The Inside Story of Azim Premji's Next Billion Dollar Plan

The same buzz of excitement and serendipity that swept the tiny campus of Wipro in 1977 has returned to its sprawling Bangalore headquarters today. More than three decades after Azim Premji sensed an opportunity in information technology for his consumer products company, the billionaire businessman is taking his next big step, ecology. And just like the way IT did, the new business is likely to transform the face of Wipro forever.

For those who know Premji, it is not uncommon to see the fifth richest Indian on the Forbes List and the 63-year-old chairman of Wipro switching off the lights before leaving office. It is this commitment to avoid waste that has turned Premji’s attention to ecology and sustainability.
In October 2008, even as it warned of slowing growth in its main software outsourcing business in the backdrop of a global financial crisis, Wipro released a recruitment ad for two new businesses, Wipro Water and Wipro EcoEnergy. The company has spent the previous two years preparing for this diversification, which may turn out to be the company’s third big change. The first was when a 21-year-old Premji took charge at Wipro after his father’s sudden death; the next was when the vanaspati and soap maker transformed itself into a multi-billion dollar information technology giant in the 80s and 90s.

But for Premji, it’s not just a diversification. “Look at it in three dimensions: As a citizen, ecological sustainability is a global problem but completely unaddressed in India. So how do you influence… your employees, partners, customers? Second what can you do within the company? Third, we see incremental business opportunities that we can create in our existing businesses.”
The business idea is simple. For the last quarter century, Wipro has been busy cutting technology and operational costs for some of the world’s largest corporations. Now, it wants to tell them how to cut energy usage and reduce their carbon footprint. It is convinced that green will be the largest force to influence the world economy in the years to come. According to a UN report last year, the global market for environmental products and services will double from $1.37 trillion at present to $2.74 trillion by 2020.

Chief Financial Officer Suresh Senapathy says green services and solutions will bring in up to one out of every four dollars of the company’s revenue, three years from now. In the financial year ending March 2009, Wipro had revenue of more than Rs. 25,000 crore. Even if the revenue were to stagnate, a fourth of it — Rs. 6,250 crore — from ecology is no small amount. The plan also aligns well with Premji’s desire to ease down IT’s profit contribution from 93 percent currently to 70 percent in the next few years.

Today it has 270 people in its water and eco energy businesses. In the last six months it has been setting up eco-friendly infrastructure for clients: A bio-gas plant in Taj Kovalam for recycling organic waste; sustainable lighting, cooling and recycling at
Asian Paints’ Greenfield plant in Rohtak, Haryana; LED lights to reduce electricity bills at the Indian Institute of Management, Bangalore campus.

The Idea
The new idea was first thought up by the 41-year-old head of Wipro Infrastructure Engineering (WIN), Anurag Behar. The two new ecology businesses will be housed under WIN. In January 2007, Behar made the first formal presentation about the ecology business to Wipro’s board of directors. The board reacted positively but also advised caution: Ecology was a nascent field with rapidly evolving technology and Wipro should not get locked in a technology that ran the risk of becoming obsolete soon.

Rather than immediately start with manufacturing equipment, Wipro decided to enter the business as a consultant. “It’s the best way to learn about a new space. As you advise your customers, your knowledge base increases and later on if you want to make a bet, it is informed choice,” says T.K. Kurien, President, Wipro Consulting, global programs and strategic initiatives. “If we are in, we know which way the technology is going.”

Wipro’s approach to the business is measured. First, it will calculate the client company’s energy footprint and find a way to reduce that. Then, it will bring in renewable energy technology such as a micro windmill, solar lighting or a biogas plant to make the firm sustainable. But one question keeps coming back. Why should a large company entrust Wipro with all its energy problems, a domain that Wipro is not an expert in? The company is aware of that hurdle. It is also why Wipro is building the business slowly and is reluctant to set a big revenue target for it.

Testing Ground
One way in which Wipro has sharpened its learning is to address its own energy problems first. That way, it becomes ecologically sustainable while gaining credibility with external customers.
Wipro has turned its 50-acre campus at Electronic City in Bangalore into a test bed. While 25,000 software engineers write code for Fortune 500 corporations, waste food from the cafeteria turns into methane for lighting burners, harvested rainwater is used to cool air-conditioning towers, a paper pulping plant recycles waste paper into writing pads and a micro windmill lights bulbs along the perimeter of the campus. Wipro’s Sarjapur campus a few kilometres away has India’s largest LED installations — all compact fluorescent lamps have been replaced with LED lights, helping save 75 percent in electricity consumption. Since 2003, Wipro has cut water usage in its offices across India by nearly two-thirds.

