MUMBAI: Investment bank Merrill Lynch (ML) is in the process of shifting a majority of its contracts with troubled software company Satyam to
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India’s largest IT vendor Tata Consultancy Services (TCS), according to software industry sources familiar with the matter. The account contributes around $40 million to Satyam’s yearly revenues.
ML had sent a team in early February to assess the ground situation at Satyam’s headquarters. The bank had told the Satyam team of their intention of handing over most of the IT services to another vendor. ET had reported in its edition dated January 31, that ML would be sending its team to the company’s office.
While the bulk of the contract will now be handled by TCS, Satyam will continue to service parts of the contract. Currently, there are no plans of terminating the contract completely, these persons said. Merrill contributes more than $50 million to TCS’ topline and is one of the top 10 clients for the company. Citigroup is TCS’ number one client contributing revenues close to 9%.
Merrill Lynch and TCS spokespersons declined to comment on the developments. Satyam’s chairman Kiran Karnik told ET, “IT companies win and loose contracts all the time. I do not know why the media has to report it all the time.” He did not confirm or deny ML’s move.
A banking industry official familiar with the development said that this move was in line with the bank’s intention to streamline processes as a lot of services provided by IT vendors tend to overlap. “It is not that Satyam is faced with uncertainty that Merrill is moving away most of its business, but because there is a lot of vendor consolidation happening now. And TCS is in a better position to serve them now,” said a software industry source. The transition will be completed within the next two quarters.
TCS currently provides application, maintenance and development work for the bank in the field of transaction documentation, legacy application, capital markets trading and financial accounting among others. TCS and Satyam also share financial services major Citi as a client.
Bank of America, which took over Merrill in September 2008, is also a TCS client. Industry officials say that when the two banks start their system and application integration process, TCS is likely to gain from this.
“TCS will be the most likely choice as it is already a vendor for both the companies. They would want to partner with an existing vendor because they would know the systems better,” said an IT analyst who did not wish to be named.
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