Wipro Initiates Mid-Level Staff Reductions to Boost Profit Margins

By Consultants Review Team Tuesday, 06 February 2024

Wipro, the fourth-largest IT firm in the country, is set to reduce its mid-level staff in response to an excess of personnel at this organizational tier and sluggish growth. The move is seen as a strategic effort to align the company's business and talent with the evolving market landscape, ultimately aiming to create a more resilient organization. While this adjustment is expected to improve Wipro's profit margins, it comes at the cost of numerous job losses.

Approximately 43.2% of Wipro's workforce falls within the 30-50 age group, a figure notably higher than Infosys, its industry counterpart, which has around 38% in the same category. IT companies commonly use organizational pyramids to enhance profit margins, with the base—comprising employees below 30 years old—playing a pivotal role. Analysts highlight that Wipro's shift in workforce demographics is notable, as it once had an operating margin exceeding 20% before FY17, with 60% of its employees below 30 at that time. Presently, this demographic has decreased to 53%, while mid-level employees constituted about 35% during FY17.

The slow growth trajectory at Wipro over the last three years is attributed to minimal hiring of fresh talent compared to other industry players. Rather than expanding the pyramid base through fresh recruitment, Wipro's growth was more inorganic, driven by acquisitions such as Capco and Edgile. These acquisitions bolstered the mid-level workforce, contributing to a less optimized pyramid structure.

According to Pareekh Jain, founder of Pareekh Consulting, acquisitions not only inflated the middle tier but also increased onsite headcount, primarily comprising experienced employees. This diversification is considered a factor contributing to margin pressure. In comparison, Infosys currently maintains the highest percentage of employees below 30, standing at 60%, leading to a more optimal age distribution relative to its peers.

Aparna Iyer, Wipro's CFO, emphasized the company's focus on maintaining resilient margins through strategies such as maximizing revenue performance, realizing savings from pyramid structural improvements and fixed-price productivity, and reducing discretionary spending.

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