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Cleaning up Satyam

Taneesha Kulshreshtha and Rahul Sharma
Wall Street Journal
7 February 2009

The company needs to resolve its crisis soon if it wants to retain clients

While Satyam has seen just one client - US-based State Farm Insurance - terminating its contract in January, it could be a precursor of things to come. Industry experts say that the company has just a few weeks to send out a clear signal about getting the crisis under control.

Some clients are already weighing their options. One such client has asked PA Consulting to do scenario mapping for it. The client recently signed on with Satyam for outsourcing services and is now worried about the continuity of its business. PA Consulting’s global IT head, Ian Murray, says that they are now assessing what would be the possible outcomes in case Satyam does not get its act together soon.

“As the situation drags, the employees too would get restless and worried. This would result in drop in service levels. Clients will then have to take a call for sure as it would affect their business,” says Murray.

PA Consulting asked their clients to adopt a wait and watch approach for signing new contracts with Satyam. Nasscom chief Som Mittal also agrees that Satyam may have difficulty signing new contracts unless a solution is found. He does say that Nasscom is working along with the Satyam Board to find a satisfactory solution to the problem and ensure that the Indian IT service industry does not suffer on the whole.

If Satyam is taken over by another company, some clients may part ways with the company. “Many clients may not be comfortable with the new owners,” he says. Clients may have chosen Satyam over other bidders for contracts, and those same companies may end up acquiring Satyam.

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