Wednesday, July 1, 2009

Filled Under:

Satyam’s new team may renegotiate $80-m FIFA deal

The new management at Mahindra Satyam is set to re-negotiate its around $80-million contract with the Federation Internationale De Football Association (FIFA) to provide customised event management system for the 2010 and 2014 World Cups.

The pressure to trim costs at the beleaguered IT firm has triggered this move, said a senior official privy to the development. According to him, the company reckons the contract would not be a profitable one, as Satyam has to spend a sizeable amount on branding.

According to the agreement, FIFA will pay Satyam for the IT that it renders. At the same time, FIFA will display the Satyam brand across all platforms during the World Cup as the IT firm is one of the sponsors. This sponsorship works out to be expensive for Satyam.

“Our current scenario necessitates frugal financial management and we will continue to explore all possible means to address this situation,” said CP Gurnani, the new CEO of Mahindra Satyam. But FIFA did not reply to an e-mail sent by ET last week.

This deal was perceived to help Satyam increase its revenue share in the European region, which contributed to a quarter of the firm’s revenues. It was also expected to help Satyam leverage on FIFA’s brand equity and give the firm a foothold in the entertainment and media market world-wide.

“Mahindra Satyam has got all the attention it needed, good or bad. So this deal with FIFA is not important on a branding level,” said the official. Satyam is now focusing on raising its operating margins, and cutting cost would help improve margins and profitability. “The company’s objective is to retain clients, grow revenues and increase profitability. And if the FIFA deal gives them only visibility and not profitability, re-negotiating the deal is the right thing to do,” said Gartner principal analyst Diptarup Chakraborti.

Satyam bagged the deal nearly two years ago, along with a contract to build intranet and extranet applications for the football organisation. The extranet platform for FIFA was meant to enable its member organisations communicate with each other and organise the work flow.

“It would help us in knowledge exchange between different sports practitioners, particularly medical professionals in member countries,” Charles-Henry Contamine, head (new media), FIFA, had said when the contract was announced. Satyam was to directly implement extranet and intranet applications. The Hyderabad-based outsourcer has already started cutting down on infrastructure expenses.

“Infrastructure consolidation continues to be a key area of focus and have identified cost optimisation opportunities,” Mr Gurnani had said.

0 comments:

Post a Comment

Blog Archive