Question
Satyam: what now?"In one of the worst days for Indian corporate and stock market history, the benchmark index plunged 749 points, rocked by revelations of Rs 7,000 crore fraud at Satyam... The chairman of India's Satyam Computer Services, B. Ramalinga Raju, on Wednesday admitted that the company's profits had been inflated for several years, sending shares of the software services provider plunging by more than 77 per cent to Rs 40." ( http://profit.ndtv.com/2009/01/07161905/Sensex-sinks-72-Satyam-cras.html )So: what do we as a network think will be the consequences of the events of the past couple of days for:
a) Satyam itself;
b) the Indian outsourcing industry;
c) India's economy as a whole?
Jamie Liddell,
Editor,
SSON,
Answer
Satyam: what now?Hi Jamie,
Truly it is a shocking news and same emotions reflected in the stock markets in India. In fact in the last year the Indian markets have fallen from 21,000 level to 8,000 ( Due to the Global financial crisis) and currently 9500.
In terms of market and the economy, it is quite fundamentally strong and will hold. Today the Satyam stock have even touched 6 INR !!!!
Satyam > Its all about the investigation on the real cause of it and how the remaining borad members can work with the regulators and retain the clients.I am sure getting new business will be a challenge for them.
Indian Outsourcing Industry >
-It surely sends a strong mesasge once again to the auditor fraternity and the outsorcing companies to tighten the belts and puts controls in place.
-My personal view is that it will not impact the outsourcing industry however they will have to reflect assurance and share the current controls and risk management framework they are following.
Anish Lalchandani, Associate Director,
Standard Chartered Bank PlcAnswer
Satyam: what now?New York Time also said:
"The scandal is also likely to intensify pressure for improved disclosure. The World Bank, which had last month revealed that it had barred Satyam in 2008 from doing business with it, on Monday said it would from now on publicize the names of all companies that have been debarred from receiving direct contracts, 'in the interest of fairness and transparency.'
"Jointly with that statement, the bank announced two more Indian outsourcers — Wipro Technologies and Megasoft Consultants — had been barred in 2007 from working for it for four years. In Wipro’s case, the bank said, the company had provided 'improper benefits to bank staff,' while Megasoft had 'participated in a joint venture with bank staff while also conducting business with the bank.'"
http://www.nytimes.com/2009/01/13/business/13outsource.html?_r=1&ref=business
Alex Sánchez,
LogicStudioAnswer
Satyam: what now? India appoints new Satyam board
More reading at: http://www.ft.com/cms/s/0/c236d6b6-dff6-11dd-9ee9-000077b07658.html Steffen Poehler, LEA School Governor
Answer
Satyam: what now?I too was shocked at the Satyam news. The question that went through my mind was, "How could a few people bake the books, as alledged, so dramatically and mislead investors." But then I remembered that even in the US where post-Enron oversight is heightened, we have the recent Madoff scandle and the subprime mortgage meltdown. As far as Satyam itself, I believe they will not only have a hard time getting new business, I can imagine many current customers looking at their contract termination options annd evaluating a move. I do not have the same concerns about the broader Indian outsourcing industry nor the general economy. The outsourcing business model still makes sense in most cases. The industry will take a hit but in the long run, as long as the economics work, business will go their way.Tom Crowell, VP/CIO,
Dole Food CompanyAnswer
Satyam: what now?I agree with Alex's remarks around the transparency issue, most of my client's have discussed this as a top discussion point with their current service providers. In 2009, I believe that most service providers will put audit controls in place to reduce the risk of this happening again.
Also, I don't believe that this will dampen the services globalization efforts, but will increase the understanding of the importance of having proper leadership in place to stay ahead of the risks of sourcing and how you need a solid understanding of the efforts it takes to do it right, the first time.
Chas R. Mullins, CEO,
The Mullins Group