Mahindra Satyam Turnaround- The Phoenix That Rose From The Ashes Story

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Satyam Computer Services has probably been the buzzword of the year gone by, albeit for unfortunate reasons. Satyam was one of the top most IT services company and shouldered the industry veterans like Infosys and Wipro. Who would have known what was cooking behind the glamorous walls and the highly profitable balance sheets.

Evidently Satyam was to become a part of one of the biggest Corporate Frauds in India.The man in charge, Mr.Ramalinga Raju evidently was cooking the books beyond recovery. We have had so much coverage here on the Satyam fiasco that there is no point going over it again. It all started with the Satyam-Matyas fiasco and then things got really ugly when Mr.Ramalinga Raju confessed his crime in open.

It opened the flood gates for the company and the in direct consequences had the Government stepping in. Eventually, Tech Mahindra ended up buying Satyam Computer Services and rechristened it to Mahindra Satyam.

There were speculations that Tech Mahindra might have made a mistake given that the clear financial details were very much under the wraps even then. Moreover, Satyam was no small fish, and Tech Mahindra would have had to really pull the plugs to make it work. The timing couldn’t have been worse as the global markets plummeted and IT budgets just vanished out of the blue.

However, cutting the long story short, Tech Mahindra has done a brilliant job of bringing the almost doomed company back on its feet.

The turnaround is even more spectacular given the industry Satyam operated in. IT services is a data sensitive industry, where confidentially and trust form the backbone of its sustainability. With the image that Satyam got itself, there were serious doubts that it will be possible to even restore the existing clients leave aside acquiring new ones.

But, Mahindra Satyam has risen from the ashes. Aided by an improving economy and some real brand building , Mahindra Satyam is finally getting into shape. The evidence stems from the fact that Mahindra Satyam is back in hiring mode.

It has called back 2000 of its employees which were relegated to the virtual pool.

Mahindra Satyam is clearly expecting increasing workload on account of acquiring new clients. More so, it is honouring the commitment made to its employees and looking to utilize the existing employee base before looking outside for hiring.

The new management board has indeed assed and executed the damage control meticulously and it is now aiming for growth. Infact, Mr.Mukesh Ambani cited Satyam’s turnaround as a great example of improving Corporate governance in India , during the show ‘The Politics of Economics’.

It is only the beginning and probably a lot needs to be done but the revival has been speedy and efficient so to speak. With improving IT spend forecasts, Mahindra Satyam would be gunning to regain its lost glory.

I remember there were news doing the rounds that Satyam Corporate Governance fiasco became a case study at one of the premier MBA schools.Wonder if Mahindra Satyam turnaround accounts for another case study on How To Revive A Maligned Brand

Who do you think should be credited for the quick turnaround of Satyam ?

An improving marketplace? – the strong technical fundamentals of the company? or the new management who steered the company? My vote goes for the management because it can be seriously daunting to chart growth plans and work towards improving the image of a company at the same time.

  1. Ankit says

    Hi Ajit,

    I agree when you say that Mahindra might have got it for cheap.But then given the market valuation at the time (and the liability uncertainity), the industry anaylsts did suggest it might have been at a little premium.

    I second ur thoughts when u say that Satyam wasn bad as a company.But, IMO brands work on trust and repo. With the image tarnished, Satyam was heading towards destruction as it is.It had lost face with the World Bank and then the whole fiasco happened.And hence, i mentioned that the branding was spectacular.

    1) yes, management ensured that they regained t trust with existing clients and also went after new clients.
    2) I agree but isnt that encompassed in the branding part.moreover, it has been discussed here already so didnt wanna repeat it.
    3) Yes, the cleansing did help the cause.Come to think of it, it happened across the sector with IT companies getting selectice bout who and how much they hire.

    may be you thought that it wasn a worthy turnaround story.However, with so much of bad press going around it, it seems the only thing the media seems to care is bad news.It never hurts to write something that deserves some praise.May be the title went overboard, but atleast we are on the same page when we say that the management deserves a pat on the back for their work

  2. ajit says

    I would not say that. In fact Mahindra bought it much cheaper than expected. Even though business satyam had was not as much as Raju said it has, but it was still pretty good. So I would not call it really a risen from ashes kind of thing. I agree mahindra did lot of work in branding it right. But the amount of credit that is given to turn around story here is not required and undeserved.
    Credit goes to –
    1. Management making sure that important clients are not leaving the ship. This was not too hard in my opinion. Services companies rise and fall with people. As long as mid management and developers were around – clients were confident. In some cases clients started india ops by bringing entire team from satyam to their india subs.
    2. Attaching brand of mahindra and tech mahindra to satyam was also important.
    3. Good thing was – lot of undeserving talent that got into satyam was already cleaned up and hence better cash-flow.

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