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Sun 9 Mar 2008 04:00 AM

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Five + one

Positioning itself as a competitor to the major IT consultants and service providers, Satyam is an up-and-comer in the Indian IT sector. In a two-part interview Satyam co-founder and CEO B Rama Raju talks to ACN about his plans for the company, and how the IT industry needs to evolve.

Positioning itself as a competitor to the major IT consultants and service providers, Satyam is an up-and-comer in the Indian IT sector. In a two-part interview Satyam co-founder and CEO B Rama Raju talks to ACN about his plans for the company, and how the IT industry needs to evolve.

The development we've seen in Dubai is spreading around the region, with projects such as Saudi Arabia's Economic Cities - what implications does this development have for the Middle East?

As human resource costs keep going up, customers will continue to be there as long as we can continue to provide value.

One thing which is quite amazing is that every time I come to Dubai, I see a lot of transformation here, a lot of innovation in every sector. Since I keep travelling, as we work in 55 countries, this topic keeps coming up - I keep hearing that 50% of the world's cranes are in Shanghai, and 25% are in Dubai. The scale is quite mind-boggling.

It may vary from sector to sector, but building this kind of world-class infrastructure here is one thing, but being able to attract talent, human resources - this is going to be very important. I can definitely see that when it comes to some of our financial services customers - I keep hearing that these financial services are going to move to Dubai, and that's nice to hear. But when it comes to the healthcare sector, there's going to be a challenge in attracting the right people to Dubai.

What do you see as the big long-term issues in bringing professionals to the region?

I can relate this to some of the other countries we're working in, such as Australia. Many people who move to Australia would like to settle down there; it has everything, it has the right kind of infrastructure and facilities. Similarly here, if all the facilities are provided, a lot of people would like to be here - definitely there are not many security issues in the UAE, which is a concern if you look at other regions like South America, for example.

Definitely the UAE is the country that people are looking at. But when it comes to Saudi Arabia, what I keep hearing from some of our partners, such as Cisco, is that Saudi is making investments in building world-class infrastructure, building cities. I'm assuming once this happens they're going to open up their economy, so people can come and start working there. So there may be some restrictions today, but I think in the long term these will get ironed out.

How do you think regional enterprises can cope with the present currency fluctuations, specifically the weakening dollar and strengthening rupee?

This is a problem the world over - even if you look at Indian companies, they are being affected by the dollar. The challenge is to meet the expectations of investors - these expectations are not coming down, despite these issues. So you need to look at finding ways of improving your productivity.

If you look at our IT industry, we are moving from tier one cities to tier two cities within India - or even exploring the possibility of doing some work in countries such as China or Malaysia. We have to find places where we can deliver the services, where we can reduce the cost of delivery, improve productivity - these are the things which we need to be more innovative in our approach towards. This is what is happening in our globalisation drive.

For Satyam, has currency fluctuation made it harder to sell into Middle East markets?

We get around 58% of our business from the US at the moment, and 22% from Europe; the balance is distributed between the Middle East and Asia-Pacific - we get around 10% of our business from Australia, and another 3% from Japan.

When we are working in different countries, there is a natural hedging that takes place, but I think that being a global company, working with around 180 Fortune 500 companies that operate around the world, we need to be global.

The Indian success story has been exporting high quality but cost-effective IT services around the world - is this model going to continue into the future, or will it change?

I don't have any doubt in my mind that in a flat or globalised world, it is not just the cost that the customers are looking at - customers are looking at the long-term, looking for companies that understand their business, and can provide solutions which allow them to become more competent and more effective in their way of doing things. As long as they have that confidence, this off-shoring or outsourcing trend will continue.

Today we are concentrating on exporting services mainly from India, but in the future as human resource costs keep going up, the customers will continue to be there as long as we can continue to provide value.

One of the things we are doing as a company, is focusing on long-term relationships. We are making investments in training and development - in 2006 Satyam was voted 15 in the world for training and development by ASTD [American Society for Training and Development]. In 2007, ASTD rated us number one in the world - this is the first time a non-US company has been number one.
We have started making this investment because we strongly believe that our differentiators are going to be leadership development, our flexibility, and the IT competence we are going to build. As part of this drive we have come up with a very creative business model, where we started a programme called Full Lifecycle Leadership.

We are close to 50,000 people now, and when you are growing 30% year-on-year, the challenge is on how to maintain the flexibility of a startup company.

To do this, we are convinced that we have to distribute the leadership. We have mapped around 2000 leaders within the company who take responsibility for these full-lifecycle businesses - every value-creating entity, be it a service offering or a customer relationship. We have around 300 processes within the company, 300 service offerings, 800-900 projects at any point in time, and about 300-400 customer relationships.

All of these are mapped, and these leaders are given the opportunity to run these value-creating entities as if it is their own business. Their job is to make sure that they delight their stakeholders - that is, their customers, their investors, their associates. If they can delight them, that's when we can say we are adding value to our customers.

What do you see as being the next wave of development in the IT industry?

When it comes to the top of the pyramid - the consulting layer - this is something that Indian companies need to focus on, and strengthen that layer. Once we give confidence to the customer that we can do end-to-end jobs, have end-to-end responsibility, we can take up - that's what the customers are looking for.

Having said that, the customers are also saying that for the small gaps at the consulting layer, they don't want to pay the kind of prices they are paying to the big five companies. So Indian companies - such as Satyam - have started investing in that layer. We've started acquiring niche companies in the banking and financial services space, for instance, to strengthen that domain expertise.

Once you start moving up the value chain, once you are able to provide services that are the best, then there's no reason why there should be any hesitation from the customers.

Do you think this will mean a reduction in the average price of consultancy, as Indian firms and the big five start to converge their prices?

Let me put it this way - if you look at the big five companies, they're all embedded in high cost structures; more than 90% of their resources are in developed companies. If you look at Indian companies, the model is almost completely reversed - almost 90% of our resources are in developing countries. I wouldn't say either of the models are right - it's becoming important for Indian companies to become more and more global, to get a workforce from multiple countries.

It will be much easier for Indian companies to increase that mix from 10% to 15% or 20% - it won't be easy for the big five to change the mix, even if they have to become 60-40. They have to be really very aggressive. That is the difference - customers are clearly able to differentiate between this.

In the long term, though, the situation is going to be how competent we are, how effectively we can add value to the customer. That's the reason we're making investments in a leadership that can understand customers' businesses better, that can provide that value to the customers, saying we understand your business and we can make a difference.

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