2. “Leaders don't look behind, they don't look to the side; they look
ahead. So as far as I am concerned we are looking to be the
best telecommunication service provider in the world. We
have been recognized by major agencies in the world as
being amongst the top and we are ranked with the best in the
world. So we benchmark not just with our peers here, but we
benchmark with the best in the world.”
‐ Anand Mahindra,
Chairman, Tech Mahindra Ltd.
3. Telecom sector
The telecom sector in India experienced a rapid growth over
the past decade on account of regulatory liberalisation,
structural reforms and competition
Besides, the growth in the service and IT and ITeS sector
also increased the prominence of the telecom industry in
India.
Telecom has emerged as a key infrastructure for economic
and consumer growth because of its multiplier effect and the
fact that it is beneficial to trade in other industries
4. Types of telecom sector
Telecommunication service provider
Telecommunication equipment manufacturers
5. One of the largest business conglomerates in India
◦ Incorporated as Mahindra & Mohammed on Oct 2nd 1945 by Mahindra
brothers & Ghulam Mohammed
◦ Renamed Mahindra & Mahindra after Ghulam Mohammed’s exit in
1947
◦ Over the next 60 years, it diversified its operations across various
sectors like automotive, farm equipment, trade & logistics, hospitality,
information technology, infrastructure, financial services
◦ US $ 6.7 billion group
1986 - Joint venture between Mahindra group & British
Telecommunications plc
◦ Company was named Mahindra-British Telecom (MBT)
6. 1960 - Indian government set up Department of Electronics (DOE)
1970 - The first software was exported by TCS
1980 - Industry managed to reach USD 12 million
Mid–1980 - Emergence of new players like Infosys, Satyam, Mastek, etc
(body shopping)
1991 - Shift from body shopping to working from offshore
Late 1990 - High growth : ‘Y2K’ problem, STP scheme by govt.
2000 - Dot com bubble burst
2002 - Fastest growing IT market and captured 70% of IT outsourcing market
2006 - High‐end software services - BFSI, telecom, retailing and automotive
segments
2008 - Global recession – US companies slashed their IT spendings
9. A very clear focus on the
telecommunication industry
◦ Achieved a clear objective & strategic
alignment by focusing on one segment
◦ Clarity of goal
By enhancing business with existing clients
10. By client acquisition in long run.
By using geographic expansion.
By moving in TEM manufacturing segment.
By innovation of customized application solutions.
11. YEAR DECISIONS REASONING RATING
1986
–
2006
Entered IT sector:
JV with British
Telecommunication
s
Strategic pre-emption – Mahindra
wanted to enter into the business
-found the resource & expertise of BT
would enhance growth in Indian
Software Industry.
2006 JV with Motorola
Inc. under the brand
name CanvasM
Field of telephone software was
booming and providing expertise in
that domain would decrease the
institutional voids
Post
2006
Expand geographic
presence
•Incorporation of MBT GMBH
(Germany):Re-certified to ISO
9001:1994 by BVQI
•Participation in Microsoft's Sandbox:
collaborative environment to develop
and test new communications services.
12. YEAR DECISIONS REASONING RATING
2007 Acquired
iPolicy
Networks Pvt.
Ltd.
•Provided complimentary strong security
services capabilities.
•It got a core competency different from its
existent core competencies.
2009 Satyam
Acquisition
•Diversification
•Acquire a better portfolio of customers.
•Opportunity to rationalize shared
functions
•Global presence
2009 Tie-up with
WIN
•Focuses on building a new platform to
provide increased functionality and faster
transactions
•Will formulate a go-to-market strategy in
key territories particularly targeting the
Asian markets.
13. VRIO framework
Resource Valuabl
e
Rar
e
Inimitabl
e
Organisati
on
In depth Knowledge of the
telecom Industry
Y Y N Y
ISO 9001 by BVQI Y Y N Y
Acquisition of Axes
Y Y Y Y
technologies Inc.
CanvasM (joint venture
with Motorola)
Y Y Y Y
Ipolicy networks private
limited (Acquisition)
Y Y Y Y
Satyam Computers Y Y Y Y
Tech Mahindra’s
Y Y Y Y
Management
14. Technology
Political
• Stable Indian Government
• Strict laws regarding development
• Anti Outsourcing Drive
Economic
• Exchange Rate Fluctuations
• STP and Fringe Benefit Tax
Social
• Focus on Education in India
• Changing
technology
• Open source
Environment
• Fraud and scams
violence
Legal
• Legally
Complaint(satyam
)
15.
