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Satyam bets big on business in Europe

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Drs Peter M Heij, Head, Continental Europe
Drs Peter M Heij, Head, Continental Europe

Any European company would like to start its business in a modest way and expand in future.

Satyam Computer Services, India’s fourth largest software exporter, is eyeing to tap a large portion of the European market. The company is targeting 30 per cent of its total global revenue from Europe by financial year 2010.

The IT major had been investing carefully and at the right places. It aimed at providing the preferred near-shore option for European companies.

The company wanted to leverage strategic initiatives such as nurturing global accounts in the region, consultative and solution-based selling and forming alliances with local technology and business partners, according to Keshub Panda, Head of Europe Operations.

Mr. Panda told Indian journalists who visited Satyam’s development centres in the U.K and Germany recently that the company hoped to see a higher IT spend in areas such as application outsourcing, project shared services, business process outsourcing and infrastructure-related outsourcing in Europe by 2010. The main aim of Satyam in the U.K. and Europe was to have deeper engagement with the major accounts and increase the revenue growth above the market trend. With the current U.S. recession, customers were having less money to spend. But business activity would neither reduce substantially nor would come to a complete standstill, added Mr. Panda.

Risk-and-reward model

He said the European region, which accounted for 21 per cent of Satyam’s revenue, had an addressable IT outsourcing market opportunity of $168 billion. The company had adopted the “risk-and-reward" model for scaling up the future outsourcing deals and turn into a partner rather than pure service provider to clients. Earlier, the companies used to adopt time and material model and fixed bid model. With risk and reward model, the companies take a calculated risk anticipating higher returns from the customers.

Mr. Panda said Satyam already deriving a certain per cent of revenue from the risk and reward deal structure. It intended to get into business transformation models instead of plain vanilla ones to increase its margins.

Today, the companies are undergoing business transformation and it became necessary for any IT company to take part in the decision-making of other companies business strategies. It also became important for the IT companies to influence decision making processes of the chief executive officers and chief financial officers in their respective businesses, which was a tough process. This led to the growth of consultancy business vertical.

The Head of Satyam’s Continental Europe, Drs Peter M Heij, said that there was a significant market in Continental Europe that was still untapped.

Market behaviour

On the market behaviour, he said the purchasing behaviour of any European company varies from that of a U.S. company. Any company in this part of the world would like to start its business in a modest way and expand in future. The local content was large when compared to the U.S. It had a protective environment and the companies wanted a blended model in the business. At present, Satyam had 25 per cent local content in its European business. That means, the local companies wanted 25 per cent of their local people to work in the onsite and rest offshore, he added.

According to Satyam penetrating into the European countries, would be done by tapping the small and medium sized companies. It was hoped that nearly 10 to 15 per cent of the small and medium companies in the European market would be tapped by Satyam. It would be providing complete end-to-end solutions to all these SMEs, said Mr. Heij.

Similarly, he said to market their product, the model would also have to be different such as "pay as you use" and ’end-to-end solutions". Under the pay as you use model Satyam will pay for the IT systems based on the usage. Similarly for end-to-end solutions, the company will provide services from installation to maintenance.

He hoped with these strategies, Satyam would be in position to acquire two very large accounts worth $ 100 million and 30 other accounts worth $ 10 million by 2010.

Satyam Central Europe Head Aloke Palsikar, said despite the global financial meltdown, the outsourcing market, in Europe and particularly in Germany and France, was expected to increase. In the present market scenario, the company saw more opportunities than challenges in the European markets, he added.

Mr. Palsikar said though the U.K. market continued to dominate, there was every probability to have change in the ratio. It was hoped that its share together with Ireland would come down from 52 per cent to 40 per cent, while that of continental Europe would increase from 48 per cent to 60 per cent over the next two years. In Q2 of current fiscal, revenue from Europe was 20.60 per cent of Satyam’s total revenue of $ 652 million. The U.S. market had contributed 62.03 per cent of Satyam’s revenue in the quarter. Satyam’s operation in European countries commenced in 1997 and at present has branch operations in 15 countries and presence in more than 20. Its three development centres in the U.K., Germany and Hungary serve over 160 active customers in Europe.

SHANTHI KANNAN

(Recently in London and Germany)


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