Satyam dead, but can TechM emerge from its shadow?

Tech Mahindra had acquired Satyam as part of a government sponsored bidding process in April 2009

On June 24, twenty six years ago Satyam Computer Services was born in Hyderabad. But, a day later, a group of people were celebrating its death in New Delhi.

The brand, which became one of the cornerstones of India’s technology story in the late 90’s and early 2000’s, will finally cease to exist after an announcement on Tuesday that Tech Mahindra and Satyam will be formally merged and the new entity will be known as Tech Mahindra.

Tech Mahindra had acquired Satyam as part of a government sponsored bidding process in April 2009 after its founder B Ramalinga Raju, confessed to a large-scale accounting fraud in the company. Pending legal hurdles, the companies remained as two separate entities even as they were operating as a part of one group.

“Like any modern day couple, we were living in together for the last four years,” Vineet Nayyar, the vice-chairman of the new entity joked adding that the two companies are married now. “All the excess weight has been removed, now we need to add more bone and muscle to the company,” he said referring to the fact four-year long process to create synergies between the two companies.

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Tech Mahindra has time and again indicated that it would prefer to do away with the Satyam brand which was restricting its ability to participate in large contracts because of the 'tainted’ image of the previous company.

 “I think when a brand gets sullied, you can't wash it like a piece of cloth. You have to burn it and that's what has happened. This is what I will term as shudhikaran of Satyam altogether," said Harish Bijoor, a brand and business strategy consultant and CEO of Harish Bijoor Consults.

According to C P Gurnani, the CEO & MD of the merged Tech Mahindra, the management decided to not give a new name to the new entity based on a 'majority view of employees, customers and analysts’.

While the management maintains that there will be no major changes in the operations, they agree that the merger will have a positive rub off.

“The benefit will be in terms of perception; people will view us as a single strong entity now,” said C P Gurnani, the CEO & MD of the merged Tech Mahindra. He added that the company has requested the Registrar of Companies to “scratch” out the name Satyam from its books.

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Even if the management of Tech Mahindra refuses to publically acknowledge, its officials will privately reveal how there was an overhang of a fraud-ridden Satyam on the group.

“There were many government deals, both national and international where we could not participate due to Satyam’s accounting not being in order,” said an official of the company. “Now, that window opens for us,” the person added.  

The combined will now have revenues of $2.7 billion and 84,000 employees, and will become the fifth largest software services company in India.

According to Jaideep Mehta, country general manager of research and consultancy firm, IDC India, the move will clearly remove the insecurity within the company about the future management structure and create strong integrated market strategy.

“Going away of the Satyam names means the stigma gone and one should not forget that Mahindra is a strong brand with global appeal, so it’s a clear advantage in these turbulent times,” Mehta added.

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Post the merger around half the company’s revenues will come from the telecom vertical as Tech Mahindra was originally focused completely on one vertical and has since been trying to diversify into other verticals using Satyam’s existing presence in them.

Partha Iyengar, VP and distinguished analyst in research firm Gartner said that integration issue has been long pending between the two companies and so “the Satyam brand had pretty much disappeared and gotten ‘subsumed’ into the Tech Mahindra brand by default.”

Iyengar said that though it is unlikely to cause much disruption in the market, Tech Mahindra has gone with the lower risk, but lower reward option with this branding approach.

“It has possibly lost an opportunity to generate some excitement around the merged entity by coming out with a totally new brand and launching it with a big bang,” Iyengar.

The company has also appointed Milind Kulkarni as the chief financial officer of the merged entity replacing Sonjoy Anand, who decided to pursue opportunities internationally.