16. Bargaining Power of Buyers:
1. Given the large number of buyers, it is safe to say
that the customers control the this industry
2. There are so many choices for a buyer (many firms
in this industry) and there are minimal switching
costs
17. Bargaining Power of Suppliers:
1. Suppliers are not "locked" into deals with specific
firms (contracts exempt), but most of the
relationships between the firms and suppliers in this
industry are well established.
18. Threat of New Entrants:
1. This industry is relatively attractive to newcomers
because of its rapid growth and appealing customer
base.
2. At the same time, the industry is unattractive to
newcomers because of the cost advantage large-scale
incumbents possess, the significant amount of
capital a new firm would need
19. Threat from Substitutes:
1. There is not much of a threat from substitutes to this
industry, mostly because there aren't true
substitutes.
20. Rivalry Among Existing Players:
1. Large companies in this industry benefit from
economies of scale.
2. Products in this industry are well branded and tend
to have a strong customer base.
21. Management is a challenge – Capabilities are far
broader than TM's own background
Legal Liabilities – it has inherited from Satyam
Mahindra Satyam – an I.T. project to provide WC
Football match details on mobile phones
Changing need of customers and changing
technology
22. Sustaining profits in a highly competitive market.
Keeping pace with continuously evolving
technology and business models.
Introduction of new portfolios and faster time to
market.
Creating reliable and optimized networks.
Improving customer experience and customer
retention.
23. Reorganizing the Management structure.
Providing more world class services to customer.
Bringing more innovations in IT project field.
Promotion of R&D activities in Telecom Centers of
Excellence.
Setting up of Telecom Entrepreneur Development
Center (TEDC) for promoting entrepreneurship.
Using merger and acquistions
1960: The (DOE) was set up to be self sufficient in matters relating to national security.
1970: TCS – Tata Consultancy Service
1980: The industry managed to reach USD 12 million inspite of regulations import of hardware and software
Mid – 1980: Many new players started entering the industry. Most of the growth was through “body shopping” i.e. a programmer from India will physical go to client location and work on the project.
The liberalization of laws in 1991 gave the right impetus to the IT industry.
1991: The shift was due to laying of optical fiber for fast communication between US and India and other countries too. The liberalization of laws allowed import of hardware and software. Also, the US immigration laws were tightened. The location of India was a big advantage for the growth with approximately 12 hours of lag, thus project work could be carried out 24 hours a day.
Late 1990: Most of the programs were written in COBOL and many companies feared that there software will crash due to ‘Y2K’ problem. COBOL language was no longer taught in US but was still in curriculum in India at the same time Indians were fluent in English. The steps taken by government also helped the industry to grow, like setting up of Software Technology Parke (STP) assured companies continuous power, high speed satellite communication, allowed import duty free, reduction of tax, etc. The government also allowed foreign companies to have 100%
ownership in Indian firms. The industry grew at CAGR of 50%.
2000: The dot com bubble burst eroded the wealth of US companies. The slowdown was for few months but later picked up. The US companies wanted to cut their cost thus relied more and more on outsourcing. By 2002 the revenues had touched USD 8 billion.
2002: India had emerged as the fastest growing and the fourth largest IT market in Asia‐Pacific. A few large firms controlled much of the exports of the Indian software industry. About 32% of total software exports were controlled by the top five firms.
2006: Over the years, sectors like BFSI, telecom emerged as the key growth sectors. Along with software services the business like Business Process Outsourcing, Key Process Outsourcing, Infrastructure Management Services, etc have increased the share of Indian export market in the current decade.
Banking, Financial Services and Insurance (also known as BFSI) is an industry name. This term is commonly used by IT/ITES/BPO companies to refer to the services they offer to companies in these domains.
2008: The US market on which the Indian IT industries relied heavily, around 58%, went into a deep recession. Moreover, the financial sector generated 41% of the revenues, which was most severely affected. The companies in US started slashing their IT spending by a large margin. This resulted in the CAGR of just 20% for Indian IT companies.
Future of IT: file patents, new model for generating revenue, focusing on process benchmarking and enhanced utilization of infrastructure and talent.
1986-2006: Mahindra group entered into IT sector when it formed a joint venture with British Telecommunications Pvt. Ltd.
