Satyam's Stunning Offshore Fiasco - InformationWeek

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Commentary
1/8/2009
09:18 AM
Rajan Chandras
Rajan Chandras
Commentary
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Satyam's Stunning Offshore Fiasco

In news that is still unfolding, the founder and chairman of Satyam Computer Services, India's fourth largest offshore services vendor, has made a stunning admission of massive financial fraud. Are you impacted? If so, how do you react?

In news that is still unfolding, the founder and chairman of Satyam Computer Services, India's fourth largest offshore services vendor, has made a stunning admission of massive financial fraud. Are you impacted? If so, how do you react?

First, the event, in case it's news to you: Satyam co-founder and chairman Ramalinga Raju has just admitted to cooking the books... for years. In his words...

"What started as a marginal gap between actual operating profit and the one reflected in the books of accounts continued to grow over the years. It has attained unmanageable proportions as the size of company operations grew. It was like riding a tiger, not knowing how to get off without being eaten."

Of course, greedy and unscrupulous corporate chieftains are no news to us - we are all thoroughly sensitized to that. Raju will get what's coming ("I am now prepared to subject myself to the laws of the land and face consequences thereof"), but the more pressing question is, as a customer of Satyam, how do you react?

Here are some thoughts.

In the first place, there is no need to press the Panic button. Satyam has revenues of over US $1 billion, employs over 50,000 people, and operates in over 60 countries. It is a large and largely well-managed organization staffed by (and managed by) experienced professionals. Satyam's core competencies remain strong: It does IT and BPO, and does them well. Also, Raju's resignation and what appears to be his unusual candor in owning up (apparently suo moto and in writing, no less) will likely allow operations to stabilize relatively quickly.

What this means to you, the customer, is that there is no imminent danger to your projects, activities or your data. The company is not likely to down its shutters immediately, and your data is not being sold on the streets. The orchard owner was rotten; the apples are ok.

On the other hand, there is no doubt that employee morale will take a significant hit. The extent of staff turnover will become clearer in due course, but there is no denying that staff retention will be Satyam's biggest challenge (the second challenge: merge or stay independent).

That's also your own biggest challenge. Depending on whether you have outsourced your operations to Satyam (and now your ex-employees are with Satyam), or whether you have contracted out development and support to Satyam, or have Satyam managing your back-end business processes, your most pressing concern should be staff continuity.

In short, Satyam does not appear to be on the brink of catastrophic failure, and your reaction should take that into account. Move quickly and proactively, but without panic.In news that is still unfolding, the founder and chairman of Satyam Computer Services, India's fourth largest offshore services vendor, has made a stunning admission of massive financial fraud. Are you impacted? If so, how do you react?

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