Executive Briefings

How Badly has Satyam Burned India's IT Outsourcing Industry?

On the morning of Jan. 7, Ramalingam Raju, the chairman of troubled Indian IT outsourcing company Satyam Computer Services, sent a startling letter to his board and the Securities & Exchange Board of India. Raju acknowledged his culpability in hiding news that he had inflated the amount of cash on the balance sheet of India's fourth-largest IT company by nearly $1bn, incurred a liability of $253m on funds arranged by him personally, and overstated Satyam's September 2008 quarterly revenues by 76 percent and profits by 97 percent. After submitting his resignation, Raju ended his letter by apologizing for his inability to close what began as a "marginal gap between operating profits and the one reflected in the books of accounts" but grew unmanageable. "I am now prepared to subject myself to the laws of the land and face the consequences thereof," he wrote.
The letter shocked and angered corporate India, which has looked to IT executives as role models for a new breed of Indian entrepreneur. As executives at other Indian outsourcing companies nervously assess what impact the scandal will have on them, many industry observers now argue that the Satyam case--"India's Enron"--will damage the nation's reputation as a reliable provider of IT services.
Source: Business Week

On the morning of Jan. 7, Ramalingam Raju, the chairman of troubled Indian IT outsourcing company Satyam Computer Services, sent a startling letter to his board and the Securities & Exchange Board of India. Raju acknowledged his culpability in hiding news that he had inflated the amount of cash on the balance sheet of India's fourth-largest IT company by nearly $1bn, incurred a liability of $253m on funds arranged by him personally, and overstated Satyam's September 2008 quarterly revenues by 76 percent and profits by 97 percent. After submitting his resignation, Raju ended his letter by apologizing for his inability to close what began as a "marginal gap between operating profits and the one reflected in the books of accounts" but grew unmanageable. "I am now prepared to subject myself to the laws of the land and face the consequences thereof," he wrote.
The letter shocked and angered corporate India, which has looked to IT executives as role models for a new breed of Indian entrepreneur. As executives at other Indian outsourcing companies nervously assess what impact the scandal will have on them, many industry observers now argue that the Satyam case--"India's Enron"--will damage the nation's reputation as a reliable provider of IT services.
Source: Business Week