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How Tech Mahindra turned around Satyam

Last updated on: July 15, 2011 12:02 IST

How Tech Mahindra turned around Satyam

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Shivani Shinde in Mumbai


On January 9, 2009, a day after Ramalinga Raju made his confession about cooking up his company's books, Satyam had 47,570 employees.

In just two months, that number shrunk by over 3,500, mainly from people who matter the most - mid- and senior-level staff.

Headhunters say over 14,000 resumes of Satyam's employees were floating in the market at that time - most of whom subsequently left.

Cut to 2011. About 700 employees who had quit have returned to the company. That includes senior executives Manish Mehta and Sriram Papani.

And the attrition rate is at the level of industry average.

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Image: Ramalinga Raju admitted cooking up books.

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How Tech Mahindra turned around Satyam

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That sums up the journey Brand Satyam has made in the last two years. But talent exodus was only one of the problems that Mahindra Satyam (the renamed entity after Tech Mahindra took over) faced.

The Satyam brand name then was a huge liability. Overseas clients left in droves (350 of the 650 big clients left within three months after Raju's confession) and very few wanted any link with a company whose cupboards were perceived to be full of skeletons.

"No one was inviting Satyam to the big parties anymore," says a company official, referring to the absence of big deals in the company's kitty.

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Image: Satyam brand name then was a huge liability.

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How Tech Mahindra turned around Satyam

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Hari Thalapalli, Chief Marketing Officer and Chief People Officer at Mahindra Satyam, admits the problem, but says things have been changing as the brand's future has much better visibility now.

"Since January this year, we are being invited to large deals. While we are yet to close any of them so far, the fact is we are at least being invited."

Mahindra Satyam is already competing for over six large deals.

"Over the last 12 months, the renewal rate on contracts from existing clients has been 97 per cent," Thalapalli adds.

So how did Mahindra Satyam bury the Satyam ghost?

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Image: Mahindra Satyam is already competing for over six large deals.

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How Tech Mahindra turned around Satyam

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Senior executives say the real turnaround for the company started from November 2010, when Mahindra Satyam announced its financial numbers for the first time after the scandal.

This had a direct impact on the firm's ability to get new business. The company reported revenue of $1.12 billion for the fiscal year 2010-11.

In the beginning of this year, Mahindra Ebitda (earnings before interest taxes, depreciation and amortisation) was four per cent. It went up to six per cent and has since gone up to over 13 per cent.

Apart from the visibility on financials, a lot has been going on behind the scenes. To start with, Mahindra Satyam has used the good office of some of its large clients to get into new client deals.

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Image: A lot has been going on behind the scenes.

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How Tech Mahindra turned around Satyam

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Clients such as GE, GlaxoSmithKline, Cisco, BT, AT&T among others not only allowed the firm to use them as reference points but many among them also agreed to talk to new clients and analysts.

"We also made sure that analysts interact with some of our clients so that they are assured about our delivery system," says Thalapalli.

This is important as analysts are important influencers in the information technology business.

Also, Mahindra Group Vice-Chairman Anand Mahindra himself met all the large customers to convince them to stay with the company.

In the first six months, CEO C P Gurnani met over 150 customers across the globe.

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Image: Anand Mahindra met all the large customers.

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How Tech Mahindra turned around Satyam

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Customer meets were organised in London and Chicago and analyst conferences were held in Hyderabad, London and Boston to apprise them of what the company was doing.

All these had its desired effect: the company's customers' delight survey shows that the score was 4 out of 5, much better than the industry average of 3.5-4.

Analysts agree. Hansa Krishnamurthy Iyengar, Senior Analyst-Market Intelligence, Ovum, has been part of two such meetings.

"The first time when I met the management - this was sometime after the acquisition - they were very jittery, completely non-committal about where they are heading.

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Image: Customer meets were organised in London and Chicago.

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How Tech Mahindra turned around Satyam

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"But now they seem to be much more confident and have better clarity on where they are heading. Most of their large clients continue to be there. I think what has paid off well has been the senior management involvement in ensuring that business delivery is not impacted," says Iyengar.

Sudin Apte, Principal Analyst and CEO of Offshore Insights, has been one of the few analysts who openly voiced his concerns about the company when the scandal broke out.

But Apte is more charitable now: "The management has dispelled the impression that the company is dying."

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Image: An analyst praises the role played by senior management.

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How Tech Mahindra turned around Satyam

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Others are also hopeful. Aniruddha Bhonsale, Research Analyst from Deutsche Bank, in his report says: "Things have improved. But Satyam will take some time before it starts competing aggressively with its larger peers.

"This is mostly due to the sizeable gap in the revenue base and balance sheet size of Satyam and other large-cap Indian IT services companies."

The improvement of the brand equity has also meant talent coming back. At 29,000, it might still be less that the peak of over 47,000 before the scandal, but things are far better now.

Most importantly, employees seem to think so.

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Image: Talent is coming back to the company.

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Consider this. About 32 per cent of the total hiring now is done through internal associate referral system compared to 18 per cent a year ago.

Thalapalli says he is now in a position to interview seven candidates for every position filled.

There are still many challenges before Brand Satyam: margins are pretty low and have to be improved to 15-18 per cent and the company is still struggling to get a go-ahead from the Securities and Exchange Commission for its merger with Tech Mahindra.

But Mahindra Satyam Chairman Vineet Nayyar is right when he says that the company was almost mortally wounded when Tech Mahindra took it over.

"Like any other patient, it was in the ICU for a while, but I do believe that phase is over and (the patient) is now convalescing."


Image: Vineet Nayyar, right, admits the company was wounded.

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