Satyam plans to offer cloud services to customers

The company is trying various revival strategies including a merger with parent company

Indian outsourcer Satyam Computer Services plans to offer cloud-based services to customers as one of many plans to recover ground it lost during a financial scandal at the company.

However, Satyam will use third-party hosting companies to host cloud services for its clients rather than invest in data centers itself, said company President Atul Kunwar.

Besides offering established third-party enterprise applications in enterprise resource planning (ERP) and other areas, the company will offer tools in the software-as-a-service (SaaS) model in areas such as analytics, workflow management, and identity management for remote devices, Kunwar said.

The enterprise cloud computing business for Satyam is expected to take off only by the first quarter of next year, he said.

The cloud computing market is growing fast because it is starting from a small base, but it will not be a large market in the short term, said Sudin Apte, principal analyst and CEO of Offshore Insights, a research and advisory firm in Pune, India.

Cloud computing for the enterprise is, however, expected to change the revenue model for this part of Satyam's business, as clients will now start paying by the transaction or on a subscription, Kunwar said.

Indian outsourcers have typically been delivering software development and other services to customers abroad on a price that factors in the number of staff and the duration of a project.

Satyam is now focused on getting more business from existing clients, and on getting some of its former clients to return after it became embroiled in a financial scandal last year. Tech Mahindra, another Indian outsourcer, acquired a 43 percent stake in the company last year after the Indian government decided to bring a strategic investor into the ailing company. Satyam now uses the "Mahindra Satyam" brand.

Six large customers that were with the company before the scandal broke are in the process of coming back, Kunwar said.

Tech Mahindra hopes to eventually merge Satyam with the company, which by current revenue levels will create a company with combined revenue of over US$2 billion. The combined entity would still be far smaller than some of India's top outsourcers, but the intention is not to compete head on with the big players in all markets but to focus on a few vertical markets, Kunwar said.

Tech Mahindra, which has BT as a key investor, and is focused on the telecommunications sector, hopes to benefit from synergies between the two companies. Tech Mahindra has so far not been able to tap the demand from its telecommunications customers for enterprise applications like ERP and business intelligence, said Vivek Kalra vice president for the Americas at Tech Mahindra.

Satyam is expected to fill that gap, and Tech Mahindra is already selling enterprise software development and services from Satyam to some of its customers in the telecommunications sector. Satyam will also be able to use Tech Mahindra's expertise in telecommunications to offer mobility technology to its enterprise customers, Kalra said.

A merger will not bring significant benefits to customers as Satyam's strengths are mainly in ERP implementations, Apte said. Customers will look for application development and maintenance services and business process outsourcing (BPO), which are small businesses currently for both Satyam and Tech Mahindra.

The companies have not finalized a date for the merger. BT is meanwhile divesting 5.5 percent of its 29.9 percent stake in Tech Mahindra to promoter Mahindra & Mahindra. Tech Mahindra did not discuss the reasons for the divestment, or its implications.

Selling its stake in Tech Mahindra will help BT raise cash as well as gives it the flexibility to explore other suppliers, Apte said. The investment in Tech Mahindra is a legacy from a time when there weren't many top quality outsourcers in India, and customers had to set up their own centers or invest in a supplier, he said.

John Ribeiro covers outsourcing and general technology breaking news from India for The IDG News Service. Follow John on Twitter at @Johnribeiro. John's e-mail address is john_ribeiro@idg.com

Tags business issuesoffshoringsatyam computer servicesservicesoutsourcingMergers / acquisitions

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John Ribeiro

IDG News Service

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