No 'Satyam' In a Year Predicts Gartner

Bangalore Jan 31: The scam-stricken Satyam Computers is unlikely to exist in its current form, according to a study by research firm Gartner. It is expected to discontinue some of its businesses, service lines or cease to exist in certain geographies by 2010.
The study indicated that even the name Satyam may not be around by that time, as the company is expected to undergo a complete change, in ownership and organizationally.
Satyam’s ability to sign on new clients during 2009 has significantly diminished, says the study. “In addition, it will be challenged to invest in client engagements, staff developments or R&D — all critical elements for IT services,’’ said Gartner’s vice president for research, Frances Karamouzis.
For the study, Gartner interviewed representatives of over 30 top Fortune 500 clients of Satyam, 20 top non-Satyam clients, the board of Satyam and CEOs of six tier-I Indian IT firms including TCS, Wipro, Infosys Technologies, Cognizant and HCL.
Many respondents felt that the job of a new CEO/COO/CFO of Satyam will be extremely demanding as holding the existing clients is going to be a tough task. Also, with a monthly payroll of more than $125 million and dire cash flow issues, the future does not bode well for the company.
IT services are based on trusted relationships or strategic partnerships, rather than on a tangible asset, such as a product (for example, PC, mobile device or router) or software code. Gartner believes that Satyam’s ability to regain this trusted status has been significantly reduced. “It lacks resources, financial and management muscle and credibility to rebuild its brand,’’ said Karamouzis, who conducted the study.
Satyam has 690 global customers, of which 185 are Fortune 500 companies. Some 53 of them had annual billing exceeding $10 million, 93 had over $5 mn, and 230 over $1 mn. The top 10 customers account for onethird of its revenue. A significant number of these clients have already sent some kind of inquiry to other vendors in India, found the study.
Gartner, however, does not believe that the Satyam Effect will trigger widespread retrenchment of outsourcing decisions. Similar to the financial services sector, where the indiscretions of some major entities have shaken users’ confidence, people still need banks, credit cards and stock brokers. The incident is also not an outright indicator of widespread corporate governance issues within the Indian offshore industry, Karamouzis said.
What’s more, in many buying markets including the US, demand for IT services skills outstrips supply. Thus, enterprises can’t afford to ignore buying offshore or outsourcing services from the external market, the study indicated.
(Source TOI)