The Hindu Business Line : ‘Satyam has created a robust, de-risked model’

We are less dependent on the top 10 customers. We now derive revenue from mature sectors numbering more than a dozen, compared to about three, six years ago. The US’ revenue contribution is lower at about 58 per cent from over 85 per cent earlier.

Mr B Ramalinga Raju, Chairman, Satyam Computers.

K Bharat Kumar

Meeting you sharp at the appointed hour, the Chairman of Satyam Computers (which is set to touch $1.46 billion revenues this fiscal), Mr B. Ramalinga Raju, thinks nothing of legging it up to the hotel 217;s reception area to check if a room has been reserved for his meetings. Not for him a big entourage to facilitate these small things. Thankfully, you have confirmed the meeting room in advance and get to have another five minutes with Mr Raju.

Excerpts from the interview:

Satyam has grown by 17 per cent in Europe for the September quarter over last year. Companies have been investing for some time now in sales outside the US. But why the sudden impetus now? Is the strong Rupee a driver?

This has nothing to do with recent developments — either the dollar weakening or concerns regarding the sub-prime mortgage meltdown. This has been a long-term strategy. First, opportunities in the rest of the world are growing. That is happening on the back of countries such as the US having taken advantage of offshoring — it’s a proven model. The rest of the world has followed in the footsteps of the US in the past also. Europe has (traditionally) adopted a wait and watch approach and when the model is proven, it quickly adopts it. Thereon, economic compulsions make them take these steps. These are opportunities opening up globally and we are taking advantage of them.

Second, within the company itself, we didn’t want to put all eggs in one basket. Every company wants to de-risk. Though we had to invest and have the right kind of strategic thrust.

A combination of these yielded good results. The most striking thing between 2000 and 2007 is that the company has created a very robust and highly de-risked business model, on multiple fronts. We are less dependent on the top 10 customers. Revenue contribution from that segment is down from 55 per cent to about 32 per cent. We now derive revenue from mature sectors numbering more than a dozen, compared to about three, six years ago. The US’ revenue contribution is obviously lower at about 58 per cent of our revenues from over 85 per cent earlier.

Even from a technology perspective, we have diversified. Contributions are now coming from integrated engineering services, infrastructure management services, and so on.

When did this thinking, of de-risking, start inside the company? Why?

Directionally, we have been looking at this. But it would be presumptuous to say that we understood in 2000 what 2007 would look like. We knew there were clear trends towards expanding our global presence. We were seeing more and more business come our way on account of the business-level responsibility we take as an organisation. That is a model wherein increasingly, engagement with the customer is going to be partnership-led.

You might notice that there are more Indian companies, in the top 12 or so globally that are ranked on market capitalisation, than the rest of the world put together. That is a major statement. It indicates that when sourcing services, global companies’ willingness and need to rely on Indian companies is high. There is no longer a limitation arising out of size of some of the established Indian players. We have guided for 53,000 people end of this year and we have a strong balance sheet. A customer no longer has apprehensions about our ability to handle a project.

Another important change is that our interaction is almost invariably at the CXO levels, the boardroom levels and with CEOs. The world around IT has changed so dramatically that there is no longer any distinction between offshoring and outsourcing. The two have become synonymous. Even global (vendors) are not making that distinction, given now that they have to offer the maximum value for customer dollars.

You had indicated in October that it is too early to comment on a possible US slowdown. Any signs you have seen in the last two months — more evident now than earlier?

Issues around sub prime have been quite extensively reported. Concerns around US slowdown are higher, as reported in the national level economic performance assessment. But at the customer level and in our day-to-day operations, nothing much has changed. Our assessment is that it is not very different from earlier.

But, should a slowdown occur, how prepared are Indian companies now, compared to 2000?

Other things remaining the same, there may be a slowdown in decision making itself and organisations will become more conservative in taking decisions. But in the case of operations we are involved in, the value we have delivered is seen as providing dramatic results for both top and bottom-line results for clients. At a time when customers’ level of discomfort is high in terms of their company’s performance, it is likely they may want to engage more with people like us. That is also not to be ruled out. That is the positive side of the overall equation. Which (side) would be more overpowering is difficult to assess.

Even if the offshoring momentum does increase with the need to cut costs in the US, wouldn’t there be a lag effect?

The situation is not the same as it was in 2000. Indian companies were much smaller. Then, our revenues would have been 1/13th or 1/14th of what they’d be this year. Size has increased, the range of service we provide and extent of business level engagement that we can create is dramatically different. We work with 117 Fortune 500 companies. So, it is not any longer a component-level engagement. It is more holistic.

We are seeing Indian vendors in large, multi-year deals. There seem to be new nuances to these. Be it the order Tech Mahindra got from BT, or Cognizant-Ordena, Infosys-Philips. Each of them is structured in a way that the client benefits, sometimes financially, even before the order can be executed. Will such compromise be a way of life?

I don’t know if compromise is the right word to use. It is true that when it comes to large deals then in most instances, it is complex. Each customer, in one sense, is unique.

What a vendor can do also is in some ways unique. We put these two together and explore what makes more sense. Then contracts take different shapes and forms. The only criterion is what kind of value we create for clients and shareholders.

Have you differently structured the orders obtained from Reuters or from the large oil and natural gas company you have talked of?

Each contract is unique and everything is tailor-made to meet client requirements. But increasingly, there are more risk and reward clauses and more of a holistic responsibility taken by us.

Some companies have talked of the need to gear up for a state where the Rupee is 34 to a dollar. Your view?

Improving operational efficiency is a battle we have to continue to fight — all of us. There are always creative ways of continuing to deliver high value while keeping costs under control and manage resources more efficiently. You have to, on an on-going basis, re-skill people in the organisation. One area where we have done, in my opinion, fairly well is to make significant investments in our leadership. Last year, we were rated 15th by the American Society of Training and Development, across the world and this year as the best.

Looking at China as a market, are Indian companies more successful there than in India?

China is an additional opportunity. It is unfair to regard that as providing a higher level of opportunity than elsewhere. As a market it has two parts — servicing MNCs; and serving local companies. We have so far serviced MNCs in China in greater degree. The opportunity for hardware vendors with servicing capability may be higher to attract local clients.

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