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Satyam: Where do you go? - Views on News from Equitymaster
 
 
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  • Dec 1, 2000

    Satyam: Where do you go?

    Satyam is moving to provide end-to-end solutions to organisations for e-business. It has over the years accumulated the expertise. What makes Satyam stand out from the rest is that it does not outsource consulting. Satyam Renaissance consulting, a division of Satyam Computer, takes care of consulting.

    But what is surprising is the fact that Satyam has chosen to outsource technology. Satyam tied up with Ariba Inc, a world leader in business-to-business (B2B) e-commerce platform provider. Through the alliance, Satyam plans to customise, implement, manage and support Ariba B2B platform as an Ariba Certified System Integrator (ACSI). This move is surprising.

    Traditionally Indian companies have been known for their technology solutions. In fact, trading engines is one of the most lucrative areas in the software market. Satyam it seems is not interested in applications development and maintenance (ADM). The share of ADM business shrunk - from 59% to 48.1% of revenues on YoY basis for 2QFY01. Implementation is a risky business because products donít last forever. Initially, SAP and BAAN implementers mushroomed all over but toady the business is not so talked about.

    However, we believe that Satyam decided to tie-up with Ariba to get its B2B exchange, Satyam Web Exchange Ltd., up and running as soon as possible. This three-year business plan involves an investment of Rs 1,500 m in a dozen portals that will facilitate B2B exchange. This is a growing area, as businesses are no longer depending on local markets. An example is, oil companies looking for tankers all over the world, through online B2B vortals (exchanges). Recently Essar group set up a B2B portal for trading steel. The other potential segments are automobiles, pharma and chemical sectors.

    The Company has also been working on enterprise-wide projects involving deployment of Vignette, Siebel, SAS data warehousing and Oracle CRM solutions (all brand names).

    One of the interesting services in Satyamís portfolio is telecom. Protocol development, network management systems and embedded software are its focus areas. These are going to be high growth areas. This division currently contributes to about 10% of the total revenues.

    It difficult to make out what Satyam is up to but then it has always been like that. The competition is getting stiffer and stiffer due to the low entry barriers into the software industry. Companies are not feeling the pinch now because of the demand supply gap is huge. But this is rapidly closing. Soon the pressure will be on the billing rates especially for the generalists i.e. the low value service provider. In the current scenario the challenge is not revenues but sustainability. For Satyam, there will be an argument in favour of shifting to emerging technologies, but can that be a core competence.

    The companies that make the transition to high end solutions are likely to stand the test of time.

     

     

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