Anand Mahindra: The Hard Work Begins Now

Creation is only the first phase. You then have to move on to the next phase of sustaining that creation to the realm of Vishnu the preserver… Perhaps that is why Vishnu comes not in one, but in ten incarnations.
- Anand Mahindra, February 13, 2008, Nasscom Leadership Summit

Anand Mahindra has got his first Vishnu moment. The creation of Mahindra Satyam from the wreckage of Satyam Computer Services has been well accomplished. Braving scepticism about the future of a company stripped down by its own founder, Mahindra entered the takeover battle and emerged victorious. Now, he has to preserve what he has created. Anand Mahindra has already set the goal. At the Satyam Leadership Council meet in May, he told the top 60 managers of Mahindra Satyam: “Mahindra group companies are usually expected to be number one or two in their line of business. Mahindra Satyam should not lose sight of this goal.”

It may sound simple, but the task is not going to be an easy one. Mahindra is talking of taking the Tech Mahindra-Mahindra Satyam (TMMS) combine to the ranks of Tata Consultancy Services (TCS), Infosys, Wipro and Cognizant Technology. TCS’ revenue has touched $6 billion, Infosys’ has reached $4.7 billion, Wipro’s IT services revenue is $4.3 billion and Cognizant’s is $2.8 billion. All these companies have been growing at more than 20 percent until last year, though not this year. The TMMS combine will end 2009-10 at $2.4 billion ($1 billion for Tech Mahindra and $1.4 billion for Mahindra Satyam). In all probability, it will have a single-digit growth rate for the next two years.

The Goal
So what should the team aim for? There has to be a slightly more achievable short-term target. The two companies can emulate Lance Armstrong or Roger Federer; they can look to somehow remain in the game, be in contention, until the adverse situation passes. For instance, they could simply choose to shadow Cognizant, the guy at the fourth spot and strive to be at least as profitable.
To stay on course with this strategy, TMMS sales will have to grow at almost 20 percent each year for the next five years. The combine’s costs have to decline fairly rapidly as well. And to make it all stick together, the two cultures of Tech Mahindra and Mahindra Satyam have to reach equilibrium, so the first two objectives are achieved.

“Very few companies would have been able to keep their customer happy if their company was in as deep a crisis as Satyam was four months ago. We are going to use that passion… that resolve… to keep the company energised as we move into the growth phase,” says C.P. Gurnani, CEO, Mahindra Satyam.

But to give Mahindra’s vision a fighting chance, the new team must remove
all traces of the inertia that Satyam gathered in the post-scam days. New customers must be acquired, key employees retained and employee morale protected through all changes.
The key to growth is sales. Now that the IT services business is facing huge headwinds from the global slowdown, that task is even more important. Gurnani is a sales guy from the hard-charging HCL school, where he spent his initial years. He and his team have put in place a new organisational structure to replace the dysfunctional old Satyam.

“The Mahindra guys have been moving at lightning speed. In just two months, they have figured out who is needed where and who isn’t needed at all. Amazing,” says a Mahindra Satyam programme manager based in the US. Speed was essential because the older structure was a mish-mash of overlapping territorial rights. Now, there will be 11 Integrated Business Groups (IBGs). Each will house sales teams and delivery units. Most of the IBGs will be focussed on an industry like banking or telecom or manufacturing.

The company will also have competency business units (CBUs). Each of these will house a functional expertise like enterprise application or consulting. Satyam also has a number of people — relationship manager, delivery manager, solutions architect, programme manager — interfacing with the customer. Now, there will be only two people: Relationship manager and the delivery manager.

Shape of Things to Come
This restructuring is not unusual as all the top four Indian IT companies follow the same approach. This industry-focussed structure needs a sales and marketing team that really understands forces that are shaping the industry. For instance, “you would typically need to staff the relationship manager role with MBAs who can do blue-sky [concept-based] selling,” says Phaneesh Murthy, CEO of iGate Global and one of the pioneers of this sort of selling.

Cognizant is a very good practitioner of this art as well and has been one of the top recruiters at B-schools for people with three or four years of experience.

In the past few months, a lot of talent of this kind has left Satyam. “It is an area of concern for us. But now with Mahindra Group’s weight behind us, we hope we will be able to attract this sort of talent,” says Hari T., chief people’s officer and also chief marketing officer. Even in the past, Satyam has had trouble recruiting people for such positions.

The term for such people was “lateral hires” then. “Most of the lateral hires of the past have not delivered. The company hires someone with seven years’ experience in selling to Indian banks. That skill is not good enough to sell to Citi, Wachovia or RBS,” says a senior programme manager based in the US. Companies like Infosys, TCS and Wipro have all hired Americans or Europeans at senior levels. Cognizant has hired senior people from places like Merrill Lynch. Satyam needs to do exactly this. It doesn’t have time to train someone on the job. This means forking out dollar salaries, but that’s what is needed.

