In an interview with Business Standard published a year ago,
Vineet Nayyar, Chairman, Mahindra Satyam (now Tec h Mahindra) says that for him, “Ramalinga Raju is a ‘Tragic Hero’ who
plotted his downfall step by step and while people commit crime out of
greed, Raju did it ‘out of pride’.”
He is spot on. To understand this, one must go
back in to the mid-nineties when the company was so small that it ranked a
lowly No. 14 in DataQuest’s ranking of Indian IT companies. When I joined
Satyam in 1996 I was shocked that the company treated its Annual Report so
light-heartedly that it printed copies on cheap news print with lot of typos.
The wisest decision that Satyam took was in
going all out for the Y2K bonanza. This is where TCS, Infosys and Satyam
benefited but Wipro and HCL lost out because they looked down on that business.
We added marquee names, particularly in the US Healthcare and Insurance
business that allowed the company to ramp up rapidly. In addition, the GE business,
though of low margin, added value to the brand. By 2000 we were on a roll and
risen up the rankings. The mood in the company was upbeat. Even after Y2K, the
company did succeed in holding back some of the clients for more value added
services.
However, the organization structure did not
really allow for high growth. Satyam was like a loosely put-together
federation. We had the core management with several Strategic Business Units (SBU)
and a few subsidiaries. Some of the senior managers had joined the company from
larger companies when Raju was still finding his feet. They tended to throw
their weight around particularly at the monthly Executive Council meetings. In fact, at some of the EC
meetings I attended it was embarrassing to watch the Chairman of the company
being harangued by a few of the SBU heads. Raju used to accept this with some
equanimity as he needed these managers more than they needed him. However, it
was also true that some of them were conveniently using the Satyam name and
money to further their own ambitions.
Some of the SBUs were also city centric with
the result the heads were like czars zealously guarding their fiefdom. In fact,
a popular tale was that one SBU head would not allow staff from any other city
to come to his office without prior permission from him. Whenever I had a press
release published in the media the same SBU head used to regularly crack a joke
that I was hired to keep the Satyam stock price up. In fact, even the corporate
HR department could not implement a lot of its plans as the SBUs and
subsidiaries recruited their own HR heads. In theory they reported to the
corporate HR but in practice the local HR person listened only to the SBU head.
However, in the flush of the Y2K bonanza a lot
of these issues were swept under the carpet. But, even then a lot of business
opportunities were lost because of internecine issues. In 1997 the techies at
one SBU had developed an internet-based product called SearchPad that was well
ahead of its time and a great product. SearchPad combined artificial
intelligence and pattern recognition concepts to provide a personalized
information filtering system. Imagine, at that time Google was not even a gleam
in the eye.
Unfortunately, ego hassles between the SBU
head and the head of Satyam’s sales & marketing prevented the company from
putting all its might behind the product launch. Eventually, a junior person in
the SBU, who was still wet behind the ears, was entrusted with the global
sales. The product bombed. A real pity as I was involved in holding an
intra-company competition for the product name and also for the global media
release. My firm view is that Indian IT companies do not have the resources nor
the bandwidth to market consumer technology products on a global scale. Satyam
would have earned millions of dollars if it had sold the technology to a
multinational IT company instead of trying to market it on its own.
The subsidiaries were a drain on the resources
as the investment in setting them up was pretty high but the income generated
was nothing to write home about. In fact, at one stage Financial Institutions
and major investors were pushing for these subsidiaries to be sold, closed down
or merged with the parent company as it was affecting the valuation of Satyam.
Eventually this was done but it was too late.
One subsidiary that has an
interesting story was Satyam Infoway. This case also revealed the visionary
element that lurked somewhere in Raju. In the early nineties, Raju was
convinced that people, wherever in the world they were located, looking for
information on any subject should be able to call one telephone number and get
that information. To this end he set up a small office in Secunderabad and
hired a retired librarian with a PhD (Raju had great regard for people with
doctorates and hired several of them later) whose job was to gather
information. By 1995 the Internet Age was in the nascent stage, but Raju
recognizing the potential hired a senior professional to relook at the whole
business. Thus, Sify was evolved and created an internet revolution in India.
Unfortunately, the subsidiary had to be sold much later because of pressure
from major institutional investors.
But the saddest case was one about a product
called VisionCompass, a web enabled EPM tool developed by Satyam. The product
helped an organization put in place a measurement system that tracked and
monitored its performance. It was considered far superior to the then popular
Balanced Scorecard. This was a product developed from Raju’s obsession with the
idea that performances at all levels across any organization could be measured
in numbers. The idea was okay but he drove the technical development team crazy
for almost two years. He would keep changing the brief at every monthly
progress meeting. This resulted in a huge cost overrun. Finally, even a
subsidiary was set up in the US with a highly paid American CEO. The first
thing he did was change the look and feel of the product. This resulted in more
delays. Eventually, the product bit the dust. Financial Institutions forced
Raju to close the subsidiary. Overall the company spent over $100 million on
VisionCompass but the income from it was zilch.
Post Y2K, the business environment had changed
and IT companies had to look at more value added services to retain clients or
bid for new ones. Ideally, Satyam should have exploited the situation to keep
up its pace of growth. Unfortunately, some of the management changes that Raju
made did not really produce the results expected by him.
Raju always felt that to sell in global
markets a company needed to hire locals at a senior level. In 1998 Raju hired
an American as the global head of sales and marketing. He was highly
experienced and a go-getter. Unfortunately, the system brought him down.
Culturally, the senior managers based in India could not (or would not) adjust
to his style of working. Some of the SBUs wanted to sell directly to
prospective customers instead of going through the US based sales &
marketing department. This caused a lot of confusion. Three years later the
sales head left the company. Another cultural shock for India based executives
was the US designation of ‘Director’. Actually, that designation referred to
nothing more than a Manager in Indian terms. However, whenever someone in the
US was given the designation of Director it raised a red flag here and caused a
lot of heartburn.
Another senior management recruitment that
caused a lot of angst was that of a person who was brought in as Executive Vice
President, the highest designation after Raju and his brother Rama Raju. In
Raju’s true style he did not want this designation to be made public, but
obviously that was not possible. He was later made the COO which again was not
made public. This issue caused me some amount of
embarrassment. After the ADR listing on NYSE in 2001 I released to the press a
group photograph of the senior management taken on Wall Street. Below the
photograph was mentioned the names and designation of the people. This manager
had given me his business card that clearly mentioned his designation as COO.
At 5 am in New Jersey, where I was visiting after the listing, I was woken up
by a call from Raju asking me how that had happened. I was puzzled as I did not
understand what he was referring to.
Finally, he told me about the issue.
Apparently all the business heads in India were up in arms when they came to
know that this particular executive had been secretly given the designation of
COO. They came to know about this only after seeing the photograph published in
the Indian dailies. This person was an egoist. He once told me
that at all Satyam functions he should be given the front row seat next to the
Rajus. He was later elevated to the Board of Satyam and had to leave the
country in a hurry when the scam broke.
More or less this was the stage when Satyam’s
growth slowed down.
