Satyam bets big on Europe with expansion



As Western firms shift their headquarters to the East, a long list of companies based there are scouting for more businesses in the West.

Satyam, India's youngest software consulting company to exceed $2 billion (Dh7.34bn) in annual revenue, is one of them.

Satyam recently indulged in a shopping spree and put in its cart big Western brands such as Bridge Strategy, Citisoft, Nitor Global Solutions, S&V Management Consultants and Caterpillar's Market Research and Customer Analytics. But Satyam's spending is not over yet. With 46 per cent global growth and 100 per cent year-on-year growth in the Middle East, the Fifa technology partner is open to more deals. In an interview with Emirates Business, Virender Aggarwal, Director and Senior Vice-President for Asia-Pacific, Middle East, India and Africa Operations, elaborated on the company's expansion plans.

Emirates Business has learned you are planning a massive expansion especially in Europe. Could you elaborate on this?

Geographically, we have been diversifying our revenue streams and expanding our global footprint, with Europe, Asia Pacific, Middle East and South Africa together contributing nearly 40 per cent of our revenues. About 60 per cent of our businesses are in North America. The outsourcing business for Indian IT companies has grown at a faster rate than the US and it is our belief that outsourcing is becoming mainstream in Europe. The market size is still substantial, and there is a significant potential to scale our operations in Europe.

What is on the agenda? What countries do you have in mind?

Our focus is on continental Europe with added emphasis on the Germanic region, which consists of Germany, Austria and Switzerland. Our Hungary development centre caters to the needs of German-speaking manpower to service the Germanic region. We have also completed an acquisition in Europe – in Brussels – this quarter and a few quarters back we acquired Nitor solutions in the United Kingdom.

How much are you earmarking for this expansion?

We do not disclose investment figures. However, we must emphasise that we have set up operations in many countries in Europe, including three locations in Germany, Italy, France, Holland and many others.

Do you have any acquisitions in the pipeline?

We have achieved excellent organic growth. However, we have also acquired companies, which are in line with our long-term goals and consistent with the thought process of adding greater value to our end customers. Our efforts have been to build niche consulting skills and competencies and this is reflected in our acquisitions such as Knowledge Dynamics, Citisoft, Nitor Global Solutions and Bridge Strategy. Recently, we obtained two additional companies – S&V Management Consultants, a Ghent, Belgium-based supply chain management consulting firm for $35.5 million, and Caterpillar's Market Research and Customer Analytics (MR&CA) operations for $60m. When we look at acquisitions, it is not just with a perspective of adding to our top line but also how these can help engage with our customers in their core business areas, directly impacting their key business and resulting in eventual downstream revenues for us.

Are you speaking to other technology providers about possible partnership?

We as a company have reached a size where customers prefer to deal directly with us – even for transformation projects. We partner with technology providers on a case-by-case basis where coming together provides better value to the customers. We have recently signed up as official IT partner to Fifa. This, we believe, is a great partnership and coupled with our sponsorship of 2010 and 2014 Fifa World Cup, gives us a brand market presence that resonates well with our European customers.

What are your plans for the GCC market, particularly the UAE?

A few years ago, Satyam was a Dubai-centric organisation with a single office covering the entire region. Over the past two years, we have expanded significantly and currently have a presence in Dubai, Saudi Arabia, Kuwait, Qatar, Abu Dhabi, Oman, Bahrain, and Jordan. Most recently, we established a state-of-the-art Global Solutions Centre (GSC) in Egypt that will serve as a near-shore to IT and business transformation requirements of the Middle East. This is our first Global Solutions Centre in the Middle East and Africa region and the 28th for Satyam globally. The GSC is meant to localise our global delivery model and will serve as the cornerstone of Satyam's strategy for Middle East and Africa, while solidifying our position as a leading global provider of integrated, end-to-end business consulting and transformation services in the region. The GSC will also serve as a near-shore delivery centre for our Middle East customers. The 300-seat centre with world-class infrastructure has about 75 associates as of now and we expect to add a significant number of associates over the next few quarters.

