20 – All Guns Blazing

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CHAIRMAN:
B RAMALINGA RAJU

This 10-year old Hyderabad-based company has been
jumping by a factor of 10 in the last three years in terms of ranking–from 41 to 30
to 20 in 1997-98. With this, another software company enters the DQ Top 20 elite club. The
entry was effected in great style: with an export turnover of Rs 178.5 crore, an increase
of 109 percent over the previous year’s turnover of Rs 85.22 crore. Given its growth
of 55 percent in 1996-97 over 1995-96, it appeared as though Satyam was settling down to a
sedate growth. However, with three-digit growth in 1997-98, it has once again become a
company to reckon with.

Satyam’s doubling of turnover has come as a result
of moving in several directions simultaneously–diversifying its product portfolio
offerings, from software services and engineering services to systems integration
solutions on ERP and Oracle Financials, electronic
satyam2.jpg (9980 bytes)commerce, software product development and management
consulting. Which is the result of its strategy of competing on service instead of price.

Leveraging on the Y2K opportunity per se has
opened up doors of very large companies for Satyam. By providing quality and efficient
service, Satyam has managed to entrench itself in the top solutions providers league and,
today, it has over one hundred Fortune 500 companies in its customer list. As far
as markets were concerned, it spread itself across manufacturing, telecom, financial
services and banking, insurance, health, and transportation sectors.

S T R A T
E G Y

  • Focus on building competency in technology areas and
    develop domain expertise to deliver value to customers through solutions and compete on
    service as opposed to price.

T A C T I C S

  • Two to four hours of training to retain people at junior
    and senior level.
  • Set up global competency centers.
  • Train people from other industries to increase the
    knowledge base.
  • Leverage on the domestic market for global requirements.
  • Product development in the web arena and in
    decision-support systems.

O B J E C T I V E S

  • Sell products as part of its consulting solutions in the
    enterprise segment.
  • To get to SEI-CMM Level 4.
  • Reach Rs 350-360 crore by 1998-99 and an additional Rs 50
    crore from the other four companies.

P E R F O R M A N C E  H I G H L I G
H T S

  • Exports revenue jumped by 109 percent; entered Top 20 at
    number 20.
  • Net profit grew by 86 percent; earned Rs 67 crore as net
    foreign exchange.
  • Attrition rate for project leaders at single digit.
  • Implemented GAAP.
  • Over 70 percent of its business came from existing
    customers.

PRODUCTS AND SERVICES:
Software Development, Consultancy
* START-UP YEAR: 1987 * EMPLOYEES: 2255 * QUALITY CERTIFICATION: ISO 9001 Tick IT & ITAA 2000 * ADDRESS: 1-8-303/36, SP Road,
Secunderabad 500003
* TEL:
843222
* FAX: 813166,
868726

It is, therefore, not surprising that the Y2K
opportunity proved to be a major contributor to last year’s growth, bringing in
nearly 30 percent to its revenue—thanks to its SOS methodology which, the company
claims, is the first Indian methodology to receive the ITAA 2000 certification. This is
expected to bear fruit in this year and in anticipation of this, Satyam formed separate
divisions to further leverage on its existing competency in technology and domain areas.

The company has formed Satyam Renaissance Consulting,
Satyam Infoway Ltd, and Satyam Enterprise Solutions to exploit the market in India for
management consultancy, ecommerce and web-related products and services, and systems
integration on ERP and Oracle Financials. This way, it could stand on the expertise in the
local market to push its case globally, and therefore push itself up the value chain of
competing on service instead of price.

However, as of now, these companies’ direct
contribution is still small—last year Satyam Enterprise and Satyam Renaissance
contributed Rs 11.51 crore and Rs 2.46 crore respectively. Satyam Infoway is expected to
start operations only this year. Another of the company’s new initiatives-to set up
‘offsites’ for customers—has come to pay rich dividends.

These centers—conceptually somewhere between onsite
and offshore—will operate as independent units within Satyam. For the customer, it
will be like interacting with a local company. Unlike other offshore activities carried
out, the activities carried out under this category are for customers whose work calls for
extensive interaction. A case in point is GE Capital. Satyam not only enhances and
maintains GE Capital’s financial products from India but also makes them fail- and
tamper-proof.

All these initiatives are expected to change the current
revenue-sharing equation of 29:36:35 from Y2K projects, legacy systems and their
maintenance, and new client server applications in this financial year. Among the other
initiatives that are likely to have a greater bearing on the company’s revenue is
packaged (not necessarily shrink-wrapped) products. The first such product from the
company is Search Pad, an intelligent web search agent that is expected to retail for $ 70
and is already into its second version. A suite of Executive Information Systems (EIS)
products are also being beta-tested for launch this year.

satyam3.jpg (15396 bytes)These products, however, will get bundled with Satyam’s consultancy services
on ERP, globally as well as locally. Unlike the Search Pad, however, these are unlikely to
be branded and sold in the immediate future. All these products will be brought out by
Satyam subsidiary (which will come into effect shortly) Satyam Spark Solutions (P) Ltd.

Satyam has also decided to go in for SEI-CMM Level 4
certification, which will enable the company to tap further into global markets,
especially the non-US markets like Asia-Pacific and Japan. While the US continues to be
its major market contributing 72 percent of its revenue, all other markets, including
Europe, Japan, Asia-Pacific and rest of world, put together made up for the balance. The
company is anticipating a revenue of 50 percent from markets other than the US by the year
2000. Toward this end, it has opened up offices in the UK and Australia. Also, last year,
Japan contributed 8 percent to its revenue and this again is poised to increase in this
and coming years. In all likelihood, Satyam the group should succeed in getting to its
stated goal of Rs 400 crore next year.

Satyam was constantly in the news last year for a reason
other than software—its stock price on the BSE. The company’s consistent
financial performance has made it one of the IT blue chips. Last year, Satyam made 20
percent net profit after tax on revenues of Rs 191.02 crore. In the process, the company
also declared a tax-free dividend of 20 percent to its shareholders.

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