CP Gurnani talks customers and the future
For a man at the helm of a business that has been through so much in the course of this year, Mahindra Satyam's new CEO CP Gurnani looks remarkably relaxed.
With his smile and immaculate suit, Gurnani has been away from home for 12 weeks on a mission to reboot Indian outsourcer Satyam in its new incarnation as Mahindra Satyam.
Once India's fourth largest software and services outsourcing company, Satyam was thrown into turmoil in January this year when the company's founder and former chairman B Ramlinga Raju admitted he had inflated Satyam's profits by £640m over the previous seven years.
Subsequently, Indian telecoms integrator Tech Mahindra paid $351m for a 31 per cent majority stake in the company and Mahindra Satyam was born.
Newly-appointed CEO Gurnani is in London as part of a charm offensive that has seen him travelling the world trying to reassure existing customers and win back those who abandoned Satyam.
Mahindra Satyam's new CEO CP Gurnani has high hopes for the company's future (Photographer: Paul Hackett/Bloomberg News)
However Gurnani faces an uphill battle - customer confidence took a heavy knock in the wake of the revelations and he said the company is now only "marginally cash flow positive". At end of March this year Satyam had a bank balance of $74.6m and it will be another six months before it will be able to restate the true figures for Satyam's accounts over the past three years.
There is a lot of damage for Gurnani to repair, with Raju's revelation appearing to have cost Satyam about a significant number of its customers. Just before the scandal broke the company claimed to have more than 600 customers whereas today Gurnani says that figure has dropped to "400 plus".
"We lost a fair amount of business and it had to go to someone - in certain cases it went to Wipro or IBM or TCS or HP, you name it," said Gurnani, who took over as CEO six weeks ago after moving from his post as president of international operations at Tech Mahindra.
In its Satyam incarnation, the company provided services to 185 Fortune 500 companies, including helping to provide a common technology platform to food giant Nestle and striking a deal with football's international governing body Fifa, to be the IT services provider for the 2010 and 2014 Fifa World Cup and two Confederation Cup events.
While the deals with Nestle and Fifa continue today, there were high profile names among this year's losses, including heavy equipment manufacturer Caterpillar, which dropped almost all of its outsourcing deals with Satyam.
Gurnani said that those companies who decided to drop Satyam were not dissatisfied with the quality of the service being: "The reality is there was an uncertain customer base and uncertain environment and some people were not willing to wait and they had to make their decisions, it's a natural thing.
"In UK and Europe we did not have even one loss whereas in the US particularly the financial services clients were much more aggressive in making the decision of moving on, particularly...
...during the times of uncertainty."
"The people from the CIO down were definitely happy to stay with the company," he added.
"But the people who questioned the wisdom of the CIOs were the chief risk and compliance officers because to them it was not about a single restatement of accounts, it was more about uncertainty of the future status of employees as things stood on 7 January."
Now Gurnani is in the process of meeting former clients who ditched the company, reassuring them that the company has a mostly new board of directors and new executive team, a revamped governance structure.
"We want to win back everybody as the reasons for separation have disappeared. We have got a very strong win back programme," he said.
"We have shown that we are a financially stable company and the governance is moving to the new ownership structure."
His no-holds barred strategy appears to be beginning to pay off - since April the company has signed 24 new customers, mainly based in Asia, India and Africa, and with two in Europe - including an automotive giant and chemical manufacturer.
Last month one of Satyam's existing clients, pharmaceutical giant GlaxoSmithKline, affirmed its commitment to stay with Satyam's progeny, signing a five year contract for Mahindra Satyam to provide SAP and other critical system support.
Further deals with old clients are on the cards, according to Gurnani, who added there are "at least another 10 major firms in the UK and Europe that are about to reveal their faith in Satyam".
But it's not just customers that the outsourcer will need to have faith in the company: it's workers too.
A wave of staff jumped ship after the news broke, with Satyam losing 1,602 employees in February 2009, more than double the 746 who left the month before. The company is keen to hold onto the skilled staff that remain and Gurnani admits that when he is not courting customers, he has been reassuring employees.
Still, Gurnani believes the company is now getting itself back on track: "The cash flow is positive, it [Mahindra Satyam] has some cash after paying debts and legal liabilities. We believe that in six months we will align our operating metrics with the industry benchmarks."
And while Mahindra Satyam will continue to provide to work on projects as the IT services provider for the 2010 and 2014 Fifa World Cup and two confederation cup events, Gurnani said that it was in negotiations over its "monetary commitments" as the sponsor of the 2010 and 2014 FIFA World Cups and the two Confederation Cup events which fall within the 2007-2014.
Looking to the future, Gurnani says that the UK remains a "critical market" for Mahindra Satyam, with the company setting its sights on landing more public sector IT outsourcing deals.
"We want to build in this marketplace. Public sector is part of the business plan being debated right now and there is a keen desire to do more work in partnership with some of the local players."
Having seen Tech Mahindra become the largest telecoms software services in India, Gurnani said that within five years he hoped to see Mahindra Satyam achieve similar dominance in another "three or four verticals", saying that the priority sectors for the company are manufacturing, banking and financial services, public sector and healthcare, retail and consumer packaged goods.
Mahindra Satyam and its parent company Tech Mahindra will be run as separate entities for the time being and Gurnani said that any merging of operations would not take place for at least one to two years.
Ahead of the integration is the thorny issue of how to reduce Mahindra Satyam's workforce to bring staffing costs more into line with the financials of the company, rather than the inflated ones.
Mahindra Satyam is not replacing most of the staff who leave as part of everyday employee attrition, and in June this year, the company set up a programme which saw 8,000 of its around 40,000 staff working from home on reduced pay. Since then, 1,100 of those have been brought back into the outsourcer full time.
The company has already shut down some of its offices and Gurnani estimates that the company has "about 30 to 40 per cent excess space", mainly in its global delivery centres.
Leaving its history behind will be a drawn-out process, as is evident from the grey diamond of the original Satyam logo which still adorns the walls of Mahindra Satyam's inherited offices in Canary Wharf.
But Gurnani is hopeful that Mahindra Satyam can rise phoenix-like, building on the company's strengths in BPO and historic relationship with blue chip companies.
"In all fairness to the previous chairman, he was one of the best social entrepreneurs I have ever come across. He was a visionary that built a great organisation and I'm glad that I inherited that organisation - what he lacked was financial discipline.
"Everyone had written this company off but what helped was the company embraced the change and accepted that we needed to regroup ourselves and to reinvent ourselves.
"We are looking at the rebirth of Satyam as Mahindra Satyam."