Reasons: Strategic pre-emption. Enter into the IT/ITES business by forming JV with British Telecom which had a foothold in the industry. Though Mahindra wanted to enter into the business directly it found the resource & expertise brought by British telecom to contribute towards growth in Indian Software Industry.
2.JV with Motorola Inc. : This was done mainly because that particular field of telephone software was booming & providing expertise in that domain would decrease the institutional voids. As recently as August 2009, CanvasM successfully bid a multi-million dollar deal from Bahrain's Aytaf Telecom to provide value added services.
3. Expand geographic presence: Incorporation of MBT GMBH (Germany) Re-certified to ISO 9001:1994 by BVQI. In 2007, Tech Mahindra Ltd announced their participation in Microsoft's Connected Services Sandbox a new program that brings together systems integrators (SIs) independent software vendors (ISVs) developers’ network equipment providers and telecommunications service providers in a collaborative environment to develop and test new communications services.
4. Acquired iPolicy Networks Private Limited: This acquisition was complementary to Tech Mahindra’s strong security services capabilities. iPolicy’ capabilities enhanced Tech Mahindra's security service offerings and enabled it to offer end to end security services to its customers. It got a core competency different from its existent core competencies. This helped it to gain momentum in the long run, which in turn stabilized the growth rate of the Company.
5. Satyam Acquisition: This strategic move paves the way for the emergence of a robust brand, which draws from the core values of the Mahindra Group and the inherent strength of the Satyam brand.
The Satyam acquisition will help Tech Mahindra-
Diversify its software services business, and compete aggressively with bigger rivals such as Tata Consultancy Services, IBM, Infosys and Wipro. Satyam, which serves customers such as General Electric, General Motors and Ford.
Help Tech Mahindra acquire a better portfolio of customers. The deal allows Tech Mahindra Ltd to reduce the dependence on telecom clients.
Tech Mahindra has the opportunity to rationalize shared functions such as accounting, human resources and other support functions.
Will help Mahindra to increase its foreign presence in North America and other Asian markets.
6. Tie-up with WIN: The tie-up focuses on building a new platform to provide increased functionality and faster transactions across a broad range of media services particularly targeting the Asian markets. The initial project with Tech Mahindra will extend WIN’s market leadership by providing improved service set-up and monitoring capabilities, enhanced transaction reporting and analysis with significant improvements in capacity and throughput to support even more media and feature rich services. The new platform will also provide increased functionality and new payments solutions. To begin with, the tie-up will formulate a go-to-market strategy in key territories particularly targeting the Asian markets.
In depth Knowledge of the telecom Industry :Tech Mahindra could offer better services in the telecommunications domain as compared to its competitors.
ISO 9001 by BVQI: Helped the organization project itself as a quality service provider in the European IT services market
Acquisition of Axes technologies Inc.: Tech Mahindra could expand its TEM expertise
CanvasM (joint venture with Motorola): Tech Mahindra could expand operations beyond Asia with the help of Motorola’s large sales force. Moreover tech Mahindra got access to Motorola’s R&D activities in the wireless domain and hence could develop technical credibility in WIMAX
Ipolicy networks private limited (Acquisition): Tech Mahindra could enhance the security services offered to its customers with the help of ipolicy networks
Satyam Computers:Tech Mahindra made a worthy investment in Satyam computers, which is showing a good payoff considering the last two quarters’ performance of Satyam computers. Working on providing worldcup football matches content on mobile phones.
Tech Mahindra’s Management:Tech Mahindra’s management vision has been to focus only on telecommunication industry. Moreover the timely acquisitions show the Management’s aspiration to develop the firm.
Political Factors:
India has a majority government at the centre which is source of stability for the political system.
Information technology Industry in India is highly dependent on outsourcing from US, Europe and other countries. Similarly, Tech Mahindra is also an export oriented company . 61.2% of the revenues are from Europe and 29% are from the United States. This makes the company vulnerable for changes in political factors in these regions. The recent drive against outsourcing in the US, supported by the ruling party may cause a threat to IT industry in India. The government of India on the other hand has been a constant source of support to the IT industry. The IT industry continues to enjoy tax exemptions and is recognized as “sunrise industry” by the government of India.
