By Simon Bragg, ARC Advisory Group

Satyam is a leading global business and information technology company, delivering consulting, systems integration, and outsourcing solutions to clients in over 20 industries. The company employs 50,843 and for FY 08 achieved revenues of $2.1 bn, of which EMEA accounts for approximately 24 percent.  Satyam has succeeded in UK and Germany, from which it derives the larger share of its European revenues.  Nevertheless, Satyam has a presence in Benelux and Scandinavia and has won accounts in France amongst the CAC 40. 

Satyam is probably the Indian outsourcer most committed to manufacturing.  In Europe, by number of accounts, automotive accounts for 15% of customer relationships, Aerospace &Defense 2%, and other manufacturing about 9%.  Life Science 9% and Energy/Utilities 7% are also major verticals.  Unlike its competitors, banking and finance only represents 12% of accounts in Europe and ~24% of its Revenues Globally (FY 2007-08).

Satyam’s culture and modus-operandi

Satyam’s success is probably due to a rather different culture and modus-operandi.  The company is far more open, friendly, and trusting than other IT vendors.  At a recent Satyam analyst event, Bird’s Eye described how they implemented a new SAP infrastructure within 18 months, after a buy-out from Unilever.  The first set of consultants rolled into meetings with an A5 copy of the contract under their arm, so that all discussions referenced the original contract.  For the consultants, this was probably a great way to manage their risk.  However, for Bird’s Eye, it was just too difficult to discuss issues, to jointly solve problems, and keep the project on track.  Rather courageously, these consultants were fired.

Satyam’s approach was completely different.  The implementation team hadn’t read the contract, and their approach was “fair”, involving give and take, open discussions, and a focus on completing the project.  Nor, according to Bird’s Eye, did Satyam focus on finding and creating additional work for its consultants.  What impressed me, was that after the weekly meeting, Satyam would provide a quote for any additional work by the end of that day.  Satyam’s culture of openness and trust even extended to the analyst meeting: senior and middle management executives were trusted and empowered to talk to analysts, alone, without being chaperoned by junior, clueless,  PR executives -  something that is sadly rather rare these days. 

Perhaps this culture arises because Satyam’s management approach is different.  Most other IT consultancies measure consultants’ billable hours, which drives behaviors that ensure each consultant remains on site.  Satyam eschews this approach, instead managing the performance of groups.  This also enhances middle-manager’s motivation and Satyam has one of the lowest attrition rates amongst its peers.

Satyam in Manufacturing

Within European manufacturing, Satyam has particular expertise in the automotive sector.  One strategy is to first win projects converting, for instance, 2-D CAD drawings to 3-D.  Then they can expand the relationship to more complex design tasks, such as simulating the interior of the Airbus.  On the plant floor, Satyam provides NC programming services, but they have also solved complex problems – in one case Satyam improved the design of the paint nozzle for an OEM’s paint shop, which reduced the volume of rework.

Satyam’s Acquisition Strategy

Satyam’s strategy is to expand their capabilities by acquiring relatively small, boutique consultancies with a strong local presence.  Recent examples include:  S&V in Belgium, Bridge Strategy, Caterpillar’s Market Research and Customer Analytics, Citisoft, Knowledge Dynamics, and Nitor.  Satyam’s value add is that the company is global, and so can replicate these consultancies capabilities and expertise globally.

S&V is a good example of a consultancy with a solid methodology for improving supply chain performance.  S&V targets six industries, namely Food & Beverage, Pharmaceutical, Paper/Steel, Industrial manufacturing, and Hi-Tech.  Essentially, S&V takes the business strategy, and defines appropriate supply chain policies and processes. 

There are seven elements to aligning the business and supply chain strategy:

• Align cost & profit offering: This is based on a fairly detailed cost to serve model, which calculates individual customer and product profitability.  For instance, this step reviews how many SKU’s there should be, and where customers should be paying more.  This step is supported by Equazion, which takes the company’s data, and builds a double cost to serve model – i.e, calculates all the discounts each customer receives, as well as a detailed breakdown of the supply chain costs.

• Align Network: is essentially supply chain network design, using Ortec’s Boss tool, and the supply chain council’s SCOR model.

• Deploy: calculates inventory and safety stock levels at each location.

• Relationships: identifies which customers and which suppliers should be part of a VMI or SMI program

• Asset: determines whether logistics should be in-house or outsourced, and if outsourced to which 3PL’s under what terms and conditions

• Technology: identifies which IT solutions are appropriate.

Once these seven steps are aligned, S&V then uses techniques such as OEE, and process mapping to improve key processes within manufacturing and the supply chain.  Although the acquisition only completed in April, S&V has already won a couple of projects in North America.

Last Words

In short, Satyam is one of the few IT companies with over a billion in revenues, that retains the flexibility, openness and client management skills of a $5 million turnover company.  There is undoubted expertise in manufacturing, especially within Automotive.  Satyam’s success in Europe, to date, has been mainly based on its relationship with global OEMs.  Its challenge is to replicate this success amongst Europe’s mid-market manufacturers, especially outside the UK and Germany.