Similarly, we have also identified various regional locations, which mirror Egypt's favourable business opportunities, including Jordan, Bahrain and Oman. In addition to the rapid rate at which these countries' IT services markets are maturing, each of them also boasts a relatively highly skilled and lower cost of manpower compared to other states across the region, and we will explore these opportunities in the future. We are also bolstering our in-country delivering capability by establishing a Centre of Excellences (CoE) for key technology competencies within the region. We have Oracle CoE now operational in Bahrain and SAP CoE set up in Qatar.

In addition, we are also looking at doubling our office space in Dubai and expanding our offices significantly in Kuwait, Bahrain and Qatar. We have about 750 consultants serving the region.

The UAE is being served by more than 250 consultants who are primarily engaged in high-end consulting work. We are expanding our office manifold in the UAE in this regard and we have already taken up new office space. We are also evaluating opening an office in Abu Dhabi.

You recently released your 2007 annual report, which shows an overall growth of 46 per cent. How did the region fare? What are your expectations for this year as well as the next two years?

We have indeed recorded a 46 per cent increase in global revenue from $1.46bn in 2006 to $2.1bn for the financial year 2007, which ended on March 31, 2008. We have witnessed 100 per cent year-on-year growth in the Middle East, with our Qatar, Kuwait, Bahrain and UAE operations registering more than 100 per cent growth rates. The company has also gained 32 additional customers, which included four companies from the Fortune 500 list. We inducted a total of 1,122 associates, including 679 trainees to the organisation, taking the number of associates, subsidiaries and joint ventures to 51,127 across 60 countries.

As far as FY2009 is concerned, we are targeting a growth rate of 26 per cent and anticipate our global revenues to be in the realm of $2.6bn to $2.7bn. In general, we do not forecast beyond a one-year time frame.

How have you been affected by the weakening dollar and the gloomy global economic outlook?

We are closely observing the economic trend and we will continue to revise our guidance as the picture emerges clearer. As of now, we are cautiously optimistic. Our strategy of diversifying our revenue base outside the US should help us manage the gloomy outlook of primarily US markets. We faced 11 per cent Indian rupee appreciation last year. However, we managed to minimise the impact of rupee appreciation to just 200 basis points on our margin through a mix of productivity enhancement, rate increase, offshore/onsite mix, broadening the associate pyramid [more intake of new graduates from college] and controlling sales and general expenses.

A number of companies, such as Halliburton, have moved their headquarters to Dubai. Have you considered moving your headquarters from India to somewhere else like the US or Dubai?

Satyam is a global company with more than 50,000 employees spread over 31 global solution centres, serving customers in 61 countries across six continents. Our Global Delivery Model – with a mix of near-shore and offshore – has given us the capability to comb talent pools and address varied markets. At this point in time, we do not consider moving our headquarters relevant.

Satyam is considered India's youngest software consulting company to exceed $2bn in annual revenue. Did you ever believe you would achieve so much so fast? What is your long-term strategy?

When Satyam was started in 1987, the intent was to create an entity in the knowledge industry where one could express oneself creatively. The world of technology was fast evolving and yet the word 'offshore' was yet to be used contextually. Satyam pioneered the off-shoring model, and this was a major break. We did see tremendous potential. We benchmark ourselves on a global basis on a variety of parameters. We believe that as long as we continue to do that and help evolve innovative solutions for our customers, we will continue to do well. The market for virtualised delivery of services is still very large and is only becoming bigger as new opportunities get explored – for example, virtualisation of R&D services. Hence we continue to believe in our long-term growth impetus. Moreover, we are confident that the pie is large enough for all of us to gain and grow even further.


PROFILE: Virender Aggarwal Director and senior vice-president for Satyam's Asia-Pacific, Middle East, India and Africa operations

Virender Aggarwal is the director and senior vice-president of Indian software consulting company Satyam for Asia Pacific, the Middle East, India and Africa. Satyam began operations in early 2000, and under Aggarwal's leadership, the Asia-Pacific operations now account for 20.62 per cent of the global revenues of the New York Stock Exchange-listed company. From his position as the company's first employee in the region, he now has a staff of more than 3,000 to cover his region. Prior to his position with Satyam, Aggarwal was the head of a large Indian software and training company operating out of Singapore. He has a master's degree in management and has more than 19 years experience, including eight years in general management positions.