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Mahindra Satyam? What's in a name?

David Mitchell | June 24, 2009
The new branding marks the start of the rebuilding exercise one that will need to be approached with care and patience.

The post-acquisition integration in many companies turns into a territorial minefield where decisions are made in the interests of demonstrating decisiveness and a long-term vision. However, this is not always the right thing and certainly would not be the right strategy for Mahindra Satyam and Tech Mahindra. In the generic case, value can often be destroyed through hasty decision-making, and this would certainly be the case if Mahindra Satyam and Tech Mahindra were rapidly crashed together.

Beyond the pragmatics, the question of corporate culture will be the next talking point. Each of the brands that make up the new Mahindra Satyam brand brings cultural heritage. Of the five values espoused at the launch of the new brand (good corporate citizenship, professionalism, customer first, quality focus and dignity of the individual), the focus on the dignity of the individual is, in our view, the prime one. All of the other values will flow from here.

Remember the cost base and read the signals right

The Tech Mahindra team are patiently and calmly working through the problems that they inherited with the Satyam acquisition, even though it may be tempting to rush through and attempt to fix all of the issues in a few weeks. It will take some time to work through the phases of understanding, stabilisation, alignment, integration and growth that their plan will inevitably need to encompass.

There will undoubtedly need to be realignment in the Mahindra Satyam cost base, to cope with the revenue realities of today rather than the Raju-esque figures. When these cuts come as they inevitably will care will be needed to interpret them correctly. Major cost reduction could not be driven out of integration synergies in IT, marketing and other back-office functions and the market should not expect this. Instead, it needs to be the service delivery functions that bear the brunt of any cost reduction, since they are where the biggest cost-line items can be found. Equally, the market needs to be careful about reacting adversely to any future Mahindra Satyam cuts. Significant cuts will be needed to realign delivery costs with real revenues. The market must recognise that these cuts will inevitably be designed to protect shareholder value, while still ensuring that customer commitments are delivered.

As SVP IT Research, David Mitchell is responsible for Ovum's global IT research activities.    

 

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