Friday, 10 October 2008

Satyam sees little UK impact from credit crisis

(By Anthony Miller) Satyam rolled out almost its full panoply of top management at its first European industry analyst meeting yesterday (Thursday), and brought along CIOs from some of its top UK and European clients. I spent much time in 1-on-1 meetings with Satyam’s UK and European business management, and with its global leaders for SAP and Infrastructure Management (IM) – and a few others besides.

Much of our discussion was done under the ‘cone of silence’ so I need to be discreet, but let me pick out some of the salient points. First, the CIOs. All were following multisourcing strategies, bringing in Satyam for SAP work, but generally leaving the infrastructure in the hands of the usual suspects. However, the CIO of a UK-based food manufacturer made it quite clear that Satyam had earned its stripes in application services, and this puts them in the frame for managing their infrastructure when that contract comes up for renewal. The CIO said that the risk of putting ‘too many eggs in one basket’ (my words) was likely to be outweighed by the complexity of dealing with multiple vendors. Now there’s food for thought. This same CIO made the startling comment that the reason they chose Satyam for their SAP work was that their (then) incumbent (a ‘usual suspect’) was too risk-averse, or to be more precise, was working to minimise the vendor’s risk rather than the client’s. The ‘coup de grace’ for the incumbent was that Satyam “didn’t try to revenue generate (sic) through change” (i.e. didn’t play the contract to the letter so that they could charge for any changed requirements). Some lessons learned the hard way, I’d say.

On its UK business, it seems Satyam is fortunate to have a relatively low exposure to the BFSI sector, with its main focus on Manufacturing clients (some 35% of UK revenues). The UK comprises just over half of Satyam’s European revenues, which puts it at around £130m over the past twelve months. But as with the other Indian players, Continental Europe is growing faster and will overtake the UK in the next few quarters. I was intrigued to find out that Satyam has won a couple of ERP-type deals in local government (Kent County Council and Stevenage Borough Council) in their own right, so a timely reminder that the ‘UK public sector won’t do offshore with the Indians’ school of thought really doesn’t stand scrutiny.

The impression I gained purely from the tone of the conversations is that Satyam may well stick to its FY guidance when it reports its 2Q09 numbers (March year-end) next Friday, unlike Infosys (see Infosys leaves Axon to HCL and expects shrinking revenues). If so, this would be a bold statement of confidence, given its very high exposure to ERP work, and I would hope they don’t come unstuck.

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