The New Face of Global Competition

Premji's story is near legend in India, largely because with a fortune estimated at $6 billion, he is by far the nation's wealthiest individual. In 1946, his father founded the Western India Vegetable Products Company to manufacture and distribute cooking oils. The elder Premji died suddenly in 1966, obliging his son to cut short his studies at Stanford to take over the family business. (He finished his electrical engineering degree in 1999.)

Premji proved to be a shrewd opportunist. He diversified into personal-care products and then into lightbulbs. In the early 1980s, after India walled off its economy and shooed away foreign technology companies, Wipro ginned up an R&D lab and produced a passable knockoff of Digital Equipment's PDP11 minicomputer. Within a few years, having concocted its own operating system and semiconductors, Wipro was the leading manufacturer of personal computers, printers, and scanners in India.

When India reopened its gates in 1990, Premji acknowledged that Wipro could not compete with PC imports. But he had his R&D lab, filled with some of India's best talent. So Premji began renting it out to the rest of the world. His engineers designed semiconductors for Texas Instruments, phones for Nokia, and switches and routers for Nortel. Then they started tinkering with software.

Here's what he will tell the executives at J.P. Morgan Chase: "What's happening now in services is what happened 15 years ago in manufacturing. It started in software, in application development. It's moving to software-enabled services. Call centers, legal services, medical. Wherever work can be removed and done somewhere else, it will be done where it's most cost-effective.

"Take a large law firm. The clerks and paralegals could be trained in India, serving partners and associates in the U.S. Salomon Smith Barney has a big research staff here. Why can't 60% of its reports be done from India? Why should they require everyone to be in the United States?" Wipro just signed a contract to interpret radiology images for a major American research hospital. Indian radiologists will, in effect, provide the hospital's second and third shifts.

Why should everyone be in the United States? In his understated way, Premji delights in this question. "I have had meetings in the past year with the top partners of a U.S. accounting firm. One year ago, they thought that the Indian model was not important. Six months back, they raised their target for outsourced jobs to 2,000. Now they're talking about raising it to 25,000. They will get to that number. If they don't, they'll be out of business."

Of course, this is a fair bit of bluster. But a few blocks away, executives at Accenture's New York offices are struggling with exactly the dilemma that Premji proposes. Accenture is more than 10 times Wipro's size. It can take on huge outsourcing projects, such as running a global company's data center, that Wipro won't be able to touch for years, if ever. Still, when Lattice Group wanted to outsource systems integration for its fiber-optic network in the United Kingdom, it awarded the $70 million contract to Wipro.

So Accenture has upped its Indian outsourced workforce eightfold, to 800 this year, even as it has fired partners and cut bonuses in the United States. In November, troubled EDS boasted that it would have 20,000 employees working offshore by 2004. It will spend $100 million to open a new business-process outsourcing center in India by spring and to build up similar capabilities in Argentina, Hungary, New Zealand, and other countries.

Wipro, in other words, is charging upstream into consulting and other high-value services while its bigger American rivals are rushing downstream. Vivek Paul argues that "both ends of the spectrum are racing for the same point. Neither strategy is easy. It's not easy to build a strong global-delivery model, and it's not easy to rent real estate in India and hire engineers. But ultimately, the center point is where the big players will play."

As it nears the center, Wipro is taking pains to seem less, well, Indian. A true global company, Premji reasons, appears to be local wherever it does business. That's one reason why he's sharing his limousine today with Richard S. Garnick, a 20-year technology-sales veteran who joined Wipro last year to head its American field operations. In July, Wipro hired Steve Zucker, a former top U.S. sales executive for EDS, to lead its push into total outsourcing deals.

Within two years, Wipro says, three-quarters of the employees its customers see will be local nationals: American, European, or Asian. It will hire local talent and buy companies that give it instant industry presence. In November, for example, the company paid $26 million for the energy practice of American Management Systems, buying not just credibility but 90 consultants and 50 existing client relationships. And within two years, Wipro will likely begin shipping development work to locations where workers are paid even less than in India. It will itself look offshore, perhaps to the Philippines or Vietnam. This is what a truly global company does. It operates close to its customers, and it constantly seeks opportunities to arbitrage labor markets.