Ask Raju and he says that it’s his knowledge "itch", the entrepreneurial ‘bug’ and his talented people, which have been the recipe for Satyam’s success. But for the knowledge itch in him, Raju would have had to remain content in the cotton spinning and construction business. He moved into the business on his return from the US after earning a business administration degree in 1977. Stepping away from the traditional agriculture business, Raju took his first entrepreneurial step by setting up a spinning and weaving mill named Sri Satyam, and, Satyam Constructions, later. However, it took about a decade before the quest for knowledge and the entrepreneurial zeal in Raju finally culminated into Satyam Computers. In 1987, he, along with one of his brothers-in-law, DVS Raju, floated an IT company in the premises of his spinning mill.

Right from day one Raju focused on the exports market though the trend at those times was focusing on the domestic market. He first developed capabilities before tapping the export market. Says Raju, "We felt that if we were successful in the international market, we could always come back to the domestic market."

Raju’s entrepreneurial zeal is now part of the Satyam culture. One of the key initiatives in Satyam has been its novel management structure called "Concept of Circles". Simply put, all the departments are separate units, along the lines of business units. The person heading the department is the CEO of the department with responsibilities of generating revenue and profits.

Other people-oriented initiatives include Raju’s unique "power in one" philosophy that promotes togetherness on the mind’s plane, including singing the corporate anthem together. No wonder, its staff attrition rate is half the industry’s 15% per year.

Raju’s hallmark is also his risk-taking ability. When Satyam began operations, Raju felt that the domestic market couldn’t earn it much margins; they lay in the international market. Also, to win international contracts, companies had to prove their domestic capability. An often-repeated example is the "Little India" project with John Deere. When Satyam offered its proposition to Deere, they just could not believe that an unknown company from India could do this. So in 1992, Raju stationed about 10 of his engineers near Deere’s plant with satellite links—the engineers would upload the software by night. Soon, Deere saw the value proposition in Satyam’s business deal. Another instance of Raju’s risk-taking and vision is the movement into the domestic Internet business while most of the service players were happy with the booming international business.

On yet another instance: while the traditional services model implied that Indian software companies set up development centers in the country to exploit the cost advantage, Satyam has gone ahead and set up four development centers in the US and three in Singapore, Tokyo and London, apart from the six in India. Keeping pace with fast-disappearing global boundaries, this has been a paradigm shift from onsite-led operations to offshore-driven ones. Reasons Raju, "This way we can eliminate the geographical barrier and can claim to our customers that we are right next door." However, since this model takes away margins, it remains to be seen whether the model can actually take off for Satyam or the industry.

All these initiatives have had a multiplier effect on Satyam’s revenues. While revenues have grown by over 146 times since 1993 from Rs 4.7 crore to Rs 679 crore in 1999-00, profitability has moved up by 149 times from Rs 90 lakh to Rs 134 crore.

Up the food chain

The value chain is becoming an increasingly debated topic on which hinges the dreams of India becoming an IT superpower. Most of the top line Indian companies are moving higher on the value chain to move into higher-margin areas. In spite of comparable quality to international players like IBM, EDS and Sapient, Indian service offerings still command lower prices than their international peers do. Satyam has followed on the same path, but with a major initiative on the product front. As the first step toward bringing it on par with international firms, Satyam was among the first companies to go in for the SEI CMM level 5. Thus Satyam has assured a quality process to its present and new customers. The company has moved a notch forward. It tries to solve the customers’ IT problem, just beyond what they ask. Comments Raju, "We have started understanding their business better and try to make them more competitive with our solutions." Satyam’s strategy has been to gain vertical domain knowledge in several fields like telecom, e-commerce solutions and healthcare. The next step: product development in the shape of "Vision Compass". Satyam has formed a subsidiary by the same name and has transferred intellectual property of all the products to the company. According to Raju, one of the things that can define the company’s ability to address business and technological needs at a higher level is the company’s presence in the product market space. The product caters to the collaborative enterprise management space and intends to make ERP meaningful to CEOs and staff alike without the intervention of the internal IT people. After addressing the market, Raju wants Vision Compass to become a passport for its service offerings.

Raju says, "We hope that not only does the product do well but also drive our services as we will usually bundle the product with the services."

Another radical step taken by Satyam has been its Internet initiative. Unlike the software services—which being a high-margin business, many companies are content to keep moving on the same tangent—Raju moved along the non-traditional lines and into the Internet services market with Satyam Infoway (Sify). According to Raju, Satyam’s investment in Sify has been appreciated by several hundred times but more importantly "Satyam is now seen as a company with very good understanding of the Web dynamics" and this has seen more service business to the company in e-commerce and Internet-related business. A look at the revenue break-up also ratifies Raju’s claim. In 1998-99, about 28% were from Y2K projects. Analysts had their doubts over continued growth of Satyam in face of such heavy dependence on Y2K. However, the company got over the Y2K threat and grew by over 77% in 1999-00 as Internet and e-commerce brought in a huge 17% of total revenues. This move up to 27% for the second quarter ending September 30, 2000.

Next stop: Biotech

Raju has moved his base to the US to get closer to the customers and gain more knowledge about the markets to make his next move. Among the new JVs that Satyam has entered into is one with the Center for Cellular and Molecular Biology. The JV will work on bio-informatics, a hot new field that combines molecular biology with datamining and datawarehousing. It is amazing that in the IT field, where an engineering degree is a prerequisite, Ramalinga Raju stands a lone ranger. He leads one of the top IT companies in the country, without an engineering qualification. With the entrepreneurial bug still intact and the knowledge itch still strong, Raju is pushing the Satyam group toward a space in the knowledge economy where Indian service companies have not gone before.

Yograj Varma
in New Delhi

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