Economic Factors:
Exchange rates have a strong bearing on the earnings of Tech Mahindra and other companies in the IT industry. Hence exchange rate fluctuations, dollar inflows and outflows in to India would affect the performance of the company. Extension of the STP tax relaxations by the Government of India would help the IT/ITes industry to prevail over the recent economic downturn. The Government’s decision to remove the Fringe benefit tax would also help the IT industry cut its tax expenditures.
India may also see an increase in interest rate in the near future because of increased borrowing by the government. This might adversely affect borrowing to private players in India.
Socio Cultural Factors:
In India great emphasis is placed on engineering education, which helps the country churn about 350000 engineers per year. These engineering graduates are potential employees for the IT / ITes industry. Bangalore, Hyderabad, Pune, Delhi and Mumbai are the major sources of engineering graduates. The cosmopolitan nature of these cities helps in attracting talent across India and the world.
Technological Factors:
Changes in Information technology is growing at a rapid pace. The increase in free wares and open source technologies are a constant source of threat to the IT industry in India.
Environmental Factors:
India has been a target of terrorism in the recent past. The government has provided protection of Central Industrial Security Force to a major IT player like Infosys. Similar protection is expected to be provided to other IT players as they face increasing threats from terrorists.
The increasing threat of communicable (contagious) diseases like swine flu might adversely affect the IT industry as the global nature of the IT industry calls for constant travelling between countries.
Legal Factors:
There are no major legal issues hampering the IT industry in India. Major players in the IT industry comply with the general regulations and law laid down by the judiciary and regulators in India.
Strengths:
1. Strong clients in the Telecom Industry like British Telecom, Motorola, AT&T and Alcatel from whom tech Mahindra can learn more about the Telecom Industry requirements.
2. Superior knowledge about servicing the Telecom Industry as compared to its competitors due to its experience with British Telecom since Inception `
3. Tech Mahindra is Ranked 1 in Telecom Software category by Voice & Data, 2009 and 5th among all I.T. service providers by NASSCOM in 2009.
Weakness
1. High dependence of Tech Mahindra on Telecom Industry. Hence if this industry doesn’t do well TechM has to suffer.
2. High degree of customer concentration which gives a higher bargaining power to customers.
Oppurtunity
1. Tech Mahindra can geographically expand its operations in countries where Telecom Industry is looking for good quality I.T. outsourcing services.
2. With the Acquisition of Satyam Computers Tech Mahindra can foray into other business verticals where Satyam has established a strong foothold.
3. With the increased competition in the Telecommunications Industry new players are coming up and they are positioning themselves on the basis of the product differentiation. Hence Tech Mahindra can leverage upon its expertise in the telecom domain and provide versatile I.T. services to these companies.
Threats
1. Different I.T. companies in India like Infosys technologies ltd. , Tata consultancy services, Wipro and HCL who also provide services to the Telecommunications Industry pose high degree of competition to Tech Mahindra especially when low expertise is required of the service required by the customer is not highly differentiated. In such cases Price becomes the only discriminating factor to secure a contract.
2. With most of the revenues coming from export services there is a threat of varying currency exchange rates which can affect the revenues of Tech Mahindra.
3. The present Tax benefits that the company is enjoying as a result of its ‘Software technology parks’ (STPs) will lapse by 31st march 2010. This will result in further reduction in income for Tech Mahindra. However this factor would be common for other I.T. companies as well.
Tech Mahindra faces a number of major challenges. It has acquired a company (Satyam) With much larger operations globally (comparing employee numbers only, Tech Mahindra's headcount at end 2008 was 25,429) whose capabilities are far broader than TM's own background of providing telecoms sector‐specific IT services therefore these pose a Management challenge of managing an acquired organization which has a broader background than the acquiring organization.
It inherits legal liabilities arising from class action lawsuits by U.S. investors.
Presently Tech Mahindra along with Satyam Computers is developing an I.T. project for providing World Cup football matches content on mobile phones. Thus we see that Tech Mahindra is also entering the sports industry.
In future although the British telecom is expected to grow, Tech Mahindra’s revenues from British telecom is expected to proportionately fall. This proportion of revenues is expected to come from businesses in other verticals.
Tech Mahindra faces a number of major challenges. It has acquired a company (Satyam) With much larger operations globally (comparing employee numbers only, Tech Mahindra's headcount at end 2008 was 25,429) whose capabilities are far broader than TM's own background of providing telecoms sector‐specific IT services therefore these pose a Management challenge of managing an acquired organization which has a broader background than the acquiring organization.
