Scam-hit Satyam turns World Cup star
By Raja Murthy
Why do we fall, Master Bruce?
So that we may learn to pick ourselves up.
- Batman Begins
MUMBAI - Telecasts of the
football World Cup from South Africa are embedded with one of the more
remarkable stories of the fall and rise of a major corporate entity - the eight
World Cup sponsors flashing on stadium digital advertising boards include the
name of Mahindra Satyam, formerly Satyam Computer Services, the company shamed
last year in a US$1.8 billion accounting fraud.
In January 2009, Satyam, India's fourth-largest software company, was drowning
in the country's worst corporate scam, one that
threatened to deal a crippling blow to investor confidence in India. The global
media called it "India's Enron".
Now guided by new chief executive C P Gurnanai and renamed as Mahindra Satyam,
the company has joined US companies Budweiser, Castrol, Continental and
McDonald's, South Africa's MTN and Baoding, China-based Yingli Solar, as sponsors of
the world's most-watched sporting event. More than that, its software
essentially is keeping the entire show on the road.
Barely a year ago, the disgraced software giant was written off as a hopeless
disaster. "Rebuilding Satyam's reputation may be a near-impossible task,"
sighed the British daily Guardian on January 15, 2009. A breakdown in trust,
industry experts said, was fatal for a major information technology service
provider.
India's Prime Minister Manmohan Singh was so concerned about the Satyam fallout
that he asked his office to give it top priority - giving the instructions even
as he was being wheeled in for heart surgery.
But by this month, Satyam has emerged as the only South Asian sponsor of the
Federation Internationale de Football Association (FIFA) World Cup,
demonstrating remarkable resilience to remain standing after a crisis of such
dimensions.
The company struck a deal to provide the World Cup with information technology
(IT) services in 2007, and the agreement survived Satyam's January 2009 fall.
As official IT service provider for the World Cup, Satyam developed a
first-of-its-kind, entirely web-based core "event management solutions" system.
Satyam software helps manage more than $1 billion in assets (such as cell
phones, flat-screen TVs, laptops and other expensive equipment used in the
World Cup), and co-ordinate and transport more than 230,000 staff, volunteers
and delegates from over 40 countries - including 10,000 daily trips in a fleet
of 1,000 cars, buses, trucks and vans. It enables electronic ticket sales and
accreditation for the event watched by 2.4 billion people across over 214
countries.
Led by Chetan Joshi, Mahindra Satyam's program manager for the FIFA engagement,
a 130-strong group of Indian technicians administers the software from a base
in Johannesburg, the largest team from a single country and company
participating in the World Cup, the number most closely matched only by a
122-person BBC crew. The fact that no disaster has yet been reported in World
Cup logistics management is a triumph for Satyam.
Ironically, while the fraud-ravaged Satyam keeps the essential communications
of the World Cup running, it is also delivering India's biggest contribution to
the event, the Indian football team being quite absent. The country ranks 133rd
out of 210 countries in the latest FIFA world football rankings - by far the
lowest among the 12 nations with a trillion-dollar-plus economy. The nearest is
China, ranked 84.
Yet a cautious Mahindra Satyam is sparing the trumpet over its World Cup coup,
refraining from any advertising blitz on its South African success. The new
company website though blares on its home page: "FIFA trusts Satyam. Discover
why".
"Trust" was the word least associated with the company after the night of
Friday, January 9, 2009. Founder-chairman Ramalinga Raju was jailed after
confessing to years of fudging accounts to fake profits for a company whose
name "Satyam" means "truth" in Indian languages.
Satyam was expected to speedily share the fate the mega-fraud companies like
Enron, Worldcom and Barings Bank in the rubbish heap of corporate history.
Instead, hopes for a Satyam turnaround appeared as early as June 2009, when the
$6.3 billion Mahindra Group took over the company with a 51% controlling stake
for $628 million after putting in the highest bid for an initial 31% stake.
Satyam became part of Tech Mahindra, an IT services provider to the global
telecommunications industry.
Mahindra Satyam has recruited 3,000 new employees since April this year. The
company is short-listed in major deals such as a $250 million outsourcing
contact with the Britain's National Grid power company and it renewed a
five-year contract with pharmaceutical giant GlaxoSmithKline in May.
The company's management points out that Satyam has not depended on government
handouts for its recovery, which is strong enough for it to invest $100 million
in new corporate infrastructure in Chennai and at its headquarters Hyderabad.
The challenges have been considerable - a credibility crisis of epic
proportions, litigation, an exodus of employees and the loss of major clients
including the US government, Nestle, General Motors and General Electric.
Recovery kicked in after a top-to-bottom clean-up process. The leadership was
revamped, decision-making processes were trimmed, and innovations were made
such as combining sales and delivery operations in the same individual.
An elaborate new "Code of Ethical Business Conduct" was introduced, which says
the Mahindra Satyam policy is to "comply strictly with all laws governing its
operations, and to conduct its affairs in keeping with the highest level of
moral, legal and ethical standards."
Yet doubts and fears linger, with concern that Mahindra Satyam might still end
up like a convalescent prematurely celebrating recovery before unceremoniously
being dragged back to the surgery table.
The Damocles Sword comes in the form of Serious Fraud Investigation Office and
the Central Bureau of Investigation, which are continuing their forensic probe
of the nearly $2 billion fraud. The trial also began this month of former
chairman Ramalinga Raju, now hospitalized for heart and hepatitis-C related
ailments.
At the Bombay Stock Exchange (BSE), where the company is still listed as
"Satyam Computer Services Ltd", the shares are hovering at around 93 rupees,
little changed over the past six months and down from their 12-month high above
128 last September. The stock was worth around 540 rupees in 2008, based on, as
it turned out, Ramalinga Raju's faked profits.
Chief executive Gurnanai gives two more years for a full recovery. He told
local journalists that the company had retained nearly 400 clients and bagged
more than 50 new ones, testimony to it moving in a happier direction. He hopes
to expand Mahindra Satyam to areas such as infrastructure management, health
care and engineering services.
Still, more skeletons may yet tumble out of the Satyam cupboard, with only Raju
and his accomplices knowing what further shocks may still lurk in the two
terabytes (over two million megabytes) of data seized from the computers of
senior company officials and which forensic accountants are now closely
investigating.
Between now and the next football World Cup in 2014, investors may find out
just how low Satyam had fallen, and how high it has to go before it can
consider itself truly back among the leaders of India's software companies.
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