Satyam sets up ITeS subsidiary

BANGALORE: Satyam Computer Services launched its back-office subsidiary on Thursday, following rival software companies in tapping an emerging high-growth area to offset slower growth in software services.

The subsidiary, called Nipuna -- the Sanskrit word for expert -- will start off by setting up a 250-seat facility, which can be expanded to accommodate 750 seats at "short notice," Satyam said in a statement.

"Satyam's foray into business process outsourcing is taking concrete shape -- in terms of infrastructure, human resources and business development," Satyam Chairman B Ramalinga Raju told an analysts' conference call.

Business process outsourcing, an omnibus expression for an array of back-office services like payroll and bill processing, is delivered from a remote location through increasingly cheaper, high-speed telecoms links.

Leading Indian software firms are leveraging their existing sales engines and global clients to tap this market as overseas companies rapidly move back-office work to India to cut costs.

Satyam, India's fourth-largest software services exporter, serves more than sixty Fortune 500 clients, with General Electric and Sony among its top customers.

"The company (Nipuna) has initiated business development efforts with a number of Satyam's existing and potential clients and is in advanced stage of discussions with some of them for early closure of work orders," Raju said.

Satyam's shares were nearly flat at 220.40 rupees in the afternoon after it reported first-quarter profit fell nearly 11 per cent from a year ago, a slightly higher drop than analysts had expected.

Satyam's rival Infosys Technologies, India's No 2 software services exporter, set up its back-office firm, Progeon, in April with $5 million of its own and $20 million from a Citigroup unit.

Software giant Wipro announced the country's biggest acquisition in the IT-enabled services sector last week, saying it would pay $83 million for raising its stake to 90 per cent from 24 per cent in Delhi-based back-office firm Spectramind.

Revenue from India's IT-enabled services sector surged 67 per cent to $1.5 billion in the past year to March. India's software body expects this to surge to $20 billion by 2008.