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Towards higher ground.
Satyam Computer Services wants to distance itself from the traditional world of offshore software development. That service may be still its bread and butter, but CEO Ramalinga Raju wants to take his company to the next ‘orbit’ of outsourcing.
Beyond the fulfilled promises of lower-costs, higher quality and domain expertise, Satyam he says now needs to demonstrate true leadership and innovation in the way it generates benefits for its customers.
That is what its largest customers are already asking for, says the head of the Hyderabad-based company. But without doubt, getting to that higher plain will be a “significant challenge”, Raju adds – one reason why he has recently augmented his senior management team with executives from European and US IT services organisations.
As a measure of how far along that path Satyam is today, 42% of revenues now come from business consulting and enterprise solutions – increasingly complex assignments involving strategic technologies – client adoption of service-oriented architecture, business process management projects or advanced business intelligence, for example.
Within that enterprise arena, Satyam also has strong credentials. A recent review of the top nine Indian service providers of ERP services by AMR Research found that Satyam had “the largest overall ERP practice and the heaviest commercial focus on packaged enterprise software”, with 3,300 SAP-focused employees.
However, at this stage, the biggest revenue source, accounting for half of revenues, is still bespoke application development and maintenance.
That change of revenue base is generating solid if (by Indian standards) unspectacular growth at the 20-year-old, Hyderabad-based company. Predictions for its fiscal 2007 ending 31 March show growth of 34% and revenues of $1.42 billion.
However, perhaps appreciating that ‘big is best’ in IT services, Satyam has been scaling up as fast as it can. It closed the calendar year with a workforce of 38,188 employees. To that end, the company increased staff deployments at customer locations and also pushed up salaries by an average of 18% last summer in order to recruit and retain more of the best Indian talent. While impacting profitability, that has also helped reduce its attrition rate to 17.3%.
Satyam’s customers are mostly drawn from the key verticals of financial services, healthcare, manufacturing and telecoms, and it is making significant investments to ramp up its BPO subsidiary Nipuna. Today Nipuna offers HR, finance and accounting, contact centre and transaction processing services, and although it only accounts for 3% of the company’s revenues, there is a shift to higher-level services, such as engineering services, that is fuelling 100% growth.
Acquisitions are also viewed as a means of ramping up domain expertise and credibility in customers’ eyes. In 2005, it added Citisoft, a UK-based investment management systems consultancy, and is actively seeking more targets. Another area earmarked for acquisitions is remote infrastructure management services – a nascent and fast growing service that already accounts for 4% of revenues.
Such moves are designed to enhance its capacity to deliver the needs of flagship clients, a list that is headed in Europe by the likes of Reuters, Unilever, Barclays, GE Energy, BP, Airbus Industries and GlaxoSmithKline. These European customers contribute 20% of Satyam’s revenues, with two thirds of revenue coming from North America and 17% derived elsewhere.
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