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Global Computer Related ServicesAn Industry Perspective
WTO Cross-Border Supply Symposium
SantoshHead, Talent Engagement & Development, Europe
Sept 28, 2005
Wipro confidential 2
The agenda
Industry Snapshot
Wipro Advantage
Outlook Going Forward & Key Challenges
1
2
3
Wipro confidential 3
Landscape of Computer Related (IT) Service –India Advantage…
Application Development
Systems Integration
Product Engineering
Consulting
ERP Services
BPO
Infrastructure Management
IndependentTesting
Services from India touch all three aspects of IT – software, hardware & network
India’s Emergence as IT Sourcing Hub –
Key Drivers
• Highly Talented Labor Pool
• Cost Arbitrage
• Leapfrog increases in Telecom reliability
in 90’s
• Quality Advantage
• Faster Time to Market
• 24 Hour Service Window
• Enables customers internal work-force to
focus on ‘core’ & strategy
Range of Services
Wipro confidential 4
Translating into >30% Growth for Indian Industry;.. & Corresponding Cost Savings for Customers
2.64
6.27.7
9.6
12.8
17.2
22
0
5
10
15
20
25
98-99 99-00 00-01 01 - 02 02- 03 03- 04 '04-05 05-06E
Americas, 69.4%
Europe, 22.6%
Japan, 3.0%
Africa, 0.6%
Others, 4.4%
$ Bn
Source: NASSCOM, Strategic Review 2005
Geo Distribution
Export of Computer Related Services
Wipro confidential 5
Offshore, 7.5%
Non-Offshore,
96.6
And Yet, India’s True Potential is Far from Realized
India, 72%
Philippines, 8%
Eastern Europe, 8%
China, 7%Others, 1%
Middle East & Africa, 2%
Latin America, 2%
Worldwide Offshore IT Services ExportShare by Region, 2003
Share of Offshore in Total IT Services Pie
Adopted from IDC, Gartner & Nasscom Estimates
Even at 72% Share of total offshore spend, India accounts for less than 6% of Global IT Spend
Total Global IT Spend (2005): $640 Bn
Wipro confidential 6
Even as more & more Global Corporates Adopt Offshore Model…
Goldman Sachs, September 2005
“we continue to expect a robust demand backdrop for offshore services over the next two
years which should drive sustained growth of at least 25%-30%. In our opinion, the
predominant factor driving growth is the continued adoption of the offshore model,
which by our estimates continues to be low.
From a client IT budget perspective, our estimates suggest that that the offshore
model has penetrated less than 10% of Global 500 (G-500) IT budgets for core
application maintenance and development work.”
Leveraging Offshore Model = Delivering Greater Shareholder Value through Smart Sourcing
Wipro confidential 7
The agenda
Industry Snapshot
Wipro Advantage
Outlook Going Forward & Key Challenges
1
2
3
Wipro confidential 8
Ranked leader by IDC, MetaGroup, Forrester – 2004Awarded the highest rating in Stakeholder Value Creation & Corporate Governance by ICRA,
an Associate of Moody’s Investor Services
Partner to industry leaders and challengers
89 global 500 clients
151 clients among Forbes 2000
Diverse talent pool
23 nationalities
2000 domain consultants
Sustained growth
CAGR of 42% in last 5 years
Part of NYSE’s TMT (Technology-Media-Telecom) Index, NSE Nifty Index and BSE Sensex
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06
217 226288
339421 430
10 13 19 2942 42
(thousands)
(millions USD)384 475 625 934
13541595*
Clients
Employees
Revenues
Wipro Today
*June Quarter Revenues Annualized
Incorporated in 1945; 60 years track record of growth & profitability
IPO in 1946; Listed at NYSE [WIT] in 2000
Entered IT business in 1980s; IT Services business launched in 1991
Our history – a track record of success
Compounded Growth Rate- First 59 Years:
Revenues: 21%, Net Income: 31%, M-Cap: 24%
IT Services Foot-Print
Wipro confidential 9
Growth Envisaged Across the Range of Services
Constantly incubating newer services
Source: Mckinsey-NASSCOM Study, NASSCOM, Company estimate ( all figures in USD B) Percentages below the pie chart represent Wipro’s distribution of Revenues for the Quarter ended June 2005
IT Enabled Services / BPO
11%
PackageImplementation
11%
Infrastructure Outsourcing
8%
Consulting 5%
CustomApp Dev &
Maintenance 25%
1.7
6.5
0.3
3.6
5.2
13.5
0.3
3.6
0.6
4.9
Indian Export Potential*
FY04
FY09CAGR 21%
CAGR 64%
CAGR 64%CAGR 52%
CAGR 31%
Wipro’s Global IT Revenue pie
3.6
21CAGR 42%
R&D Services 32%
Q1 2005-06
$398.5 M
Testing Services
8%
1.1
3.1CAGR 23%
Wipro confidential 10
Manpower Demand-Supply Scenario:Wipro- Preferred IT Employer
One of the top 3 leading recruiters in India
Hired over 15000 employees in last one year
Has a career portal with active applicants of over 300,000.
Recruits from over 160 leading engineering and management colleges.
One of the most preferred employers for the top class talent in India.
