Wipro co-CEOs Suresh Vaswani and Girish Paranjpe lose jobs. TK Kurien to take over

Blame it on the Rule of Three.
Azim Premji may well have broken the bad news to Wipro co-CEOs Suresh Vaswani and Girish Paranjpe “somewhere in the last 48 hours”, but it was not the abstemious chairman who had put them on notice.

It was Francisco D’Souza.
The boyish CEO of Cognizant Technologies, who has been piloting the Nasdaq-listed, India-based company for just over three years now, had been snapping at Wipro’s heels in the last couple of quarters, both in revenue and profit-growth terms.

So much so, in all probability, Cognizant has lapped the Bangalore No. 3 in the October-December quarter — and comprehensively at that.

For a worried Premji, fellow board member Jagdish Sheth’s dictum came back to haunt: If you aren’t among the top three players in your sector, you are basically out of the game.

In 2002, Sheth had expounded the theory he devised with co-author Rajendra Sisodia in his book, The Rule of Three: Surviving and Thriving in Competitive Markets.

While both Vaswani and Paranjpe told DNA that the joint chief executive structure was meant to afford Wipro more management bandwidth to absorb the bumpy ride of economic slowdown that started in September 2008, industry and Wipro insiders said the real reason was lost business traction and the fear of being elbowed out of the coveted Top 3 club.

The duo had taken over in April 2008, just before the economic meltdown began in the US.

While the decision seems to have shocked investors and analysts, their replacement TK Kurien is no cold turkey, say experts.

“He (Kurien) will bring a lot of zing into the role,” said Jessie Paul, who left Wipro in 2009 as its chief marketing officer.

It was less than a year ago that Premji’s son Rishad was inducted into the senior ranks as the chief strategy officer heading mergers & acquisitions strategy for Wipro.   

The announcement coincided with the company’s lacklustre third-quarter results and that of Google Inc replacing its chief executive Eric Schmidt with founder Larry Page.

The two replacements couldn’t have been more contrasting.

“Larry is ready,” Schmidt said after leading the search giant to gigantic heights.

Back in Bangalore, Paranjpe said change was in the works “at least in the thinking” for some time now.

“Given the current market scenario, which is more predictable, we wanted to have a simpler structure at Wipro,” he said.

For the nine months ended September 30, 2010, Cognizant had revenues $3.3 billion, compared with $3.6 billion of Wipro. The company is yet to announce numbers for the December quarter.

It was nearly a decade ago, in 2000, that another rival, Infosys Technologies, overtook Wipro as India’s second-largest software exporter.

“For Infosys, there has been no looking back since,” a former Wipro executive said, asking he be not named. “Premji definitely does not want history to be repeated.”

Paul said the No.3 spot gives Cognizant bragging rights. “Be sure they will go to town about it, which will likely have a negative impact on Wipro employees,” she said.

Paul expects Cognizant’s sales team to make the most of the situation.

Curving out of the slowdown, Wipro hasn’t been able to garner growth like Infosys, TCS or Cognizant, and this was becoming increasingly evident in the last 2-3 quarters.

In the quarter ended December, for instance, HCL Technologies recorded a volume growth of 6.1%, the highest among India’s Top 5, while TCS and Infosys had volume growth of about 5.7% and 3.1%, respectively. And Wipro’s? A mere 1.5%.

In the economic recovery phase, demand came mostly from industry verticals such as banking and financial services and healthcare, where TCS and Cognizant have a significant presence.

“The increasing competition has made it a pressure-cooker situation at Wipro,” said another industry veteran, who was at Wipro but currently heads another mid-sized IT services firm. He, too, did not wish to be named.

Wipro insiders said the joint chief executive structure was cumbersome with dual reporting structures and played on the company’s agility.

So why didn’t Premji opt for one of the two for continuity’s sake?
Both Paranjpe and Vaswani said at the time of taking over, they had agreed to “swim together and sink together, if that is the case.”

“Giving one of us such a promised incentive would not have been in the best interests of promoting collaboration among us to work as a team, so we were clear about that,” Paranjpe said.

The new chief executive Kurien is known for his stint in Wipro’s consulting division, for turning around its business process outsourcing division called Spectramind, after its then-head Raman Roy left in 2006.
An engineer and chartered accountant, Kurien established Wipro’s industry practice in the telecommunications sector.

“He is an original thinker and his own man,” said Samiron Ghoshal, another senior ex-Wipro employee, who currently heads technology advisory services at multinational accounting firm Ernst& Young. “He has a reputation for being very strategic and very decisive.”

But while Kurien is very decisive, he is not known for consensus-building efforts, said another Wipro veteran, not wishing to be named. “He will do what he thinks is right, and not bother so much with consensus building.”

During a conference call with analysts on Friday after the results, replying to a question on whether Rishad Premji’s role will change, Kurien said as of now the promoter’s son would continue in his current role.

While concerns remain on how clients would perceive the change at the top, both Paranjpe and Vaswani were quick to clarify communication lines with clients is already buzzing.

Premji said along with Kurien, he would be meeting ‘26-27 chief executives’ of global companies at the World Economic Forum in Davos, which begins on India’s Republic Day.

So what do the exiting honchos do next?
Suresh Vaswani said there are a lot of opportunities in India’s information technology sector.
“It is a matter of deciding what gets you excited,” he said, adding that both entrepreneurial pursuits and mentoring firms with growth potential are options that are on the table.

Paranjpe said for the last 24 years every day, he has been busy thinking about what to do for Wipro tomorrow.
“Now I will have to start thinking about what to do for myself.”