Satyam’s brand valued at Rs 3,462 crore

Srinivasa Rao Dasari / Hyderabad

B Ramalinga Raju, Chairman

The brand value of the Hyderabad-based Satyam Computer Services has been pegged at Rs 3,462 crore according to the 2003-04 annual report. For computation of brand value, the profit before income tax (PBIT) was reduced by non-branded income. The brand multiple was estimated based on certain parameters and internal evaluation. Satyam used the Lev & Schwartz model for computing the human resource (HR) value. The HR value is the present value of the future earnings up to the retirement age. The company’s future earnings have been discounted at 19.32 percent. In order to move up the value chain and the next level of growth, Satyam plans to make considerable investments in building its brand. According to the company’s outlook for 2004-05, income from software services is expected to grow by 28-30 percent in dollar terms and would be in the range of Rs 3,097-3,146 crore. Software revenues for the year 2003-04 were up by 25.59 percent at Rs 2,541.54 crore as against

Rs 2,023.65 crore in the previous financial year. Of the total software revenues earned by the company, offshore services accounted for about 42.70 percent (46.89) while 57.30 percent came from onsite consultancy (53.11).

Backlash abates

Citing reasons for the outsourcing controversy in the US, Satyam says that the jobless economic recovery and political expediency in the wake of presidential elections are responsible for this outcry. However, these will subside over a period of time as US industry associations continue to back the offshoring model and are against legislative interference in global trade of services.

Rise in billing rates

B Rama Raju, Managing Director

After witnessing negative pressure last year, Satyam has seen its billing rates stabilise and expects it to go up this year. In some cases, a new customer acquisition has come with higher than average prices. From a pricing standpoint, the earlier models of time & material and fixed bid are also changing in today’s environment. Now, a vendor partner is expected to commit to share risk and rewards and work out a flexible engagement model. Based on this, a portfolio of business engagement models have sprung up. The structure of the engagement model depends on a customer’s business objective and competitive scenario.

Multi-year deals

There have been increasing instances of customers signing multiple-year deals reflecting the shift towards a partnership status with companies such as Satyam. In many service areas, particularly enterprise applications, Indian companies have become a viable alternative to global vendors. Satyam is collaborating with global vendors for system integration deals to offer best-of-breed solution to customers.

Expanding in EU, Asia Pacific markets

The growing share of revenues in Europe and Asia Pacific reflect its enhanced global footprint. The presence of Satyam’s nearshore centre in Canada is expected to strengthen its North American operations while its Chinese subsidiary is expected to make further inroads into the Japanese market in 2004-05. With the Indian economy in a high-growth phase, Satyam expects domestic IT spending to improve considerably and this should further open up growth avenues for the IT sector.