Satyam sees benefits in Oracle's PeopleSoft buy

Satyam Computer Services, India's fourth largest software exporter, expects the recent takeover of PeopleSoft by Oracle to have a favourable impact on its business.

Satyam which earned close to Rs 687 crore in the last fiscal, representing a significant 26.22 per cent of its total business from the packaged software business, is one of the largest players from India in this space.

Commenting on the merger, Vijay Prasad, director and senior vice president, enterprise applications and business intelligence solutions, said, "Satyam is uniquely placed by having competencies in Oracle, PeopleSoft and JD Edwards, thereby being able to capitalise on the opportunities thrown up this merger. With unmatched competencies in both Oracle and PeopleSoft together we can exploit the time and competency advantage ultimately benefiting its customers."

The combined Oracle and PeopleSoft team at Satyam is around 1700 employees. This according to Satyam officials is a huge number compared to many Indian and Big 4 consulting firms.

The increased man-power would provide significant opportunity to cross skill consultants for better utilisation, which would result in better acceptance in certain situations where a client is considering migration from PeopleSoft to Oracle.

The merger is also expected to offer Satyam an opportunity to cross-sell to its existing client base.

It was only in July this year that Goldman Sachs Global Investment Research had termed Satyam Computer Services' package implementation pricing strategy 'surprising'.

Satyam charges billing rates which are only 10-15 per cent higher than the average billing rates of the company for this service line and this had surprised the leading research agency.

The Goldman Sachs research report expects Satyam's package implementation (PI) business, which is the second biggest contributor to overall business, to grow an estimated 60 per cent in the current fiscal. But surprisingly, the research team felt that Satyam despite the dominant position it enjoyed in the PI business was not demonstrating pricing leadership.

"Satyam indicated that its lower rates are by choice and the result of client penetration and relationship management considerations.  We note that Satyam's peers are able to get higher billing rates and manage higher profitability from this line of business; therefore, in our opinion, Satyam needs to demonstrate pricing and margins leadership in the coming quarters if it hopes to hold on to its leadership position in the space," the Goldman Sachs report said.

The pricing strategy apart, the research team has predicted the PI business of Satyam to grow an whopping 60 per cent which would mean that by the end of this fiscal the company would earn revenues of around Rs 1000 crore plus from its PI business.

Satyam's growth strategy for its PI consists of  creating industry-specific templates and frameworks, which it intends to use to bid for fixed-price work; and in the area of data warehousing and business intelligence, Satyam is investing in tools and intellectual property, which it hopes will help differentiate its offerings, the report noted. 

The report said that through this Satyam believed that it would enable it to lower its total cost of ownership of a solution for the client and protect its own profit model.