B. Ramalinga Raju, Chairman, Satyam Computer: Building new strengths

There has been a tectonic shift," declares B. Ramalinga Raju, leaning back in his black leather chair at his corner room in Satyam Computers' 100-acre technology centre near Hyderabad. The bespectacled Chairman of the Rs 1,800-crore company is, of course, talking about the great outsourcing boom. Of companies roping in external vendors to design and maintain not just their it systems, but also a range of back-office processes such as accounting, pension-funds management, and customer call centres. Raju is not exaggerating. For the first time, Indian companies like Wipro, Infosys, TCS, HCL, and Satyam are being talked of in the same breath as IBM and EDS. If it's a leap of faith for the customers, then it's a leap of competency for the vendors-one well worth making. A Nasscom-McKinsey estimate puts the Indian it services and it-enabled services market at $57 billion (Rs 2,79,300 crore) by 2008, of which it-enabled, or BPO, services should account for $20 billion (Rs 98,000 crore).

BPO Bandwagon

The 47-year-old Raju himself, who 15-odd years ago steered a family-owned textile business into software, has been late to sense the tectonic shift. His BPO arm Nipuna, which is Sanskrit for expertise, was thought of almost eight months ago, but it wasn't until early November that Raju signed on Ram S. Ramasundar from Electrolux Kelvinator to head the business. In contrast, rival Infosys set up its Progeon in April, Wipro hit the ground running with an over Rs 400-crore acquisition of Spectramind in July this year, and HCL's E Serve Technologies has already completed its first full year of business.

Raju admits that Satyam has been slow off the starting line, but having kicked off, he wants his company to go full steam ahead. He's already been cutting the slack. Early this year, he announced his intention to make Satyam a pureplay it services company, by exiting from the internet space (Satyam recently lowered its stake in loss-making subsidiary Satyam Infoway from 52.5 per cent to 35 per cent by roping in Softbank Asia Infrastructure Fund Company and VentureTech, a London-based investment company, to jointly invest $20 million, or Rs 96.72 crore, in the internet company). Raju also plans to close down loss-making subsidiaries in Europe, Asia and Japan and divert the business to Satyam branches abroad, and focus on packaged software implementation and winning new customers.

To do all that, he has identified three areas of improvement: Managing relationships at the global level, sewing up complex deals, and developing a solutions mindset, one that is aligned to the business needs of the customers. Says Raju: "These have not necessarily been the strengths of Indian companies."

More specifically, Satyam's. The company, some analysts point out, is perceived as a volumes player that competes on price. Now that the cuts in global it budgets are forcing its rivals to drop prices too in one form or another, Satyam's edge is getting blunted. Take, for example, the recent $70-million (Rs 336 crore) outsourcing deal with Lehman Brothers that TCS and Wipro snagged. Although the top 10 companies were on Lehman's list, only three were shortlisted. The third was Infosys, not Satyam.

So what did TCS and Wipro have that Satyam didn't? Put simply, a track record. TCS, for instance, has a history of executing large and complex projects dealing with automation of stock exchanges, including BSE, Canadian Depository for Securities and sis Segaintersettle AG, Switzerland. Wipro, on the other hand, has proved its ability to deliver on big-ticket contracts like the three-year $70 million (Rs 336 crore) system integration work for Lattice Group Plc, a British utility. Infosys too offers a wider range of services. A case in point: its deal with GreenPoint Mortgage, the sixth largest wholesale mortgage lender in the US, which is sourcing everything from BPO on one end to business consulting on the other. Says T.V. Mohandas Pai, Chairman, Progeon, Infosys' BPO arm and CFO, Infosys: "Even if Indian vendors have some similar clients, there is a vast difference between the vendors and the nature of their businesses."

