The Effect of Satyam’s Revelation
As you've all seen by now, Satyam (one of the biggest Indian-based outsourcing companies) is in the midst of an earnings misstatement crisis. Like many other companies, Satyam was subject to substantial pressure to show results, particularly as the world economy deteriorated.
Whether the fraudulent statements by Satyam or the Indian governments late-but-strong reaction to it will affect the outsourcing business as a whole remains to be seen, but there is no doubt that it casts a pale on the statements of strength in the face that many Indian outsourcing firms made in the face of the global financial crisis.
No doubt, this crisis will be difficult for Satyam and its employees. However, it may also prove to be a turning point for Indian outsourcing vendors and large Indian companies and could have a silver lining – particularly if it brings more recognized financial reporting discipline to all players in the industry.
Glowing annual reports and boundless, unrealistic optimism have long been part of India's sales pitch. For the more cynical among us, these statements always seemed a bit suspect. Perhaps now the puffery will die down a bit and a more realistic view of the business model will evolve.
Like most aspects of the global economic crisis, Satyam's downfall was caused by the pressure to "keep up with the Jones's." The vicious cycle of upward pressure may finally begin to fade, hopefully leading to a period of rational optimism.
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Yes truely there will be a slow down in the Indian Outsourcing industry but you cant deny the fact that India still stands at the global number 5 in top Outsourcing companies.
http://squamble.blogspot.com/2009/01/worlds-top-5-outsourcing-countries.html
Comment by Nams on January 14, 2009 8:45 pm
Bad press is definitely bad for business, where credibility still counts. This and other cases that serve as black marks could be the catalyst for corporates to seek other, safer, more stable alternatives to India.
Comment by OutsourceOpinionist on January 18, 2009 8:37 pm
A few years back, values of many Indian ICT companies were higher than comparable Western ICT companies. This basically meant that Western ICT companies could have been taken over by Indian companies. For the short term and with the Satyam case in mind, the reverse could happen now. There are rumors that IBM wants to take over Satyam. On the long run, Indian ICT companies will probably come back strong again. Since the amount of IT skills is so high, you can bet that within 2-3 years the industry will be back on top again.
Comment by Errol van Engelen on January 20, 2009 8:25 am
Vangtel (http://www.vangtel.com) offers a nearshore business model that enables companies to shift work to a a low cost and low risk environment, while maintaining 100% control of their operations.
Comment by Steve on January 22, 2009 8:27 am