Edited by Deepali Verma
The presence of excess staff at the middle level of its organisation as well as the slow growth have prompted Wipro to start downsizing its mid-level staff. Analysts believe this will help the firm improve its margins, even if the process will see hundreds of people losing their jobs.
Wipro, which is the country’s fourth largest IT firm, this week remarked that aligning its business and talent to the changing market environment is a crucial part of its strategy that is required to build a resilient organisation.
Nearly 43.2% of Wipro’s employees fall in the 30-50 age group whereas Infosys has about 38% of employees in the same bracket. IT companies leverage their pyramids as one of the main tools to get higher margins. To achieve the most optimised pyramid, the base that makes up the employees in the category of below 30 years needs to be widened.
According to analysts, Wipro, which used to have an operating margin of over 20% before FY17, had 60% of its employees falling below 30 years at the time. Today that group has reduced to 53%. Mid-rung employees were close to about 35% during FY17.
Pareekh Jain, founder of Pareekh Consulting, said, “Growth has relatively been slow as well as the fresher hiring in Wipro in the last three years was less compared to other companies. Wipro held onto its growth more inorganically because of many acquisitions like Capco, Edgile and other small companies. Thus, while the pyramid base didn’t register optimum growth, acquisitions fattened the middle level of its pyramid.”
Jain said that acquisitions also increased its onsite headcount, which mostly comprised experienced employees and is one of the main reasons for margin pressure. As per the analysts, today Infosys has the most percentage of employees in the under-30 bracket at 60% and therefore has the most optimal ratio relative to its peers.
Aparna Iyer, CFO, Wipro, said during a recent earnings call, “Our margins have remained resilient owing to out execution on three counts: one, maximising our revenue performance; two, realising savings from structural improvements of pyramids and fixed price productivity; and three, reducing discretionary spend.”
