News Analysis: Post Satyam Go Forward Strategies
Much has been said about Satyam CEO’s recent announcements of financial irregularities. The tragedy is in management and reeks of a failure in oversight and governance by executive muckey mucks, regulators, investment houses, accountants, auditors, investors, and government officials. As the authorities and management team sort out the mess, clients and competitors will need to quickly assess their situation, take action, and move forward. With doubts being cast on India’s tech firm reputations, the firms, clients, and government officials will need to carefully consider their actions or risk exacerbating the emerging crisis of confidence. Going forward:
- Indian technology firms must quickly act to prove transparency. While many have speculated that this crisis could be widespread among Indian firms, keep in mind, hiding a $1B is not an easy thing to accomplish. However, such lingering doubts will require each firm to quickly demonstrate how a scenario like this could be discovered and averted. This will require third parties to actually do their job and highlight what controls are in place and what will be provided going forward in order to “certify” a clean bill of health. Firms must put in risk mitigation programs or face significant market pressures.
- Satyam clients should quickly assess their relationship status and exposure. The announcement that an investment bank is assisting Satyam with options puts the firm’s independence into question. While overall client service on the ground will be minimally impacted, engage in active dialogue with your account team. It will be important to separate the actions of top management from those servicing your account. There may be opportunities to bring the team members in-house or already discussions by other firms to acquire certain teams. If you’re unhappy with the current service, this creates a good opportunity to let the teams go. New prospects will be better off waiting to see the final outcome. If significant exposure to BPO and other hosting services create risk should the company become insolvent, begin discussions with Satyam on how to mitigate exposure.
- Government officials must quickly act to prove regulatory oversight but not create unnecessary burdens. Regulators face tough challenges in finding the right controls to enact. Sarbanes Oxley in the US has become a regulatory nightmare with minimal benefits. Regulation is sorely needed but lessons learned from SarBox and JSOX should be applied to find the right balance.
The bottom line - in today’s economy this could happen anywhere so be a bit more vigilant
From Madoff to Peters to Satyam, big business scandals continue to abound in 2008. Call it a loss of business ethics at the top or the by product of an irrational exuberance, we can only expect to uncover more of these going forward. The solution will require clients to call for more transparency and regulators to find the right balance between oversight and burden. Expect risk management programs to flourish in this time of economic recession.
Your POV.
Are you a Satyam client and not sure what to do? Do you have a different perspective? Share your thoughts here or send me a private email to rwang0@gmail.com.
Copyright © 2009 R Wang. All rights reserved.
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| Tags: , contract strategy, News Analysis, R "Ray" Wang;, Satyam, scandals, system integrator, | Categories: Apps Strategy, ERP, News Analysis, R "Ray" Wang;, Satyam, System Integrators, contract strategy, scandals
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I agree with you that Indian technology firms must quickly act to prove transparency
Ray, thanks for the analysis and opportunity for discussion.
The unfortunate admission by Satyam’s CEO of corporate fraud, has left many of us stunned and disappointed, and deeply concerned about the implications of this news on customers, employees and shareholders of Satyam, especially at a time we’re all grappling with a difficult economic environment.
Indications from the market are that customers are not only worried about Satyam, but also more apprehensive about other Indian IT Services providers. To that end, I wanted to this opportunity to highlight some key points from HCL CEO, Vineet Nayar’s communication to all stakeholders and well-wishers recently, reaffirming the company’s credentials, and commitment to the highest standards of Trust and Transparency.