"We are trying to ensure that all of us, including the top management, do the right things" K. Thiagarajan, Sr. VP (Corporate Strategy & Communications), Satyam

In terms of domain expertise, Satyam has established itself in verticals like manufacturing, financial services, and insurance. But it needs to strengthen itself in banking, finance and insurance (BFI) segment. More than 35 per cent of its revenues come from manufacturing clients, and less than 30 per cent from financial services. Says a Mumbai-based analyst: "What Satyam needs to do is to build skills in areas where it is weaker than competitors."

Another thing that Satyam might want to do is to diversify its customer base. Almost a fifth of its revenues comes from just one client, GE. By contrast, Infosys' top five customers fetch only 24 per cent of the topline, and in the case of Wipro, it's 25 per cent. But that shift may already be happening. Its second quarter results show a dramatic rise in income from new clients, particularly in telecom. Worringly, however, revenues from the top clients, especially GE, were stagnant-a contrast to the trend witnessed by most other companies. Also, its net profit was much lower than expected, mainly due to forex losses (unlike its rivals, Satyam maintains most of its cash abroad, but is planning to shift a quarter of the funds to India).

Needed: A High Profile

But Satyam's apparent lack of a high profile may boil down to something more intangible: Charisma. Infosys draws its aura from N.R. Narayana Murthy, and Wipro from Azim Premji. While Raju is a prominent industry figure, he doesn't have the halo of either Murthy or Premji. In addition, Satyam has no high-profile No. 2 like Vivek Paul at Wipro or Nandan Nilekani (now No. 1) at Infosys who can present a strong face to the customers. "Having a high-profile CEO helps a lot when you are negotiating for major deals," says an old associate of Raju.

That's something Satyam is beginning to address. Around June this year, the company launched two new "groups"-Principal Solution Architects (PSA) and Principal Relationship Managers (PRMs)-to add more muscle to its business development and customer interface. Under this, a talent pool is created by bringing together senior executives from various sectors and consultancy majors. Members of the two groups would be loaned to various projects, which will use their expertise. By March next year, Satyam hopes to have close to eight PSAs and 12 PRMs. "This will strengthen the bandwith of leadership within the company," says A.S. Murty, Senior Vice President (HR), Satyam.

"Even if Indian vendors have similar clients, there is a vast difference between the vendors and the businesses" T.V. Mohandas Pai, Chairman, Progeon

No surprises, then, that eavesdropping on Satyamites catches phrases like "raising the load factor", "measure and lead philosophy", and "orbit 5". The last one stands for organisation and business transformation "to a high level of excellence" suggested by the 5 in SEI CMM Level 5-an indication of process robustness. Orbit 5 challenges Satyam to achieve global excellence in all areas of its business: processes, services, people, and all partnerships. Says K. Thiagarajan, Senior Vice President (Corporate Strategy & Communications): "We are trying to ensure that all of us, including the top management, do the right things."

Of course, there's somebody keeping tabs on that. Satyam has about 60 executives at the level of vice president and above, and their monthly performance review meetings have become more rigorous and quantitative, with specific topline, bottomline targets, plans and measures on customer delight. No longer do performance appraisal sheets read 'good' or 'ok', rather they carry scores. A 9.1 on customer delight or 6.4 on associate (read: Satyamite) delight is followed by the why, how and what-to-do of it.

Raju, who lost his father last year, says the end objective is to engage CXOs for a deeper relationship instead of managers or vice presidents for component level services. Says Ram Mynampati, Executive Vice President and Chief Operating Officer (coo), Satyam: "We are looking at deals where the breadth of service is wider and the length of engagement longer." He points to the recent deal with Johnson & Johnson to which Satyam is offering ERP implementation and industry-specific solutions.

For now, Dalal Street is bullish on Satyam. Most analysts say that the worst may be behind, and that the second quarter may actually mark the beginning of an uptrend. Says Saurabh Agrawal, Vice President and Head of Technology, Investment Banking at DSP Merrill Lynch: "Its operating margins are a little under pressure, but the company has shown a strong topline and an ability to get more business, which is very good." If the new man in, Ramasundar, delivers too, Raju may actually begin enjoying the "tectonic" shift.