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Satyam clients mull over an issue of trust
By Jordan Robertson |
February 4, 2009, Wednesday
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Print Edition
Print Edition
OUTSOURCING partnerships are built on trust, so when Satyam Computer Services admitted to inflating its books by US$1 billion, its customers - some of the world's biggest companies - were shocked.
Satyam - Sanskrit for "truth" - counts a third of the Fortune 500 as its clients, some of which had handed Satyam their most critical technology chores. No longer just cheap call centers or help-desk technicians, outsourcers do it all now, from maintaining clients' databases to handling their payroll.
That means that severing an outsourcing relationship is like cutting off a limb. Companies are loath to unplug even from a shaky outsourcing deal.
Yet that's the dilemma facing Satyam's customers as they see the company in tatters.
Three former top Satyam executives ?? founder and ex-chairman B. Ramalinga Raju; his brother B. Rama Raju, Satyam's former chief executive; and Srinivas Vadlamani, former chief financial officer - have been arrested and face conspiracy, forgery and other charges in India.
The future of the company is unclear - facing a cash crunch, Satyam recently had to press some customers to make early payments.
Still, Satyam says its biggest clients have promised to remain.
"Well over 90 percent of our clients have committed to staying with us, either formally or informally," spokesman Jim Swords said. "We're not experiencing any volume of attrition at this point."
Only one big company is known to have jumped ship.
Illinois-based State Farm Insurance ended its contract with Satyam fewer than 10 days after the accounting shenanigans emerged.
General Electric is monitoring the situation. Cisco Systems says it is considering "appropriate risk mitigation strategies." Coca-Cola is "reviewing its options" while Nestle is considering "alternative solutions."
Satyam - Sanskrit for "truth" - counts a third of the Fortune 500 as its clients, some of which had handed Satyam their most critical technology chores. No longer just cheap call centers or help-desk technicians, outsourcers do it all now, from maintaining clients' databases to handling their payroll.
That means that severing an outsourcing relationship is like cutting off a limb. Companies are loath to unplug even from a shaky outsourcing deal.
Yet that's the dilemma facing Satyam's customers as they see the company in tatters.
Three former top Satyam executives ?? founder and ex-chairman B. Ramalinga Raju; his brother B. Rama Raju, Satyam's former chief executive; and Srinivas Vadlamani, former chief financial officer - have been arrested and face conspiracy, forgery and other charges in India.
The future of the company is unclear - facing a cash crunch, Satyam recently had to press some customers to make early payments.
Still, Satyam says its biggest clients have promised to remain.
"Well over 90 percent of our clients have committed to staying with us, either formally or informally," spokesman Jim Swords said. "We're not experiencing any volume of attrition at this point."
Only one big company is known to have jumped ship.
Illinois-based State Farm Insurance ended its contract with Satyam fewer than 10 days after the accounting shenanigans emerged.
General Electric is monitoring the situation. Cisco Systems says it is considering "appropriate risk mitigation strategies." Coca-Cola is "reviewing its options" while Nestle is considering "alternative solutions."
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