Tech Mahindra Buys Satyam But At Whose Cost?

by Manu Sharma    Apr 14, 2009

Tech Mahindra has finally acquired the fraud-ridden Satyam Computers but at whose cost? The buyout is expected to put tremendous pressure on the operations due to interest payments and borrowings of the company.

More ever, the IT services landscape is rapidly evolving under the current global landscape and by becoming a bigger organization in size and scale, Tech Mahindra will have to deal with not just internal challenges of integration but also external challenges which would necessitate new business models and flexibility.

Talking to CXOtoday, Chandramouli, director-Advisory Services, Zinnov Management Consulting said, Besides the pressure on the operations, the company is likely to lose its advantage as a niche player in a fast growing vertical and this would impact its competitiveness in the telecom space.

Currently, Tech Mahindra earns its revenue by providing IT services to global telecom clients; BT is its single largest client. Now it will get access to Satyam s diversified clientele.

Besides the order book position, Satyam liabilities includes the legal liabilities arising out of the class action suits filed by shareholders in the US and any other liability arising out of the tussle with UK based mobile payments services provider Upaid.

To top it all, Satyam has a 46,600 strong work force, land assets of 450 crore and lately a number of employees and customers have been moving to rival companies like Infosys, TCS and Wipro, making it more difficulty to Tech Mahindra to win back the lost assets.

Customers will now expect high level of commitment from Tech Mahindra management team in accommodating the requirements and being flexible to changing market conditions and so a testing time over the next 2-3 years in gaining visibility and customer confidence, said Chandramouli.

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