Wipro is also building its knowledge by making beachhead acquisitions. One of them, Aquatech Industries, offers water purification solutions to industries. In May this year, Wipro signed a contract with the University of North Dakota, a leading expert on clean coal technology. It has tied up with 14 global technology partners and solution providers, ranging from a micro windmill manufacturer in Scotland to GE Energy. In some cases, Wipro will sell the products under its own brand. A lot of this work is systems integration (building a system with diverse components) of which Wipro has considerable experience.

Premji is aware that the only way for Wipro to truly become a “green” company — in its own operations and in offering solutions to customers — is when all business units come together. That’s why over the last one year, he and Behar have been getting other business unit heads to set targets for selling environment-friendly solutions and reducing emissions in their units. For the future, Senapathy says Wipro will evaluate financial and ecological returns before it takes on any new project
for investment.

Leveraging IT for Green
Wipro wants to leverage its presence in two industries that directly have an impact on reducing energy consumption — IT and lighting. For instance, it combined lights with sensors so they would switch on and off based on ambient light. That helped Vineet Agarwal, Wipro’s head of consumer care and lighting business, win a large order from the Delhi metro rail project to provide lighting for 27 stations. Today green lighting accounts for 15 percent of Wipro’s lighting business.
In fact, IT could play a significant role in helping corporations become green. While IT contributes only 2 percent to the global carbon footprint, it has a big role to play in reducing carbon emissions in the remaining 98 percent of the world’s businesses.

Besides, a green pitch is also a good way to shore up profitability. Operating margins in global IT business have fallen from 28 percent in 2003 to 21 percent last year.
A few months ago, Wipro’s Global IT business started an energy consulting practice to offer green IT services to its Fortune 500 customers. In the next three years, Wipro’s goal is to have 10 percent of consulting revenues from green IT consulting (expected revenues: $500 million by 2011). It will invest $10 million to $15 million in the next three years in hiring people and building capability, tools, brand and marketing. “This is the absolute minimum that we are aiming for. If the market really opens up, then much more could be done,” says Girish Paranjpe, joint CEO, Wipro IT business. Green data centres and a carbon accounting tool called Hara (green) that can help a company measure its carbon emissions are some of the other ways in which Wipro is leveraging IT to make organisations more energy efficient.

Follower or Leader?
Wipro is hardly the only one to be thinking this way. Accenture, Deloitte, IBM and BT too are keen on the green IT services space. In November 2008, Gartner and WWF released a report naming the most environment-friendly companies in the information and communication technology sector. BT, Fujitsu, HP and IBM were doing a better job at handling climate change than others such as Cisco, SAP, Nokia and Wipro. Behar, while admitting that Wipro still has a long way to go before it can become completely ecologically sustainable, says that the point most people seem to miss is that Wipro is the only technology company from India that agreed to be tested for its environmental and climate commitment.

The company says ecology is a business for the long haul and that Wipro is now at the same juncture that it was when Premji first started the IT business in India 25 years ago. “No one knew then that offshore could be a $40 billion industry one day,” says Senapathy.

There is also the question of what happens to renewable energy technology at a time when the world economy is facing a slump. Initial cost of installation is higher for renewable energy than conventional energy. On Wall Street, stocks of renewable energy companies have taken a battering and there are concerns that funding for large-scale projects in wind and solar plants is drying up.
Wipro takes a contrarian stance. While the meltdown might hamper projects in the short term, it will work to the benefit of these companies in the long term, because hard times will force companies to look at saving costs by cutting energy bills. The challenge for Wipro is to establish its credentials in a market and industry where it seems to have no natural or geographical advantage. The West is clearly ahead in the game as far as the ecoology business goes. CEO Girish Paranjpe admits that selling these consulting services is currently more of a push from Wipro’s rather than a pull from the consumer.

“Wipro has always done well in following a trend rather than leading it. That’s how we have built our businesses. When everybody is getting into the market that is the wrong time to be going in. After a lot of people have gone bust, we can pick up assets at very good prices.” says Kurien

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