Tech Mahindra-Satyam: Integration Challenge
Tech Mahindra, which emerged as the highest bidder for Satyam, will have to work harder in the IT services space to compete with large system integrators as TCS, Wipro, Infosys, Cape Gemini, Accenture, among others.
While the acquisition will give Tech Mahindra scope to emerge out of the telecommunications shadow, it also offers the company ample opportunity to tap markets in the BFSI, health, government, PSUs and other sectors. Plus, the company can leverage on the impressive Satyam client list (as reference points) for further penetration in these markets.
On the technological front, Satyam infrastructure (HP, Microsoft and SUN), SAP technologies would be a great asset for Tech Mahindra. It helps more horizontal technologies across BFSI, healthcare, manufacturing and automotive verticals, said T.R. Madan Mohan, managing partner at Browne and Mohan.
There will also be teething troubles. For one, Tech Mahindra’s primary focus is on India based global delivery model. Satyam, on the other hand, has always followed a global delivery model with delivery centres across the world. So it will be interesting to see how the two companies integrate and ensure that linkages are established without transgressing individual egos.
"Most importantly, the conflict will come in how the integrated entity will manage 200+ business leaders across Satyam and TM. That would be the most crucial challenge," said Mohan.
Secondly, Tech Mahindra is very strong in the telecom vertical, whereas Satyam had non-BT growth in recent years. This is another area of conflict.
Tech Mahindra can take solace from the strong SAP services business, around which Satyam had developed a larger part of its portfolio. And there are lots of alliance opportunities. For example, verticals such as manufacturing, quality analysis and test areas would complement.
Tech Mahindra has been bidding system consolidation contracts mostly under $100 million till now. Coming together, the two companies will be able to hold on to better delivery. All the same, Tech Mahindra will require hand-holding in quickly integrating Satyam, ensuring that the Satyamites do not feel threatened in the new environment and most importantly in the management of the transition itself.
"Any intended management changes should be done within 60 days," said Partha Iyengar, head of research at Gartner India. Iyengar feels speed will be of essence in undertaking confidence-building measures aimed at integrating the two companies and restoring confidence in clients, employees and investors of Satyam.
Managing the Board with its unique composition of L&T, TM, government nominees, and investors (count PE and LIC, SBI, etc) would be a major challenge, said Mohan.
One major area of coordination will be the SAP practice of each company. Satyam has helped worldwide businesses derive greater value from their SAP investments by providing solutions that enable business transformation and create value. It provides comprehensive services, ranging from consulting, end-to-end implementation, rollout, and version migration to production and maintenance support for SAP R/3 and the mySAP business suite of products and applications.
Satyam’s SAP clientele - including many Fortune 500 companies - have leveraged its offshore delivery model and dedicated offshore development centres. Some of these clients include DuPont, Saint Gobain, Philips, TRW, Mittal, Bridgestone, Birds Eye Iglo Group, Nestle, Sony, Unilever, among others.
On the other hand, Tech Mahindra’s SAP services extend across the enterprise application lifecycle from SAP evaluation and implementation, integration, to upgrades and migration, through support, maintenance and enhancements. Tech Mahindra’s SAP Practice has been servicing world’s leading corporations across the globe equipped with proven tools, templates, methodologies and accelerators.
Tech Mahindra, too, claims special focus on new dimension SAP products such as CRM, SEM, BI/BW, NetWeaver-SOA, EP and XI, as also experience of executing large SAP engagements for global companies in multiple geographies and multicultural environments.
Going forward, the combined entity will have to identify focus areas for growth and enhance investments in these areas, pointed out Iyengar. Also it is imperative for the company to have a 30/60/90-day plan that would put it back on track, said Iyengar.
"Doing these things in a coordinated manner will cause the sentiment around Satyam to stabilize and hasten a return to ‘business as usual’ for the company," concluded Iyengar.
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