- HCL was founded 33 years ago, by Shiv Nadar, a globally respected visionary and recipient of the Padma Bhushan (one of the highest civilian recognitions bestowed by the Govt. of India). It is today a US$ 5 Billion enterprise spread across 20 countries with 58,000 employees, and run by a very experienced and professional leadership team led by Vineet as CEO
- Over the years, HCL has grown through a culture of trusted partnerships with customers, including JVs with some of the world’s leading corporations like Hewlett-Packard (1991), Deutsche Bank (2001), British Telecom (2002), and NEC (2005), many of which remain its largest customers, even after the conclusion of the JVs
- HCL has not only come to be known for its innovative IT services, but also as a thought leader in management innovation, with case studies on the company’s “Employee First” philosophy being taught at the Harvard Business School
- In addition, HCL maintains a very strong Corporate Governance policy, with an active and independent Board comprising 6 non-executive members (out of a total of 8). The roles of Chairman and CEO (the 2 executive members of the Board) are bifurcated, with Shiv Nadar as Chairman and Chief Strategy Officer, and Vineet as the CEO. The Chairman’s majority holding in the company lends security of ownership and ensures that motivation of HCL’s leaders is guided exclusively by the creation of long term value for customers and shareholders alike
- Finally, and most importantly, HCL is governed by a culture of Trust and Transparency. This extends to all interactions at HCL, across employees, customers and investors. For example, HCL’s Annual Global Customer Meet allows key employees, customers, analysts and investors of the company to come together and interact in unfettered discussion. This level of transparency was also affirmed recently by a poll conducted by Asia Money, citing 239 fund managers, that rated HCL as one of the top 2 companies in India for investor access and relations.
Debashish Sinha
Vice President Marketing
HCL America, Inc.
Comment on this Poll on LinkedIN:
Who should be the next CEO of Satyam?
http://polls.linkedin.com/poll-results/16338/fgihu
Got an interesting post from Durga Prakash from Bootstrap. He suggests Vivek Paul.
Over the past 48 hours, the Central Government has really shored up the Investor Confidence and boosted the existing Satyam employee base. The Stock Market is testimonial of the fact. Its time the IT Sector in India acted with Central Government backing and its taking shape. As a responsible Netizen, here is my take:
1. The Board has eminent personalities, a lot more credible than some of the board members of existing IT firms. The clarion call to a “Satyam as a PSU within the IT Industry” was much needed. The GOI has acted responsibly.
2. The CEO, a wish should be someone of the stature of Narayan Murthy, whose portfolio enhances from an Infosysian to a Socio-Economic Oracle for Corporate India. Hope he takes over. Or someone equally credible from the like of TATA Group of Companies.
3. The CFO should be someone, again, on similar lines from above. With a strong committed board at the help, Satyam is on course.
4. Parekh should get intouch with every single Client of Satyam and shore up their confidence (an easy task for him), and keep the Corporate Vultures from other IT firms at bay. It is critical for the survival of Satyam to hold on to Clients, Employees, Investors and Analysts. Task forces in competition would only underline the values and ethics adopted by such Indian Offshoreing partners.
5. All of us need to be careful and responsible in our statements in the blogosphere to ensure that the rise of a new Satyam becomes a success. Send a univocal message to the Ecosystem to assist the Government of India with a fair chance and not taint the already tainted IT and ITes sector by staying away from Satyam employees and Customers.
Any non-alignment to the above is only going to erode the Global perception of Organizations looking at taking advantage of such a situation and such Organizations creating task-forces to steal accounts must be black-listed by Customers. In the wake of Obama rise, this rings just right.
Wishing the Satyam board good luck. There is enough and more business for all.
There’s more to this saga than what meets the eye.
Software outsourcing and IT engagements has been a profitable business.
It’s hard to believe that there were non-existent profits.
In this age of regulatory compliance it is hard to believe that even with the Big 4 auditors involved there has been a failure in corporate goverance.
I’m surely an investigation of the facts will reveal the true story.
The fallout of this episode is that the business dealings of the entire company would be doubted for ethical standards and the customers would rethink about extending the contracts. It would indeed be an uphill battle for the employees to re-establish the trust that they had worked so hard to establish over decades.
We have to save the Satyam employees. This is a human tragedy of significant proportions. Tens of thousands of families are now jeopardized.
HariHari
Bengaluru
Can you only imagine what’s going on in China? I bet its just as fast and furious. Corruption and greed is a universal problem.
The SWITCH (i.e. Satyam, Wipro, Infosys, TCL, Cognizant, and HCL)is now a WITCH (i.e. Wipro, Infosys, TCL, Cognizant, and HCL). Hearts and prayers go out to the families and employees of Satyam.
Srini
Chennai