Azim Premji was 21 years old in 1966 when he took the helm of his family business. At the time, it focused on vegetable oil, but following the fad in those days, Premji eventually diversified into a variety of businesses. Luckily for him, one of those industries was information technology. Now his company, Wipro (NYSE:WIT), is one of the largest IT companies in India, with a market cap of about $22 billion.
BusinessWeek senior editor Steve Hamm's Bangalore Tiger is a great story, and it's more than just a biography of Premji or an account of Wipro's rise. U.S. businesses can learn from what's happening at companies like Wipro.
Hardware to software
When Wipro moved into the IT industry in the 1980s, the company mostly sold hardware. It was a profitable business, but the future didn't look bright, given intense competition from players like Dell (NASDAQ:DELL), IBM (NYSE:IBM), and Hewlett-Packard (NYSE:HPQ). Providing IT services would give Wipro greater growth opportunities -- but prospective customers would certainly be skeptical of signing a contract with a tiny Indian firm.
Nonetheless, Premji saw this as an opportunity, aiming to win over customers by adopting the highest international standards for quality. In the mid 1990s, Wipro received certification from the International Organization for Standardization (ISO) 9000. By the late 1990s, the company was certified for Capability Maturity Model Level 5, which the highest level of international quality standards for information technology.
To further burnish Wipro's reputation, Premji also associated with companies that promoted quality standards, such as GE (NYSE:GE).
The Wipro way
The IT services business is tough; nearly 50% of Wipro's costs go to salaries and benefits. As a result, Wipro has a relentless drive to lower costs. Premji sets an example for the rest of the company -- he drives a Toyota Corolla and won't even accept an upgrade to first class from an airline.
A big part of the company's cost-cutting strategy is to measure corporate activity, and publicize it to the employees. For example:
- Wipro measured the amount of food waste in its cafeterias and published the results on a weekly basis. Over time, waste fell.
- By measuring the usage of paper towels in restrooms, the company realized it was more cost-effective to install air dryers.
Process innovation
Besides cost efficiencies, Wipro is constantly trying to find ways to improve its processes. Ultimately, these better approaches should increase quality while most likely lowering costs.
Wipro studied the Toyota Production System, which involves the complex management of a car assembly line. Standardization helps Toyota produce a variety of cars on the same line. Wipro now employs a similar approach in software projects. Hundreds of projects from around the globe flow to India, where standard building blocks of computer code are applied to the projects.
The company of the future?
Hamm's book does a fine job telling this story. It's clear that he's done quite a bit of research, interviewing many principle players in the story, including Premji himself.
Hamm shows that -- almost by necessity -- Wipro had to keep finding new ways to improve its business. The result is a highly efficient global organization that thrives on a seeming paradox: lower costs and higher quality.
As Hamm states: "These days, operational excellence is a requirement for success even survival. Who better to learn lessons from than the companies that have become potent global players against all the odds?"
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Fool contributor Tom Taulli does not own shares mentioned in this article. He is currently ranked 834 out of 17,896 in Motley Fool CAPS.
