Beyond Satyam

I have been keenly watching, as we all have, the Satyam debacle over the last few weeks. Although this is an isolated incident, one does have to wonder what impact this will have on the Indian outsourcing market.

This raises considerable corporate governance issues for many companies who outsource or are looking to outsource to India. For India itself, it has put a question mark over its corporate governance system.

With analysts and industry experts stating that there will be more companies coming under similar scrutiny, there is a strong possibility that investments in India will be affected.

However, before everyone begins tarnishing all Indian companies with the same brush, maybe it isn’t simply the Indian market place that we need watch, maybe no market is safe!

One of the main issues that has come to light as a result of the Satyam scandal has been the that fact that it is easy to hide financial discrepancies in a strong marketplace. But as soon as the market weakens, there is nowhere to hide irregularities in the accounts. In effect the ever rising lake is starting to be drained and now we see what’s really there!

The extent to which Satyam’s hundreds of Fortune 500 clients decide to take their business to other Indian suppliers or switch back to western IT companies will be a critical measure of the damage the fraud has done the Indian marketplace.

I predicted in an earlier blog that 2009 could see offshoring decrease, with patriotic sentiments and the rising unemployment in the UK encouraging organisations to bring back home poor performing offshore operations and now the Satyam debacle may add fuel to the fire.

Although bringing their offshored operations back to the UK may feel good, whether this is economically right entirely depends upon each situation. Companies still need to take their time and consider all their sourcing options before acting, otherwise they may end up worse off in the long run.

Remember that old proverb “Marry in haste and repent at leisure” – commentators, like me, often say outsourcing is like a marriage!


Copyright © 2009 IDG Communications, Inc.

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