Mission Impossible
The man who has been given charge of the biggest industry group — healthcare and banking — is Keshab Panda. He is an old Satyam hand who increased the business from Europe from 7 percent of revenues to 22 percent. In these times, when the US market outlook is uncertain, this contribution is all the more important. But Panda, for the most part, had lived in the shadow of Ram Mynampati, the big satrap of the old Satyam, who as one insider said, “has become a victim of circumstances”. Mynampati has had to quit because “he was the only board member who had not quit after the scandal broke and he can’t visit India as he fears arrest”. Panda steps into big shoes though because Mynampati, urbane and suave, looked the part. He could talk strategy and hobnob with the Wall Street types. But some insiders reckon that Dr. Panda’s low-profile style may work great in these times.

Panda’s old job in Europe, Asia and all other non-American markets has passed on to Atul Kanwar who had been part of many significant sales wins at Tech Mahindra. “Atul is a very high energy person and really connects to customers,” says Gurnani. Kanwar has already started chairing the weekly sales call in Mahindra Satyam, nicknamed the Rainmakers call.

Apart from fresh sales, the new structure is making delivery heads responsible for increasing business from existing accounts. “Nobody knows more about business opportunities in an existing account than the delivery people,” says A.S. Murthy, the interim CEO who is now CTO. Indeed, most delivery heads are brimming with enthusiasm. “I think we should try to get back the business that we lost,” says D.V.S.B. Ramachandra Raju, who heads operations at the enterprise applications group.

But, this is a sort of exuberance that the delivery heads shouldn’t indulge in much. It may be a waste of time. A part of the business that Satyam has lost will not come back as those clients have cut back spending. “For many others, it doesn’t make sense to transfer business back because it is too expensive,” says Phaneesh Murthy. The delivery group should look at clients that have stayed and look for any small opportunity to sell more services.

But the guys to watch there are the team of T.R. Anand who has grown the TIMES (Telecom, Internet, Media, Entertainment, Semiconductors) IBG from 6 percent of revenues to nearly 20 percent. His delivery head is Ravi Bommakanti, one of the most solid senior delivery people in Satyam, and the man who has handled the coveted GE account. He was one of the guys who ensured that the GE account was never staffed by very senior and costly resources. This became possible because of extremely good knowledge management of all processes on that account. The saving thus earned was passed on to GE. If he manages to do the same with TIMES, it would add to the bottomline because this account makes up for almost 20 percent of Mahindra Satyam’s revenues.

Those Left Behind
Until now margin employee reduction is the one lever the company has used to boost margins. Since the scandal broke, almost 6,000 people have quit. Now 10,000 people have been asked to go on leave with 40 percent of their salaries (under the “VPP” or the Virtual Pool Policy). Insiders expect another 3,000 people to leave.

“There is no choice. If this company has to make money, then we just have to let these people go. We can’t save them,” says a senior manager. But consider this. In January, Satyam had around 40,000 people. And after six months, it will have about 25,000. That means one out of three employees is on his way out. “I have lost countless friends in the past few months. And there are many like me. Who is going to give these guys a job in this environment? How can you work with this sort of uncertainty?” asks a senior manager in Satyam.

This is exactly the sort of feeling Gurnani wants to avoid. “This company has been through a lot of pain and anxiety. I want to make this a happy place to work. It is the responsibility of all of us who have stayed in Mahindra Satyam to work hard so that we are able to recall people and grow our business,” says Gurnani. About 600 people have indeed been called back ever since VPP became a reality.

To be fair to the Mahindras, they rejected the painful and expensive option of going in for mass sacking. It is estimated that the severance bill would have touched Rs. 250-300 crore for 10,000 people. But under the six-month soft severance method, people have been given time to look for jobs while being paid 40 percent of their salary. The knock is now about Rs. 50-60 crore a month, over six months. “And if we win more business in coming months, we will recall people from the VPP,” says Hari. Employee reduction and closing down some facilities should add about 5-6 percent to the gross margins of the company as estimated by Nomura Securities.

It is not all going to be easy. The Mahindra Satyam team will have to go out and sell in an extremely unfavourable environment.

“Most senior Satyam sales people have prospered during the boom time of IT from 2002-2008. Today getting new business is really tough,” says a senior Mahindra Satyam staffer. Hari believes that it will take at least a month before that picture becomes clearer.
Only when the sales engine starts kicking in and new business starts coming in can the company dream of Anand Mahindra’s bigger vision. Until then, it is time to “hunker down and work”!