(By Anthony Miller) Wipro, the third largest of the Indian SIs, won a handful of major deals in Continental Europe (CE) last quarter, many in new accounts. Reporting its 2Q09 results today (see here), Wipro chairman (and 80% stakeholder) Azim Premji outlined key European wins in financial services, telecoms (France) and manufacturing (Germany), all first-time Wipro clients.
Second, none of these new European deals will use 'nearshore' centres. Management told me that they will be using "proximity centres" (I think this means onshore) for some of the transitions, then the offshore work will be transferred to India. I am trying to find out more about how this works in practice as it suggests that language is not a big issue in these clients. Anyway, it's clear that Wipro, like peers, is winning business in Europe's two largest markets which have traditionally been considered a slow-go if not no-go zone for Indian SIs. Wipro gets around 27% of it revenues from Europe, though two-thirds of this comes from the UK. I estimate Wipro billed around $735m in the UK over the past 12 months and $400m in CE. However, management told me that CE revenues are growing faster - I'd say well over 20% yoy (organic).
Management also called out some trends which I think apply to the wider IT services market . Firstly, and this will comes as no surprise, decision cycles are lengthening. Deals which Wipro used to close in 60 days are now taking 90 or even 120 days. Secondly, customers are becoming more receptive to moving from time & materials contracts to fixed price. This works well from both sides of the deal; the customer gets cost-certainty and guaranteed service levels, while Wipro gets better labour flexibility and (usually) higher margins. I see this as one of the key sector trends and I think it is really important for traditional body-shops to take note. Wipro has seen revenues from fixed price contracts rise from 27% of sales to 32% over the past four quarters, Infosys from 30% to 34%, though Satyam's fixed price mix fell from 33% to 31%.
The grand-daddy of the Indian SIs, TCS, reports later today and I will comment then.
Post Script. India to open new nearshore centre on the moon.
India successfully launched an unmanned lunar probe this morning. Commenting on this momentous occasion, Indian Prime Minister, Manmohan Singh, said that the moon would become a nearshore services centre for intergalactic corporations that found the earth too risky to run core IT and business processes. OK then, he didn't, but ...