Competing at One-Tenth the Cost

Report From the Past.

My portrait of the Indian technology outsourcer Wipro Ltd. ("The New Face of Global Competition," February 2003) wasn't, it turned out, a story that some people wanted to hear. The emails I received after that piece appeared, many from American tech workers who had lost their jobs, evinced fear, anger, hyperbole, xenophobia, and resignation. I was scolded, insulted, even vaguely threatened.

All of which underscored this reality: Competing against people who can do your work for one-tenth the cost is a scary thing. And it's getting scarier. In the last year, Wipro's global IT services and products revenue has grown by more than 40%, fueled by projects for the likes of Sanyo Electric, Brocade Communications, and easyCinema. Gross margins slipped to 45% from 53%, reflecting tougher price competition and a stronger Indian rupee. Still, Wipro now employs 25,000 people, up from 15,000 when I visited Bangalore.

Finding enough technical talent to feed that growth will be one of Wipro's toughest challenges, says Vivek Paul, the former General Electric executive who heads the company's IT business. India's universities, he says, produce just 20,000 qualified engineering graduates a year. That number should increase, he expects, as the IT recession eases.

Another challenge--the one signaled by the reaction to my story--may prove more nettlesome. Wipro, like its outsourcing rivals, has an image problem. "Are we good guys or bad guys?" is how Paul puts it. The anti-outsourcing ardor hasn't swayed Wipro's corporate customers, and Paul argues that American industry will find new, high-value jobs to replace the work going overseas. Exactly what jobs those are, of course, no one knows yet. "At every point of inflection," Paul says, "the answer is always difficult to see."

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