BENGALURU, India Wipro Ltd., one of India's largest outsourcing companies, is eyeing expansion in Europe and the U.S. as part of the next phase of globalization. The $5 billion IT services firm plans to open two new software development centers in the U.S. and is studying a sizable acquisition in technology R&D in Germany.
"We want to give our customers a choice of geography with a distributed network of low cost development centers close to their centers of operation," said Azim Premji, chairman of Wipro Ltd. in a presentation to members of the international press here.
Wipro already has two software development centers in the U.S. One in Troy, Mich., focuses on automotive systems. Its other software development center is in Atlanta.
"We are going to open up at least two more centers in the U.S. in the next two years, but we haven't announced them yet," said Premji.
Part of the rationale for the U.S. centers is to be more actively engaged in the U.S. market in hopes of winning future public outsourcing contracts in areas such as IT development. Wipro has also opened small development centers in Shanghai, Chengdu, Cebu, Brazil, Mexico, Bucharest and will open one soon in Poland.
The company already has as many as 8,000 engineers stationed in the U.S., according to Wipro chief financial officer Suresh Senapaty. Today those engineers rotate in and out of the U.S. for stays of three to six months to work closely with customers, including large financial firms and big high tech companies such as Cisco Systems, Hewlett-Packard, Microsoft and Sun.
Wipro claims it is the world's largest company in outsourcing R&D. In recent years it acquired three small European chip and design firms to bolster this business and is exploring one larger acquisition in Germany now.
"We'd love to get a good sized acquisition in Germany to establish a beachhead there," said Premji. "We are willing to pay a good price for it, and we have shortlisted some companies," he said, adding Wipro would spend up to $500 million on such a deal.
Salaries on the rise
Back home, Wipro is struggling to keep up with rising local salaries which have been increasing as much as 15 percent a year, according to Pratik Kumar, an executive vice president for human resources at Wipro.
"The days of such annual increases are over," said Kumar. "Such increases are mindless. No industry grows salaries at this rate. We are close to moderating salaries starting this year," he added.
To keep a lid on wages, Wipro is decreasing the number of engineering graduates it hires in favor of students with a general four-year science degree. Science graduates in India typically command salaries at a level about half of the $750 per month of engineering grads, he said.
"Most of the engineering students can perform as well as an engineer after one year of [on the job] training. They are the cream of the crop and highly motivated," said Premji.
As many as 3,000 of the new hires at Wipro this year--about 35 percent of its intake of college students-- could be science grads, said Kumar.
"They are smart people but could not afford an engineering degree or wanted to graduate in less than four years," he added. "At half the costs of an engineer, this creates an extremely powerful model. Our customers often don't care if we bring in an engineer or non engineer as long as they are trained and smart," he said.