A very expensive consultant - Satyam acquisition of Bridge Strategy Group
SOURCE: Computing.UK
DATE: 22nd January , 2008
This is an interesting article by Mark. If indeed the size of the company is 36 management consultants and Satyam has paid $ 35 million dollar it is an extremely expensive acquisition.
I am assuming that Satyam has also structured the deal where the money paid is not all upfront but based on certain milestones and there are golden handcuffs for key employees ( In this case should be all 36!).
I think it is still to be seen if Indian firms are going to be able to integrate consulting business with their existing business and or change their branding to be more global. Infosys has been trying hard for a while but not succeeded in making their consulting business break even. Some of the other smaller players have looked at acquiring consulting practices but have had trouble integrating them and using them to drive more business to offshoring.
ARTICLE
By Mark Kobayashi-Hillary
Indian IT services supplier Satyam has purchased Bridge Strategy Group, a Chicago-based management consulting firm. It’s a $35m all-cash deal that adds 36 management consultants to the ranks of Satyam, boosting its ability to deliver high-end management consultancy in the US.
Satyam has announced this purchase with the usual platitudes: enhancing leadership capabilities, strengthening the brand, adding higher value service offerings, but perhaps I’m missing something?
This is an all-cash deal. So that means the company just paid about a million dollars for each new employee. I appreciate that given the nature of management consulting most of the value lies in the head of each one of those consultants, but that is also the danger in purchasing this type of company. What happens if those guys and girls don’t like working for Satyam and they walk?
Satyam plans to continue using the Bridge brand in the US, but anyone who is an existing or potential customer will know that the company is really just a subsidiary of Satyam now. That can be seen as a positive - access to a large resource pool, proven expertise etc - or a negative - they can no longer give an impartial recommendation about the best place to get some IT work done.
It seems like the team at Bridge has negotiated a great deal, but I’m not sure how this helps Satyam to start competing with the likes of Infosys and TCS – who are both well down the road of developing their consulting offering, but in a more organic fashion. If they can afford to throw a few million around here and there then why not go for some big name hires and develop the consulting service more organically? It takes guts to do it because there will be a long lead before the business rolls in, but in the long term surely that is where the real value lies, building your own brand to be a trusted source of advice.
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