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How Mahindra’s tail digested Satyam’s dog

If January 7 had ushered in a scandal etched out in a confession by no less than disgraced Chairman Ramalinga Raju, on April 20, Anand Mahindra, vice-chairman of the Mahindra & Mahindra Group, addressed an embattled army of technology workers to infuse back an asset most eroded in the preceding three months — trust.

business Updated: Jan 04, 2010 21:34 IST
Gaurav Choudhury

The picture was one of contrast for Satyam’s employees last April, in more ways than one.

If January 7 had ushered in a scandal etched out in a confession by no less than disgraced Chairman Ramalinga Raju, on April 20, Anand Mahindra, vice-chairman of the Mahindra & Mahindra Group, addressed an embattled army of technology workers to infuse back an asset most eroded in the preceding three months — trust.

Those months saw the induction of six government-nominated directors, their process of selecting a suitor to replace the Raju family and then the formal takeover of the management of Satyam Computer Services Ltd by Pune-based Mahindras before its eventual renaming as Mahindra Satyam Ltd.

All this happened in the backdrop of the world’s worst economic downturn in seven decades, which added to uncertainties surrounding customer loyalty, employee retention and corporate governance.

The straight-talking but affable Mahindra, whose flagship auto maker is historically associated with military Jeeps in battlegrounds, addressed employees.

“The uncertainty is over now,” he told thousands of scam-scarred employees, whose careers were pinched for no fault of theirs.

But reassuring employees was one thing, while winning back the confidence of restless, rich customers who signed cheques to execute business-critical software was another.

Mahindra’s chosen lieutenants from Tech Mahindra (TechM), the M&M group’s respected but relatively small IT services company, criss-crossed the planet to tell customers that they cared. They were like rockstars on a roadshow, singing songs of encouragement and assurance.

Mahindra himself led the camp, with Mahindra Satyam’s chairman Vineet Nayyar and CEO C.P. Gurnani systematically knocking the doors of customers that include venerable giants such as General Electric and Glaxo SmithKline, which have since renewed long-term deals.

“We had a broad plan which we had rolled out in front of them,” said Hari Thalapalli, who sports the double title of chief marketing officer and chief people officer at Mahindra Satyam.

The new managers went into the backroom to study how much numbers had been rigged while moving out to retain customers who might flee in the wake of uncertainties.

Raju’s revenue figures, inflated to keep share prices high and package a shaky business as rosy, had revealed a hole of at least Rs 7,800 crore, reminding many of the Enron case in the US that led to the conviction of key executives.

It is still not clear how much Satyam’s financial hole is, but a company source put it at 50 per cent of annual revenues.

“Of course, there have been some specific concerns. And we have responded quickly and in a transparent and effective manner, which has assuaged their apprehensions,” the 50-year-old, moustachioed Gurnani told Hindustan Times.

The results are showing. The company has won 35 new customers, while old big-ticket customers have renewed ties for three-to-five year terms.

The new Satyam management decided not to meddle with an old culture of empowering line managers but knocked down strange silos that stood in the way of coordinated customer service in overseas markets.

“The guys on the field, those closest to the customers had maximum powers. That remains unchanged,” Hari said.

But the Mahindras did away with a system called “global accounts” under which industry specialist leaders could sidestep regional heads.

“I could earlier have a 20 million-dollar account, running in Europe which the Europe head would not even know what was happening. Those kinds of silo functioning we cut,” said a senior executive, who did not wish to be identified.

The company’s new organization design integrated sales and service delivery into a “two-in-a-box” collaborative model while adding competencies in industry specialization and business consulting and eliminates duplication in roles, Gurnani said. For employees, dissent is no longer a dirty word at Satyam, in which a lack of transparency had earlier been possibly the biggest flaw.

“We are bringing in a whole new process of transparency and participation in the system,” said Hari.

Above all hung a big question: can Satyam still attract top-notch talent? After all, talent and management are the two legs IT services walk on.

Mahindra Satyam answered the question by sheer action.

“We told ourselves: Let us go out and hire so that the world knows that we can do it if we want,” Hari said.

The company picked up a strategic initiatives head from Wipro and a leader for managed services in infrastructure from Infosys, a sales honcho in Australia from IBM and a sales head in Singapore from HCL. This kind of symbolic name-dropping helps in the head-hunting game.

In the new 10-member executive management team, five are from TechM, one from outside and four from Satyam, showing a mix of continuity and change.

Beneath all the firefighting, the Mahindras had real reasons to smile. In the pecking order of India’s IT, they were earlier not household names, but now they are. Also, TechM was steeped in serving the telecom industry, thanks to its umbilical link with BT –the former British Telecom. The Satyam acquisition, howsoever, muddied, was a glorious opportunity to swallow a target larger than itself and break into the big boys’ league of enterprise software.

The diversification also reduced risks.

To achieve this, Tech Mahindra spent Rs 1,756 crore to acquire 31 per cent stake at Rs 58 a share. It has since raised its stake to 42.7 per cent.

Two government-nominated directors remain on the board, while two others left in June last year.

At present, only 10 to 12 customers are common between TechM and Mahindra Satyam.

“For our joint go-to-market strategy, a new structure has been created that is more suitable to cross-selling and collaboration between different units,” Gurnani said.

Satyam has also incorporated TechM’s global leadership cadre programme—a kind of assessment system that pulls out staff to give them bigger responsibilities.

“The momentum is positive and we are focusing on emerging markets and verticals in a big way to drive our revenues,” said Gurnani.

The message is seeping down the ranks at Satyam.

(Tomorrow: the highs and lows of Satyam’s employees)