It inherits legal liabilities arising from class action lawsuits by U.S. investors.
Presently Tech Mahindra along with Satyam Computers is developing an I.T. project for providing World Cup football matches content on mobile phones. Thus we see that Tech Mahindra is also entering the sports industry.
In future although the British telecom is expected to grow, Tech Mahindra’s revenues from British telecom is expected to proportionately fall. This proportion of revenues is expected to come from businesses in other verticals.
Tech Mahindra faces a number of major challenges. It has acquired a company (Satyam) With much larger operations globally (comparing employee numbers only, Tech Mahindra's headcount at end 2008 was 25,429) whose capabilities are far broader than TM's own background of providing telecoms sector‐specific IT services therefore these pose a Management challenge of managing an acquired organization which has a broader background than the acquiring organization.
It inherits legal liabilities arising from class action lawsuits by U.S. investors.
Presently Tech Mahindra along with Satyam Computers is developing an I.T. project for providing World Cup football matches content on mobile phones. Thus we see that Tech Mahindra is also entering the sports industry.
In future although the British telecom is expected to grow, Tech Mahindra’s revenues from British telecom is expected to proportionately fall. This proportion of revenues is expected to come from businesses in other verticals.
Tech Mahindra faces a number of major challenges. It has acquired a company (Satyam) With much larger operations globally (comparing employee numbers only, Tech Mahindra's headcount at end 2008 was 25,429) whose capabilities are far broader than TM's own background of providing telecoms sector‐specific IT services therefore these pose a Management challenge of managing an acquired organization which has a broader background than the acquiring organization.
It inherits legal liabilities arising from class action lawsuits by U.S. investors.
Presently Tech Mahindra along with Satyam Computers is developing an I.T. project for providing World Cup football matches content on mobile phones. Thus we see that Tech Mahindra is also entering the sports industry.
In future although the British telecom is expected to grow, Tech Mahindra’s revenues from British telecom is expected to proportionately fall. This proportion of revenues is expected to come from businesses in other verticals.
Tech Mahindra faces a number of major challenges. It has acquired a company (Satyam) With much larger operations globally (comparing employee numbers only, Tech Mahindra's headcount at end 2008 was 25,429) whose capabilities are far broader than TM's own background of providing telecoms sector‐specific IT services therefore these pose a Management challenge of managing an acquired organization which has a broader background than the acquiring organization.
It inherits legal liabilities arising from class action lawsuits by U.S. investors.
Presently Tech Mahindra along with Satyam Computers is developing an I.T. project for providing World Cup football matches content on mobile phones. Thus we see that Tech Mahindra is also entering the sports industry.
In future although the British telecom is expected to grow, Tech Mahindra’s revenues from British telecom is expected to proportionately fall. This proportion of revenues is expected to come from businesses in other verticals.
Tech Mahindra faces a number of major challenges. It has acquired a company (Satyam) With much larger operations globally (comparing employee numbers only, Tech Mahindra's headcount at end 2008 was 25,429) whose capabilities are far broader than TM's own background of providing telecoms sector‐specific IT services therefore these pose a Management challenge of managing an acquired organization which has a broader background than the acquiring organization.
It inherits legal liabilities arising from class action lawsuits by U.S. investors.
Presently Tech Mahindra along with Satyam Computers is developing an I.T. project for providing World Cup football matches content on mobile phones. Thus we see that Tech Mahindra is also entering the sports industry.
In future although the British telecom is expected to grow, Tech Mahindra’s revenues from British telecom is expected to proportionately fall. This proportion of revenues is expected to come from businesses in other verticals.
Tech Mahindra faces a number of major challenges. It has acquired a company (Satyam) With much larger operations globally (comparing employee numbers only, Tech Mahindra's headcount at end 2008 was 25,429) whose capabilities are far broader than TM's own background of providing telecoms sector‐specific IT services therefore these pose a Management challenge of managing an acquired organization which has a broader background than the acquiring organization.
It inherits legal liabilities arising from class action lawsuits by U.S. investors.
Presently Tech Mahindra along with Satyam Computers is developing an I.T. project for providing World Cup football matches content on mobile phones. Thus we see that Tech Mahindra is also entering the sports industry.
In future although the British telecom is expected to grow, Tech Mahindra’s revenues from British telecom is expected to proportionately fall. This proportion of revenues is expected to come from businesses in other verticals.