Wipro cutting client base to concentrate on profitable deals: CEO Thierry Delaporte

Wipro is consciously shrinking its client base for a faster ascent up the profitability gradient, pursuing deals with fatter margin and bigger revenue potential to remedy its status as a relative straggler among India's technology bellwethers.

The number of active clients at India’s fourth-largest IT services firm, which ceded the third slot on the leader-board to HCL Technologies a few years ago, declined by 35 sequentially to 1,444 for the period-ended June, Chief Executive Thierry Delaporte told ET in a recent interview. This comes even though the company added 65 new clients in the three-month period, suggesting the gross decline in client base to be around 100.

“We have a certain number of clients– 1,450 or 1,500. We have a plan to reduce the number of clients and cut the longtail and those clients that are very small and will never grow beyond a certain point,” said Delaporte. He added that the company will “reduce clients strategically” and “it is part of the plan” as Wipro is focusing on its large accounts.

The company, which has one of the lowest operating margins among the top IT pack, also said that it plans to maintain the operating margin above 16% for the current fiscal year.

“We do not want to invest closer to those too small ones with no real potential,” he told ET. The company said smaller clients also get onboarded during acquisitions and they are now “cutting the tail” of clients based on both revenue potential and margin profile.

“We reduced (the number of) clients by around 100. But we have added six more customers in the $20 million plus range and two more customers in the $100 million plus range. Strategically, we are pivoting our business to doing more value-added work to more strategic (large) customers,” said CFO Jatin Dalal at the post-earnings press conference too, in response to ET’s questions.

Wipro and Infosys are the only firms among the top four players to disclose the active client base numbers. Infosys, on the other hand, added 11 clients on a net basis in the June-ended quarter. LTIMindtree’s number, too, fell by five sequentially but the management called it “insignificant” as the company will target top-100 accounts for deriving more business.

This also comes as Wipro announced a new organisation structure earlier this year. Under the new model, Wipro has created four global business lines organised around cloud, enterprise technology and business transformation, engineering and consulting. The changes took effect from April 1.

Wipro said it is also “very careful” when choosing a large deal and their margin profile.“When you are assigning a low margin deal with the client, the temptation of the team is to not mobilize the best players for this project. I want to put my best players on the large deals. It's a completely different approach,” Delaporte told ET in an exclusive interview last week.