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Business News/ Companies / Combined Tech M-Satyam entity may emerge mid-market IT services leader: Offshore Insights
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Combined Tech M-Satyam entity may emerge mid-market IT services leader: Offshore Insights

Combined Tech M-Satyam entity may emerge mid-market IT services leader: Offshore Insights

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Mumbai: The merger of Satyam Computer Services Ltd, rebranded Mahindra Satyam, with Tech Mahindra will make the resulant entity prominent and possibly the biggest in the mid-market segment, according to a report by information technology (IT) research firm Offshore Insights.

Over the past three years, Satyam Computer has come a long way and managed to bring back some shine to its battered image. However, though the company has achieved stability, it is not yet ready to compete with its larger peers but has nevertheless created a new tier-2 Indian club where Mahindra Satyam is a strong player, he explained.

There are five to six companies with $1 billion plus revenue in the mid-market information technology or IT services space. Most of the companies have made some significant acquisitions and are growing steadily. For example, Genpact Ltd acquired Headstrong Corp. in April 2011 while iGate Corp. announced the purchase of a majority stake in Patni Computer Systems in January 2011. “Mahindra Satyam with its current capabilities and strengths is a significant contender in this space," said Apte.

The report noted that while Mahindra Satyam’s management was preoccupied with fire fighting and ironing out internal chaos, the competition has moved on. “Infosys Ltd, Cognizant Technology Services Corp. and Wipro Ltd. were Satyam’s competitors at that time who have since then moved on. Clearly, Mahindra Satyam has fallen behind their peers. The company once featured among the industry leaders in India and has since the crisis dropped down the list, while its peers witnessed strong topline growth. They have to accelerate (acquire new business fast across verticals) in order to catch up with the competition," according to Apte.

“Post-acquisition, Mahindra Satyam has not only restored client confidence but also managed to gather a good deal of appreciation from their clients. However, we believe that if Mahindra Satyam increases its momentum; leverages the opportunity completely; and clearly defines and articulates the differentiation or value proposition, they can achieve much more," Apte said.

After the acquisition, Satyam faltered badly and faced initial challenges including lost customers, an exodus of employees and a legal battle with Upaid. Three years after the acquisition, Mahindra Satyam has successfully addressed battered employee morale, arrested the exodus of staff, gradually regained client confidence and resolved legal matters. The company took several positive steps such as announcing financial results regularly, stabilising operations and mitigating risks from lawsuits. All of this helped Mahindra Satyam improve its image.

Mahindra Satyam reported revenue of around $1.14 billion for the year ended 31 March 2011. The company has reported total revenue to the tune of around $975 million in the last three quarters. Profitability has increased during the period, indicating positive movement. While earnings can’t be compared with that of the industry leaders, the company’s financial performance is encouraging in relation to its own performance in recent years, the report said.

Mahindra Satyam has successfully managed to restore client confidence over the last three years. Several clients including Coca-Cola and State Farm Insurance deserted Satyam in 2009. However, the company was able to retain some of its old clients and gradually regain their confidence especially in the ERP (entreprise resource planning) space. A leading pharmaceutical company that expressed serious concerns two years back told Offshore Insights that they are happy with the progress on their current project with Mahindra Satyam. In addition to this, over the last three years, the company has added new names to its clientele across verticals, the report added.

“A majority of the company’s clients reported overall satisfaction with Mahindra Satyam’s services. Offshore Insights spoke to about a dozen of Mahindra Satyam’s clients to assess their performance regarding delivery and quality of work. Interestingly, clients expressed overall satisfaction with the company’s service quality and delivery. Their clients were not only inclined to continue to work with them but are also open to extending their work with them," said Apte.

However, the company needs to speed up its efforts, it said. Customers are no longer apprehensive about Mahindra Satyam’s past. There are clear signs of stability now. However, the company has yet to leverage the opportunity completely. The company should leverage this positive client mood. Interactions with clients reveal that the level of confidence in the company has increased considerably. The work is being delivered on time and to clients’ satisfaction. However, Mahindra Satyam has been unable to leverage this positive client mood. While clients are open to extend their partnership with Mahindra Satyam, the company has been relatively slow at tapping the opportunity.

Also Read |Mahindra Satyam, Tech Mahindra agree to merge

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Published: 21 Mar 2012, 02:59 PM IST
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