Growth in GIS and BPS helps Wipro, a top IT service provider, maintain traction, though profitability remained pressured from heightened investments, says Ryan Blanchard, research analyst at TBR.
The TBR report said digital adoption supports growth across Wipro’s service lines as clients turn to IT modernization to drive cost-savings.
Sustained growth from Wipro’s GIS service line (up 8.2 percent) is owed primarily to demand for digital transformations. The company is gaining traction in its cloud-based infrastructure solutions, evidenced during the quarter by its contract from NSB Group to deploy its BoundaryLess Datacenter solution.
BPS growth remained inflated during 3Q16 (up 54.8 percent) as inorganic contributions, though TBR believes the service line would have expanded regardless, as the company benefits from increasing demand for automated, digital business process solutions such as its Base))) offering.
The product engineering service line reported modest growth in 3Q16, up 1.9 percent as the company’s focus on digital transformations and cloud computing is driving subsequent demand for product engineering services.
Demand for analytics-driven solutions across verticals is supporting consistent growth from the service line (up 4.6 percent in 3Q16). Partnerships such as Wipro’s recently announced engagement with Stibo Systems will help bolster the firm’s analytics capabilities and will help drive continued growth in 4Q16.
Wipro ITS continues to develop its horizontal capabilities to drive broad-based growth across verticals
With demand for next-generation technology permeating across verticals, Wipro is ramping up investments in its horizontal capabilities including cloud, analytics and cybersecurity to facilitate broad-based growth. Wipro announced a pair of partnerships to augment its data analytics capabilities, aligning with Reltio to leverage its data management platform, and Stibo Systems to co-develop master data management solution.
The company also partnered with Vectra Networks and invested roughly $1.8 million in Israel- cybersecurity vendor, Insights Cyber Intelligence Limited to improve its Threat hunting and Threat Intelligence as-a-Service offerings. In October, Wipro ITS announced its intent to acquire Indianapolis-based cloud consultancy and app development firm, Appirio.
Wipro is leveraging automation tools and bolster its delivery network to improve operating profitability
Wipro’s operating margin has declined on an annual basis every quarter for the past two years to 18.6 percent in 3Q16. While Wipro is not the only India-centric firm to experience profitability headwinds resulting from the commoditization of traditional BPO and ITO services over that span, its decline has been more consistent.
The competition for legacy services is requiring part of the savings from automation to be passed along to clients to maintain revenue growth. To combat this, Wipro is leveraging its Holmes automation and artificial intelligence software internally, to bolster contract structure, service delivery and project management functions and ultimately creates higher value portfolio.
TBR believes Wipro’s use of the tool will begin to generate margin improvements for the company, helping keep pace with Indian peers such as TCS and Infosys, who generated operating profitability of 26 percent and 24.9 percent respectively in 3Q16.
