The Hindu Business Line : ‘Satyam in good fit to face challenges’

New Delhi, Nov. 20 After years of posting stellar growth rates, it is now time for the $40 billion Indian IT industry to re-adjust expectations as its traditionally strong export markets – the US and Europe undergo a prolonged financial crisis.

India’s fourth largest software services company Satyam Computer Services has recently scaled down the annual guidance in dollar terms, and pruned the fiscal hiring plans by nearly 33 per cent to 8000-10000 employees.

Mr B. Ramalinga Raju, Chairman of Satyam, however, is confident that his company is now better placed to respond to potential challenges, particularly after a slew of measures put in place following the dot com crash in 2000. Business Line caught up with Mr Raju on the sidelines of India Economic Summit. Excerpts:

Satyam has reduced the guidance in dollar terms and increased it in rupee terms. Do you anticipate a further impact of the slowdown on your outlook?

The issue is more about what may happen next year and we are not in a position to give guidance as such.

The world will be closely watching as to what impact the bail-out packages will have, and how they will help overcome the current situation.

Depending on how that pans out, one would potentially look at a quick turnaround or a more protracted one. As a company, we will be watching the situation closely and make appropriate moves to best respond to the situation.

But do you foresee a cut in IT spending in 2009 or are there indications that the downturn will prompt a higher offshore allocation?

It is too early to tell…But whatever assessment we have made, got reflected in the guidance that we have given.

As a company have you faced any delay in new projects?

All I can say is that we are all geared up to respond to any potential challenge that we may face as a company. In 2000 after the dotcom bubble bust, we did a lot of things that have only strengthened the company.

Our revenue has grown ever since, by more than 15 times and we have broadened our activities and lessened our risks to the extent that we are a lot more insulated from shocks in terms of sector, technology or geography.

We took concrete measures, came out with new offerings, invested in leadership and innovation, and that has worked well for us. We believe that there is a window to turn some of this adversity into an opportunity. We have given importance to understanding what truly matters to customers by way of strengthening our competency, and those are the things that will help us in these more testing times.

In your view how many quarters will the current market slowdown last?

I cannot give a specific guidance, other than saying that unlike in 2000 when it was a technology issue and the impact was directly on companies like Satyam, this time our concern is not on account of primary effects.

It is more secondary and tertiary…If customers are impacted by credit crisis, what are the likely approaches they may adopt to respond to the situation, and that, in turn, may have some implications for us.

But one does not even know whether it will be positive or negative.

There may be emphasis on cost-cutting, but there will also be higher emphasis on value addition, and we will be closely watching the situation.

Earlier this month, Satyam acquired Motorola’s captive software development centre in Malaysia. Are you scouting for other buys, especially now that the valuations are more attractive?

We give a lot of importance to acquisitions, so long as synergies that they bring to table are high and hey help us mitigate the risk and strengthen our asset base. We are not putting any boundaries around the same. So long as the fundamentals are correct, we are willing to look at many options with an open mind.

However, while I think the opportunities would be larger than what they were, the care with which one should approach those is also now greater from an acquisition standpoint. One has to be much more careful about the choices.

There have been reports of large-scale retrenchment in Satyam. Your comments?

That is the most ridiculous thing I have heard. We have come up with results a month ago and the net additions have been close to 1,800 people. And these reports about us laying-off 4500 people appeared in the same quarter. This is an absolute rumour…When you have 53,000 people, there are going to be non-performers and what we call a group that is under watch for their performance. This is not a new thing. The percentage of non-performers is more or less the same as previous years.

How do you react to the churn at the top level for Satyam, including the high profile exit of Chief Strategy Officer and BPO head?

We have an excellent track record of retaining leaders. All I can say is that attrition at the leadership level is far lower than the general attrition. We had excellent leaders…those who have been in the system and have done well outside the system as well. The case of one or two senior colleagues looking for other opportunities is something that one can expect.