Wipro’s String Of Pearls: How India’s Third Largest IT Firm Plans To Benefit From Mergers And Acquisitions
String Of Pearls: How India’s Third Largest IT Firm Plans To Benefit From Mergers And AcquisitionsWipro chairman Azim Premji announces the company’s financial results at Wipro’s facility in Bangalore. Photo credit: Manjunath Kiran/AFP/GettyImages

Unlike its peers TCS and Infosys, India's third-largest software firm Wipro on Friday reported a lower net profit for the second quarter and projected flat revenue from its IT services for the third quarter of this fiscal (2016-17) due to weak demand and uncertainty in technology spending.

But interestingly, Wipro has a unique investment plan to pull itself out of the slow growth cycle. While most Indian IT giants have preferred sitting over huge pile of cash that earns poor returns, Wipro has employed its revenue in acquiring firms in an attempt to generate better returns and accelerate towards emerging sectors such as cloud computing and digital services.

It was a part of this strategy, usually referred to as Wipro’s ‘string of pearls’, that the company acquired Appirio for $500 million. A US-based cloud service firm, Appirio has annual revenue of less than $200 million. Though Appirio will prove to be earning dilutive in the short-run, analysts are convinced that the acquisition will help Wipro diversify revenue and will provide it with the opportunity to dwell into the cloud-integration business.

Appirio brings to Wipro widely used platforms such as Salseforce.com, Workday and Topcoder - all leading products in their fields of service. The acquisition of Appirio has provided Wipro access to clients such as Stryker, Robert Half, Johnson Controls, Cardinal Health, Coca-Cola, eBay, Facebook, Home Depot and Sony PlayStation.

“The acquisition leapfrogs Wipro in Salesforce and Workday implementation over other Indian IT (firms) and places it among the top-five players globally along with IBM, Accenture and Deloitte," analysts at Kotak Institutional Equities said in their report. They also stated that acquisition of Appirio will improve Wipro’s ability to take this capability to its existing large clients; tweak its digital positioning and also open up opportunities for integrated deals as opposed to simple reliance on implementation revenue.

As India’s core IT sector is growing sluggishly, this aggressive mergers and acquisitions strategy employed by Wipro will help it compete with its larger rivals in the Indian market, while it diversifies its sources of revenue and ventures into new fields through its string of pearls in the international arena.

An Appeal...

Dear Reader,

As you are no doubt aware, Swarajya is a media product that is directly dependent on support from its readers in the form of subscriptions. We do not have the muscle and backing of a large media conglomerate nor are we playing for the large advertisement sweep-stake.

Our business model is you and your subscription. And in challenging times like these, we need your support now more than ever.

We deliver over 10 - 15 high quality articles with expert insights and views. From 7AM in the morning to 10PM late night we operate to ensure you, the reader, get to see what is just right.

Becoming a Patron or a subscriber for as little as Rs 1200/year is the best way you can support our efforts.

Become A Patron
Become A Subscriber