Indian ‘Big 5’ IT services company, Satyam, reeling from revelations of a $1 billion fraud led by its chairman, has weeks to find a buyer or face a large-scale customer exodus, according to several of its flagship customers. To protect the vital services and projects delivered to them by Satyam, several are preparing to unilaterally withdraw from contracts with the stricken company, offering jobs to the Satyam employees involved.
“Satyam has very little time – weeks at most – to find a buyer or we will make job offers to the several hundred staff currently working for us indirectly in India as well as on-site in the UK,” a senior executive at one of the company’s flagship UK customers told Information Age.
His organisation is already working through the legal issues involved in withdrawing from contacts and “capturing” the skilled employees working on the delivery of some of its core services. “Time is running out for Satyam,” he said.
“In situations like these, the crisis can spiral in on itself; Satyam itself has a whole supply chain of suppliers who don’t know where they stand,” he said. Moreover, customers are also worried that staff working on their contracts will leave in large numbers, drawn by the opportunities at Satyam’s more stable rivals. “That adds further risk to our projects and services.”
Satyam has been in limbo since chairman Ramalinga Raju confessed to a $1 billion fraud involving the manipulation of revenue, profits, cash reserves and staff numbers over several years. The Indian authorities have now effectively taken control of the company in an effort to determine the scale of the fraud and stabilise the company in advance of a sale.
However, given the complexity of the fraud, customers are not convinced of a positive outcome. The uncertainty over the company’s historical financial results makes the establishment of a valuation difficult, and as customers begin to withdraw contracts, that uncertainty will grow, says a long-standing Satyam customer.
Satyam’s UK clients include BP, Unilever, Thomson Reuters, Barclays and GlaxoSmithKline. In the US, State Farm Automobile Insurance has already said it is ending its contracts with Satyam.