Satyam has the potential to be resuscitated
The closing of an inglorious chapter in Satyam’s life book is both an occasion of good riddance and happy arriviste. Ingrained in our world view of evaluating businesses is an accounting principle that developed to discern a mercantile world. And while it is necessary to employ such an evaluation matrix by investors and others, it is not sufficient to evaluate Satyam, or for that matter any business that is engaged in the business of development of knowledge artefacts.
The quintessential artefacts in the IT services industry are specific development methods or processes, reusable codes, domain expertise and other sources of tacit knowledge. While this knowledge is unquantifiable in the strictest sense of accounting assets, their currency has increasing returns to scale. So Satyam has the inherent potential to be resuscitated in the first place.
Tech Mahindra’s acquisition is the second source of Satyam’s survivability. That this acquisition has been acknowledged with a thumping yes by the stock market and by sections of analysts and industry leaders is not without material considerations. In retrospect now, the Tech Mahindra-Satyam dyad made every sense, even after factoring the vicissitudes of time.
Here are two businesses that are complimentary in every sense — in terms of verticals they serve and the strengths that they posses. Lastly, their mutuality cancels the business risks of standalone model. Satyam’s customer gain assurance on continuity from this acquisition and with BT on the board as a promoter, adds to the sense of comfort.
Tech Mahindra’s acquisition of Satyam is not without challenges, particularly on how well Tech Mahindra executes the integration process and in there lies the source of Satyam’s vulnerability and sustenance. A few quick observations. Over the past few years, Satyam was slowly falling to the clique of price discounters.
To serrate the edges of the teeth and gain competitiveness on the value proposition remains an important task. On the manpower front, the Tech Mahindra-Satyam combination definitely looks bloated. With IT budgets under pressure across the spectrum, growth momentum in near term may not adequately compensate for excesses of size and hence, some degree of rationalisation on manpower front will be warranted.
The closing of an inglorious chapter in Satyam’s life book is both an occasion of good riddance and happy arriviste. Ingrained in our world view of evaluating businesses is an accounting principle that developed to discern a mercantile world. And while it is necessary to employ such an evaluation matrix by investors and others, it is not sufficient to evaluate Satyam, or for that matter any business that is engaged in the business of development of knowledge artefacts.
The quintessential artefacts in the IT services industry are specific development methods or processes, reusable codes, domain expertise and other sources of tacit knowledge. While this knowledge is unquantifiable in the strictest sense of accounting assets, their currency has increasing returns to scale. So Satyam has the inherent potential to be resuscitated in the first place.
Tech Mahindra’s acquisition is the second source of Satyam’s survivability. That this acquisition has been acknowledged with a thumping yes by the stock market and by sections of analysts and industry leaders is not without material considerations. In retrospect now, the Tech Mahindra-Satyam dyad made every sense, even after factoring the vicissitudes of time.
Here are two businesses that are complimentary in every sense — in terms of verticals they serve and the strengths that they posses. Lastly, their mutuality cancels the business risks of standalone model. Satyam’s customer gain assurance on continuity from this acquisition and with BT on the board as a promoter, adds to the sense of comfort.
Tech Mahindra’s acquisition of Satyam is not without challenges, particularly on how well Tech Mahindra executes the integration process and in there lies the source of Satyam’s vulnerability and sustenance. A few quick observations. Over the past few years, Satyam was slowly falling to the clique of price discounters.
To serrate the edges of the teeth and gain competitiveness on the value proposition remains an important task. On the manpower front, the Tech Mahindra-Satyam combination definitely looks bloated. With IT budgets under pressure across the spectrum, growth momentum in near term may not adequately compensate for excesses of size and hence, some degree of rationalisation on manpower front will be warranted.
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