Email
Print
ShareRecently, rupee rise and economic slowdown in the US rained on the Indian software industry's parade. But one company whose growth curve defied logic is Satyam Computer Services. Despite the adverse conditions, Satyam posted anet profit growth of 20.2% in FY08.
It is no surprise then that Satyam founder and chairman B Ramalinga Raju is radiating contentment. In an email interview with DNA Money's Amit Tripathi, the low-key IT honcho discusses the past, the present and the future.
You have called your last year's performance 'exceptional'...
Yes, it was a landmark year for us. We posted a year on year (YoY) growth of 30.7% and crossed the $2 billion milestone in revenues and the 50,000 mark in associates. This despite the global economic environment being challenging. We experienced industry-leading growth throughout FY08, and could sustain a high single-digit volume growth with an appreciable increase in average price realisation of 5% for the year. This is the highest in the last seven years. In the last eight quarters, we have reduced our annualised quarterly attrition from 22% to just 11.5%!
Our business model is becoming more robust and de-risked. Our growth has been broadbased, not dependent on a specific sector or customer. There was significant increase in our large and strategic deals. This gave us not only better revenue traction but also a chance to participate in transformational opportunities.
We have grown in verticals such as digital convergence and emerging areas like retail and transportation. The distributed leadership framework we adopted has led to increased sense of ownership and flattened decision cycle times. It has dramatically reduced attrition. This is helping knowledge retention and in turn, increased customer confidence.
Non linear growth is being given higher importance and we continue to explore newer business models to leverage this further.
From the customer engagement perspective, what is the break up in percentage of time and material versus fixed costs?
Fixed bid accounts for 33% of our revenues. The type of engagement has largely to do with 'risk perception', and associated issues such as clear definition of the deliverables, handling of the risk in terms of overruns, maturity of the vendor vis-à-vis the customer, and so on. In the case of a 'time and material' engagement, the risk is more the customer, while the opposite is true in the case of fixed bid projects. As we become trusted advisors to our customers, we are increasingly seeing more fixed bid projects. Almost all our large deals have a component of fixed bid engagements. At Satyam, we have moved significantly towards fixed bid projects in the last couple of years. In fact, at the corporate level, we have measures that focus on the number of fixed bid projects we undertake. Our key clients too prefer fixed bid engagements, which reflect the maturity of the relationship.
Satyam recently announced it was setting up a process manufacturing innovation centre. How is that developing?
Process Manufacturing Innovation Centre of Excellence at Hyderabad was set up with the aim of providing continuous support for product and process innovation and futuristic solutions development in collaboration with the industry, R&D centres and educational institutions. It will help process manufacturing companies exploit advances in IT, especially in the areas of product & process innovation.
Some US and UK clients have started rejecting the burden of onsite service provision. So has it led to increase in offshoring? What's happening on the near-shore front?
Geographically, we have been diversifying our revenue streams and expanding our global footprints, with Europe and Asia Pacific, Middle East and South Africa together contributing nearly 40% to our revenues from about 35.5% a year ago. Our global delivery model, with a mix of near-shore and offshore, has given us the capability to comb talent pools and address various markets. We have near-shore centres in the US, Europe, the Middle East and APac. There is definitely an increase in offshoring. Interestingly, Satyam has won several large deals of $50 million and above, which were earlier going to western IT companies.
How do you plan to diversify your revenue stream?
The market for virtualised delivery of services is still very large and is only becoming bigger as newer opportunities are identified - for example, the virtualisation of R&D services. We have increased focus on infrastructure management, business process outsourcing and integrated engineering services while maintaining growth in application development and maintenance and enterprise solutions. We adopt a 'market' approach when entering different geographies. 'Market' is a combination of a vertical and region.
Your acquisitions show focus on consulting. Is this a good approach to offset service-specific revenue slowdown?
We have made acquisitions that are in line with our long term goals and offer high level of synergy. We have built niche consulting skills and competencies and this is clear in our acquisitions of Knowledge Dynamics, Citisoft, Nitor Global Solutions and Bridge Strategy. These acquisitions not only add to our topline but also help us connect with our customers' core business areas, directly impacting their key business and resulting in eventual downstream revenues for us.
