The Beginning of satyam

Thursday, January 8, 2009

The Beginning:

Ramalinga Raju's grandfather was an enterprising farmer who ventured out of traditional
agriculture into agribusiness and bought a sugar mill. The venture backfired and the family lost a fortune. It then scattered into different parts of Andhra and Satyanarayan Raju, Ramalinga Raju's father, whose name inspired the group's name Satyam, moved to Hyderabad and became one of the first farmers to start commercial grape production around Hyderabad. The family recovered and Ramalinga Raju, the eldest son, was sent to the US in 1975 to get an MBA from Ohio after he completed his from Loyola College at Vijayawada.

In India, as a commerce student at Vijayawada, he had been a carefree young man, from a well-to-do farming family, with not a worry in the World. To begin, when Ramalinga Raju came back from the US in 1977 armed with ambition and new ideas, he tried to build new business for the family. He went into cotton-spinning and construction. This earned him his bread and butter. Out of curiosity he had brought a small computer back with him from the US. It was a glorified programmable calculator. He realized that information technology would be big in the future and took the plunge in this new business, about which he had limited knowledge. Satyam Computer Services was incorporated in 1989, though it took of only in 1991-92.

Ramalinga Raju very soon realized that there could be higher margins if one could convince companies abroad that Indian companies could develop the software in India and upload it to the US companies mainframe computers through a satellite data link. Satyam was one of the first companies to get a dedicated 64kbps data link for such "offshore" development. Satyam was among the first Indian companies to make the unique paradigm shift from onsite-led operations to offshore driven ones.

The Transormation:
Satyam also became one of the few companies in the world to attain the top rating -level5- in the capability maturity model (CMM) instituted by Carnegie-Mellon University's software engineering institute.

Satyam's foray into corporate data and Internet services too was path breaking. While several e-mail companies were languishing in the pre-Internet days due to unreasonably high license fees and port charges by Dot, Satyam Infoway moved into this space in 1995. It invested heavily in TCP/IP networks when the only internet service provider was the government monopolized VSNL. At that time companies could only be listed in India after three years of profitable business, while Internet play required large funding for infrastructure and acquisitions. Satyam quickly moved to list Satyam Infoway (SIFY) on Nasdaq with great success. On 19 October 1999 it became the first internet company from India to be listed in the global markets. In June Satyam infoway reached a milestone with its subscribers base crossing the two lakh mark. SIFY posted a profit of Rs 67 crore for the year ended March 31,2000 against Rs 10 crore in the previous year.

Setting Standards:
While high-flying SIFY has caught people's imagination, the flagship Satyam Computer
Services, a software services company, has grown from a turn over of less than Rs4.7 crore in1993 to Rs679 crore in 2000(146 times) and its net profit 149 times from Rs 90 lakh to Rs134 crore. Satyam today has become folklore in Andhra Pradesh.

Satyam now has six development centers in India, seven overseas and marketing offices in 30 countries. The company services over 140 multinational and Fortune 500 clients, many of them among the largest corporations in the world.

To increase technology competency continuously, the company has started a Tech Guru scheme. These are top line tech professionals from the global IT industry, who come to the impressive Satyam Technology center (STC), Hyderabad and conduct courses for about two weeks. Already nearly 30 such professionals have been to the center. A brainchild of Ramalinga Raju, STC is perhaps the most impressive corporate campus in India and would be well placed in the rest of the World.

Choosing the right partner @ speed of thought:

Choosing the right partner in software services the world over, has been the key strength of Ramalinga Raju. The November 1999, the all-cash Rs499 crore India-world deal looked astronomical. It made several people to sit up and take notice. Nasdaq certainly did. It gave an even higher valuation to Satyam's subsidiary - Satyam Infoway (Sify), than before. Consequently, its market cap went up by $800 million.

Recently it has tied up with Computer Associates international to provide online access to advanced E-business applications for small and medium enterprises. The venture will have an initial investment of $3million.It has also entered into an agreement with Texas-based Enterprise Inc. to enable E-market solutions for traditional businesses and dotcom companies worldwide. Focusing on the auto sector, Satyam decided to tie up with TRW under which the latter will outsource to the venture at least $200 million worth of projects, spread over a five- year period. In June Satyam Infoway Ltd took 25% stake in the popular Cricket website by issuing $37 million worth of American Depository shares (ADS) in an all stock deal.

SIFY's buying spree continues. It has just announced that it has signed an agreement to buy-out 100 per cent of for $8.1 million. It is an all-stock deal.

Now Satyam computers is tying up with CCMB(Centre for Cellular and Molecular Biology) in bio-informatics, a hot new field which combines molecular biology with data mining and warehousing in information technology. An 'MOU' to this effect is to be signed soon. True to its reputation for speed, Mr.Raju is in advanced discussions with CCMB for setting up an International training center in bio-informatics, among others.

How he runs the Company:
Raju has always felt that to really succeed one must have a vision and must be ready to take risks. That's the reason Satyam's management style is unique. It does not function as a normal pyramidal hierarchy. Every department or division is formed as a circle where the head operates as a CEO of an enterprise, with all the responsibility of running an independent company, including making profits. Even though the perks in Satyam are lower than the industry standards, What holds the staff together is Raju's unique "power in one" philosophy that promotes togetherness on the mind's plane, including the singing of a corporate anthem together. Its staff attrition rate is a half of the industry's turnover of 15 per cent per annum. Content wise, the crux of the philosophy is Japanese. Raju recently received the Ernst & Young Entrepreneur of the Year Award for the Services sector. In the manner true to him he explained that he was receiving the award on behalf of all Satyam associates.

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