A stunning confession of fraud by the CEO of India's Satyam Computer Services sent major corporate customers into damage-control mode half a world away. State Farm Insurance, for one, was able to react quickly. In two weeks it reprioritized key outsourcing projects, redistributed work among other vendors, and severed its ties to the fourth-largest Indian IT outsourcing firm.
The Satyam scandal not only led to the arrest of CEO B. Ramalinga Raju and CFO Srinivas Vadlamani (among others), but also tarnished an outsourcing industry that seemed poised to boom as companies look for more ways to cut costs. Many offshoring firms have been working diligently to expand their offerings beyond core IT services to more-sensitive (and higher margin) work, including finance and accounting. Now many companies may question just how much they put at risk when they ship work overseas.
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