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January 08, 2009

Satyam Schadenfreude

You may have heard that Satyam, one of the most prominent Indian IT outsourcing firms, is in deep doo-doo this week, due to revelations that they inflated their balance sheet by almost a $1 billion (among other sins).

As executives at other Indian outsourcing companies nervously assess what impact the scandal will have on them, many industry observers now argue that the Satyam case will damage India's reputation as a reliable provider of IT services. Because of the Satyam scandal, they say, Indian rivals will come under greater scrutiny by regulators, investors, and customers. "The bubble is going to burst in terms of trust," says a fund manager in Hong Kong who has followed Satyam closely. Doubts about the reliability of Indian outsourcers are especially important, since customers often allow the Indian companies access to sensitive systems. "This industry doesn't just make widgets," the manager explains. "It's an intimate relationship." Certainly, says Gartner (IT) analyst Diptarup Chakraborti, "there will be caution in the short term, skepticism, and questioning." After all, "no one wants to do business with a known fraudster." (Empasis mine)

I can't believe how many years has it taken for our industry to come to this realization! No disrespect to my great friends and former colleagues at smaller firms in India, but I am not surprised one bit that the corruption flows from the top at the big Indian contractors.

Over the years, some of my bigger enterprise clients have flushed ridiculous amounts of money down the toilet with Satyam, Wipro and Infosys. All of us collaborating and integrating with their software teams were privy to their dirty, little secret. They usually had one guy that actually knew (anything about) programming, floating at least five or six others that didn't have a clue and hid behind the excuse of language barriers. However, since their individual bill rates were around $20 or less, the managers on this side of the world thought they were getting a great deal!

Good riddance!


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