Tech major Wipro anticipates tough challenges in the global marketplace that witnesses rapid technological changes and changing client preferences.
The company said its future success would depend on its ability to anticipate challenges in advance, enhance its existing service offerings and develop new product and offerings to meet changing client requirements.
Stressing the importance of cost management, it said any failure to cope with the evolving IT environment, particularly Internet of Things, Artificial Intelligence, cloud computing, etc., could have an adverse effect on the company.
“Our business will suffer if we fail to anticipate and develop new services and enhance existing services in order to keep pace with rapid changes in technology and the industries on which we focus,” the tech major said in its annual report.
The company said it would be unsuccessful in stimulating customer demand for new and upgraded products, or seamlessly managing new product introductions or transitions, if it failed to quickly respond to market changes. Under such a situation, products, services or technologies that are developed by competitors may render its services non-competitive or obsolete, stated the company.
Elaborating on possible risk factors, the company in its stock market filing said, “Our failure to address the demands of the rapidly evolving information technology environment, particularly with respect to digital technology, the Internet of Things, Artificial Intelligence, cloud computing, storage, mobility and applications, analytics, augmented reality, automation, blockchain and quantum computing could have a material adverse effect on our business, results of operations and financial condition.”
On cost cutting, Wipro said its cost management strategies would include maintaining appropriate alignment between the demand for services and resource capacity, optimising the costs of service delivery through automation and deployment of tools, and effectively leveraging its sales, marketing and general and administrative costs (SG&A).
“Our ability to improve or maintain our profitability is dependent on successful management of our costs. We also have to manage additional costs to replace solutions or services that our clients are not happy with. We need understand our customer needs and develop solutions accordingly.”
Wipro said if proper measures were not taken to mitigate rising employee compensation costs by passing such increases to clients, or by increasing company revenues sufficiently to offset costs or if the company fails to maintain high employee utilisation rates, margin and profitability pressures would continue.
However, it said it had already taken actions to reduce certain costs including increasing productivity from fixed costs, better utilisation, investing in automation, relocating non-client-facing employees to lower-cost destinations, etc.
$330 mn on expansion
The tech major invested $329.4 million towards purchase of property, plant and equipment during fiscal ended March 31.
Additionally, the company had contractual commitments of $179.9 million related to capital expenditures on construction or expansion of its software development and other facilities.
“We may encounter cost overruns or project delays in connection with new facilities and these expansions may increase our fixed costs. If we are unable to grow our business and revenues to sufficiently offset the increased expenditures, our profitability could be reduced,” Wipro said in its annual report.
The company further said it invested substantially in construction or expansion of software development facilities and physical infrastructure in anticipation of growth in its business.