Mumbai: Software services exporter Mahindra Satyam is aggressively hiring senior executives from larger rivals as it attempts to win back clients, and is returning to offering pay hikes of up to 20%—the surest signs yet that the firm is losing its crutches.
Since October, Mahindra Satyam has hired at least three senior executives from International Business Machines Corp. (IBM), Infosys Technologies Ltd and Wipro Ltd, and is looking to recruit more senior people to strengthen its presence in key geographies and verticals, a company executive said.
Safe mode: A file photo of Satyam’s corporate office in Hitec City, Hyderabad. The company has offered salary hikes of 7-20% and hefty retention bonuses as it struggles to stem its steep attrition rate. Bharath Sai / Mint
Another executive said the firm, after concluding its appraisal process for 2009-10 in mid-December, has offered employees salary hikes of 7-20% and hefty retention bonuses as it struggles to stem its steep attrition rate.
Both the executives didn’t want to be named.
After B. Ramalinga Raju, founder and former chairman of Satyam Computer Services Ltd, confessed on 7 January 2009 to having doctored the firm’s accounts to the tune of Rs7,136 crore, several employees quit, both because of the resultant stigma and uncertainty over the company’s future. Some of the senior executives walked away with key customers.
Industry and market analysts say the company’s recent hiring appears to be strategic. Without reliable, audited financial data, the company cannot participate in competitive bidding for large contracts yet, but it can after 30 June, by when it has to submit its restated accounts.
Current chairman Vineet Nayyar had said in May, less than a month after Tech Mahindra Ltd took over Satyam, that the Hyderabad-based firm had lost 35% of its clients since January. Satyam had around 600 clients in September 2008.
Industry experts say most of the clients who left Satyam early last year gave their business to rival Indian information technology (IT) firms.
In the past three months, Mahindra Satyam has hired Bobby Gupta, previously IBM’s Asia-Pacific head for telecom expenses management, as its business development head for Australia and New Zealand; Sudhir Nair, who was an assistant vice-president, infrastructure management, at Infosys, to head the same business segment at Satyam; and Vijayanand Vadrevu, formerly a vice-president at Wipro heading the life sciences practice, as its head of Strategic Initiatives. Mint could not contact these executives.
“The very fact that senior employees of our peers are joining us is an indication that Mahindra Satyam evokes confidence as an organization that holds promise for a tremendous future, personally and professionally,” a Satyam spokesperson said by email.
In mid-September, Satyam said it had 420 clients, including 32 it had added since May.
“Tech Mahindra has been telecom-vertical focused and predominantly Europe-based, and for managing a wider portfolio company like Satyam, you need people with different skill sets than Tech Mahindra can source internally,” said Partha Iyengar, vice-president and regional research director at the Indian arm of technology researcher, Gartner Inc.
Meanwhile, Mahindra Satyam is still losing its employees. According to company executives Mint spoke with, the firm’s attrition rate continues to be as high as 20-25%.
According to the company’s estimate, it now has around 30,000 employees, down from around 52,000 before Raju’s revelation.
“We have taken up a number of associate recognition programmes, which will bring forth an enhanced sense of pride,” a Satyam spokesperson wrote in an email. “The reinstatement of performance-related variable pay, along with the successful completion of our appraisal process, has given the necessary confidence to the associates on the financial stability of the company.”
These include retention bonuses of up to 90% of an employee’s annual compensation package, staggered over four years and paid half-yearly, for those in middle management. Junior employees will be given a one-time retention bonus and those in senior management, stock options.
Still, Mahindra Satyam has extended its virtual pool programme for several employees by another two months, this time without pay—which could hurt its attrition further.
In June, as the firm was trying to rebuild itself, it put at least 7,000 employees on the virtual pool, sending them on a six-month leave and paying them only a part of their regular salary. It has since hired back about 2,000 employees.