DQ IT Man of the Year 2000

Ask Raju and he says that it’s his knowledge

"itch", the entrepreneurial ‘bug’ and his talented people, which

have been the recipe for Satyam’s success. But for the knowledge itch in him,

Raju would have had to remain content in the cotton spinning and construction

business. He moved into the business on his return from the US after earning a

business administration degree in 1977. Stepping away from the traditional

agriculture business, Raju took his first entrepreneurial step by setting up a

spinning and weaving mill named Sri Satyam, and, Satyam Constructions, later.

However, it took about a decade before the quest for knowledge and the

entrepreneurial zeal in Raju finally culminated into Satyam Computers. In 1987,

he, along with one of his brothers-in-law, DVS Raju, floated an IT company in

the premises of his spinning mill.

Right from day one Raju focused on the exports market though

the trend at those times was focusing on the domestic market. He first developed

capabilities before tapping the export market. Says Raju, "We felt that if

we were successful in the international market, we could always come back to the

domestic market."

Raju’s entrepreneurial zeal is now part of the Satyam

culture. One of the key initiatives in Satyam has been its novel management

structure called "Concept of Circles". Simply put, all the departments

are separate units, along the lines of business units. The person heading the

department is the CEO of the department with responsibilities of generating

revenue and profits.

Other people-oriented initiatives include Raju’s unique

"power in one" philosophy that promotes togetherness on the mind’s

plane, including singing the corporate anthem together. No wonder, its staff

attrition rate is half the industry’s 15% per year.

Raju’s hallmark is also his risk-taking ability. When

Satyam began operations, Raju felt that the domestic market couldn’t earn it

much margins; they lay in the international market. Also, to win international

contracts, companies had to prove their domestic capability. An often-repeated

example is the "Little India" project with John Deere. When Satyam

offered its proposition to Deere, they just could not believe that an unknown

company from India could do this. So in 1992, Raju stationed about 10 of his

engineers near Deere’s plant with satellite links–the engineers would upload

the software by night. Soon, Deere saw the value proposition in Satyam’s

business deal. Another instance of Raju’s risk-taking and vision is the

movement into the domestic Internet business while most of the service players

were happy with the booming international business.

On yet another instance: while the traditional services model

implied that Indian software companies set up development centers in the country

to exploit the cost advantage, Satyam has gone ahead and set up four development

centers in the US and three in Singapore, Tokyo and London, apart from the six

in India. Keeping pace with fast-disappearing global boundaries, this has been a

paradigm shift from onsite-led operations to offshore-driven ones. Reasons Raju,

"This way we can eliminate the geographical barrier and can claim to our

customers that we are right next door." However, since this model takes

away margins, it remains to be seen whether the model can actually take off for

Satyam or the industry.

All these initiatives have had a multiplier effect on Satyam’s

revenues. While revenues have grown by over 146 times since 1993 from Rs 4.7

crore to Rs 679 crore in 1999-00, profitability has moved up by 149 times from

Rs 90 lakh to Rs 134 crore.

Up the food chain

The value chain is becoming an increasingly debated topic on

which hinges the dreams of India becoming an IT superpower. Most of the top line

Indian companies are moving higher on the value chain to move into higher-margin

areas. In spite of comparable quality to international players like IBM, EDS and

Sapient, Indian service offerings still command lower prices than their

international peers do. Satyam has followed on the same path, but with a major

initiative on the product front. As the first step toward bringing it on par

with international firms, Satyam was among the first companies to go in for the

SEI CMM level 5. Thus Satyam has assured a quality process to its present and

new customers. The company has moved a notch forward. It tries to solve the

customers’ IT problem, just beyond what they ask. Comments Raju, "We have

started understanding their business better and try to make them more

competitive with our solutions." Satyam’s strategy has been to gain

vertical domain knowledge in several fields like telecom, e-commerce solutions

and healthcare. The next step: product development in the shape of "Vision

Compass". Satyam has formed a subsidiary by the same name and has

transferred intellectual property of all the products to the company. According

to Raju, one of the things that can define the company’s ability to address

business and technological needs at a higher level is the company’s presence

in the product market space. The product caters to the collaborative enterprise

management space and intends to make ERP meaningful to CEOs and staff alike

without the intervention of the internal IT people. After addressing the market,

Raju wants Vision Compass to become a passport for its service offerings.

Raju says, "We hope that not only does the product do

well but also drive our services as we will usually bundle the product with the

services."

Another radical step taken by Satyam has been its Internet

initiative. Unlike the software services–which being a high-margin business,

many companies are content to keep moving on the same tangent–Raju moved along

the non-traditional lines and into the Internet services market with Satyam

Infoway (Sify). According to Raju, Satyam’s investment in Sify has been

appreciated by several hundred times but more importantly "Satyam is now

seen as a company with very good understanding of the Web dynamics" and

this has seen more service business to the company in e-commerce and

Internet-related business. A look at the revenue break-up also ratifies Raju’s

claim. In 1998-99, about 28% were from Y2K projects. Analysts had their doubts

over continued growth of Satyam in face of such heavy dependence on Y2K.

However, the company got over the Y2K threat and grew by over 77% in 1999-00 as

Internet and e-commerce brought in a huge 17% of total revenues. This move up to

27% for the second quarter ending September 30, 2000.

Next stop: Biotech

Raju has moved his base to the US to get closer to the

customers and gain more knowledge about the markets to make his next move. Among

the new JVs that Satyam has entered into is one with the Center for Cellular and

Molecular Biology. The JV will work on bio-informatics, a hot new field that

combines molecular biology with datamining and datawarehousing. It is amazing

that in the IT field, where an engineering degree is a prerequisite, Ramalinga

Raju stands a lone ranger. He leads one of the top IT companies in the country,

without an engineering qualification. With the entrepreneurial bug still intact

and the knowledge itch still strong, Raju is pushing the Satyam group toward a

space in the knowledge economy where Indian service companies have not gone

before.

Yograj Varma



in New Delhi