12. SATYAM COMPUTER SERVICES Going Digital

This
is the company that took one of its subsidiaries, Satyam Infoway, to Nasdaq,
thus making it the second Indian company to be listed on the hi-tech
international exchange. It also set a trend of tapping the US bourses even
before trying its luck at the domestic market. However, on the branding count,
Satyam failed to impress.

By starting subsidiaries in different
regions and amalgamating other companies, Satyam tried to be a global player
with a local flavor. Its avowed aim was to move into the digital era with a
single entity and a single brand. But its subsidiaries, including the ones that
it formed in the last
fiscal–Satyam Japan in Japan and Satyam Asia in Singapore–were not able to
create the much valued branding it needed to become a global competitor.

Satyam’s turnover grew by 79%–to
touch Rs 677 crore. Exports contributed Rs 663 crore–98% of the revenue. Its
net profit also went up by 85% to cross the Rs 100-crore mark, reaching Rs 135
crore.

However, the company failed to improve
upon its operating profit margin, which came down to 37% in the last fiscal as
compared to 39% in 1998-99. For the January-March quarter of 1999-00, it was
35%, down from 40% in the corresponding period in 1998-99.

Satyam’s off-site development centers
too were not able to generate substantial revenue, and, coupled with the rise in
the marketing expenses, were responsible for the dip in Satyam’s profit
margin. Incidentally, only 21% of its revenue from exports was realized through
on-site projects, with the bulk 74% coming from offshore development.

Satyam’s technological mix of
businesses shifted a great deal from that in 1998-99. The company

was able to bring down the level of
Y2K-related work to 5% of the total revenue, as compared to 28% in the previous
year. On the other hand, specialized services were able to make a headway with
ERP solutions from SAP and Oracle contributing 10%, telecom and digital
communications 11%, internet and ecommerce projects 17%, and engineering
services 6%. The company was able to do well in consulting and systems
integration with the total solutions business making up 25% of its revenue.

To strengthen its presence in the
enterprise application portfolio, Satyam forged partnerships with Siebel and i2
Technologies, besides the existing ones with SAP and Oracle. Looking at the
revenue mix, telecom was another domain where the company was able to strengthen
its presence. And the investments that it made in embedded systems, ecommerce,
mobile internet applications and call centers started yielding results too.

As with other software export majors,
the US was Satyam’s strong ground. It raked in 77% of its revenue from this
region, while Japan, on the strength of a newly-formed subsidiary, made up 9% of
the revenue. Europe and the rest of the world, contributed 7% each. On the
domestic front, Satyam increased its revenue to Rs 14 crore in the last fiscal
from Rs 1.5 crore in the previous year. Satyam also went in for a five-for-one
stock split in the last fiscal.

It was also a year of consolidation for Satyam. It was
able to retain most of its customers as well as rope in new customers like Cable
& Wireless, Emirates Airlines and Hsupply.com, among others. It also entered
into a 50:50 joint venture with Venture Industries Global Engineering LLC to set
up Satyam Venture Engineering Services, for offering CAD/CAM solutions to the
automotive industry worldwide. But if the company has to keep pace with the
competition in the global arena, it needs to immediately address its branding
problem. DQ