Wipro career portal
Offer
Evaluation
100%
15%
4%
0.8%
Tra
ck
ap
pli
ca
nt
Retain
Candidate applications
Screen / manage
2001- 02 2002- 03 2003- 04 2004- 05 2005- 06 2006- 07 2007- 08 2008- 09
Total Manpower in IT Services 416 490 588 697 839 1010 1215 1462Additional Manpower Required in IT Services
56 74 98 109 142 171 205 247
Supply of IT Engineering Degree Graduates 71 81 95 100 111 117 123 129
Manpower Excess 15 7 -3 -9 -31 -54 -82 -118Supply of IT Engineering Graduates (Degree & Diploma)
115 127 141 165 181 193 203 213
Manpower Excess 59 53 43 56 39 22 -2 -34Total Supply Non IT + Graduates Entering IT
67 74 70 70 70 70 70 70
Manpower Excess 126 127 113 126 109 92 68 36
Wipro confidential 11
Q-cult: Enterprise-wide quality culture for continuous improvement
4,000+ employees trained in Six Sigma methodologies
204 certified black belts and 10 master black belts
Over 700 PMI certified consultants, highest in India
All fresh recruits undergo a 3 day Veloci-Q training
33% business parameters for the Wipro CEO relate to quality
Proc
ess
Technology
People
SixSigma
World’s first SEI CMM/CMMI Level 5 IT services company (1998-2002)
BS7799 ISO 9000
Worlds 1st IT Services Company to
use Six Sigma (1999)
1st company outside the USA to receive IEEE award (2003)
Worlds 1st PCMM Level 5 software company (2001)
“Wipro clients see additional application maintenance productivity of 10% to 15% from added familiarity with systems; another 10% to 15% raise in productivity after applying Wipro's CMM-based methodology and consolidating redundant programs applications; and yet another 3% to 30% productivity improvement thanks to process automation and tools”
Forrester
Wipro confidential 12
“An increasing number of offshore players are building greater presence in the United States. Examples include Wipro, with its acquisition of the consulting company formerly known as NerveWire ” - US customer experiences and best practices when going offshore, IDC, May 2004
What analysts speak about us
- No Longer Off-Broadway: Offshore Moving to Center Stage, META Group, May 2004
“Wipro's most recent annual results provide further validation that upscale/upstream services provided by "offshore" firms are now mature ”
“…because of its brand, impressive size, and breadth of capability, Wipro is often selected as a strategic partner by customers seeking large, broad-based capability in their primary offshore outsourcing providers. . “- Indian Offshore Suppliers: The Market Landscape, Forrester, April, 2004
Wipro confidential 13
The agenda
Industry Snapshot
Wipro Advantage
Outlook Going Forward &Key Challenges
1
2
3
Wipro confidential 14
India continues to rank as the preferred destination…
Likely to benefit disproportionately from Offshoring Drive
ChinaCIS
Mexico
India
Philippines
People Sophistication(Number, Cost, Language Skills)
Ve
nd
or
So
ph
isti
ca
tio
n(N
um
be
r, Q
ua
lity
)
Russia
Co
st
Quality of Supply(Resource Availability, CMM Level, Cultural Fit)
China
Hungary
Philippines
Malaysia
Mexico
India
Ireland Israel
Singapore
IndiaLow CostHigh Quality Development
Source: McKinsey-NASSCOM study
Deep Rooted strength for sustained global market-share gain…
4.7
0.5
0.9
1.8
1.9
12.6
17.2
39.6
Others
Mexico
Philippines
Eastern Europe
China
Canada
India
Total
Source: Nasscom
10.0
1.1
2.6
6.4
5.0
20.9
48.0
94.0
India - the Preferred Offshore Destination
2004 2008
Wipro confidential 15
And Yet, There Are Challenges…
• Immigration & Visa Issues
• Universal Recognition of Qualifications, Experience and Training
• Employment laws enforcing local hiring
• Wage Parity Insisted upon
• Social Security Tax
• Tax Withholding
Movement of Employees
Wipro confidential 16
And Yet, There Are Challenges…
• Structure of Entity (Branch, JV, Fully owned Subsidiary etc.)
• Restrictions on Foreign Investments & Local equity participations
• Remittance of foreign exchange
• Staffing & Management conditions
• Restricted Access to certain market segments based on the structure
• Dual Taxation
Government Regulation on Business Entity & Vendor Selection
Wipro confidential 17
And Yet, There Are Challenges…
Macro environment related
• Improving quality of technical education in India
• Challenges posed by Urban infrastructure
• Preparing for competition from other low cost countries
Business model related
• Expanding the breadth of service offering
• Managing scale without diluting quality & delivery excellence
• Expanding geographies & adapting to local language and cultures
Financial
• Adverse currency fluctuations
• Managing wage inflation
• M&A and their impact on financials
Other Challenges
Wipro confidential 18
Conclusion
• Offshore Model is a Great Opportunity for Developed nations to achieve
Highest Quality services at reasonable prices
• Visa & Immigration, Taxation, Protectionist Law and Uniformity in
Qualification are some of the key challenges still faced by a service
provider like us…
• A uniform GATS framework and commitment will provide the right
impetus to the growth of Cross-Border IT Services
Wipro confidential 19
Q&A
Our promiseWith utmost respect to Human Values, we
promise to serve our customers with Integrity,
through Innovative, Value for Money solutions,
by Applying Thought, day after day
Information contained and transmitted by this presentation is proprietary to Wipro Limited and is intended for use only by the individual or entity to which it is addressed, and contains information that is privileged, confidential or exempt from disclosure under applicable law.