 and 2015.
Wipro ITS’ aggressive acquisition strategy has resulted in the company maintaining year-to-year growth for 30 consecutive quarters. Since 2015, organic revenue growth as a share of overall top-line expansion has gradually declined, down to 93.6 percent in 1Q17 compared to 98.7 percent in 1Q15.
TBR said excluding the inorganic contributions of HealthPlan Services, Appirio and Infoserver, Wipro IT Services would have reported overall revenue contraction for the second consecutive quarter in Q1 2017.
TBR attributes the decline in organic revenue to a lack of differentiation in Wipro ITS’ legacy portfolio by comparison to its India- based peers, including HCLT and TCS, and to a lesser degree, macroeconomic headwinds that have dampened spending on newly crafted offerings including the HOLMES platform.
