The BASIS of SAP

Dennnis Howlett has covered the implications for PWC (the auditor) in the Satyam fraud . However, I have included his list of links if you want a quick background :

• Satyam Shares Plunge on Scandal
• Satyam chairman resigns amid accounting scandal
• Computer Head Admits to Faking Profits
• Fraud revelations hit Indian computer company
• Satyam accounting scandal could be ‘India’s Enron’
• Fraud revelations hit Indian computer giant

However, what are the implications for the Indian outsourcing industry, SAP in particular. Satyam, like all other outsourcing companies, lives and dies by the quality of its people. Right, now those people are thinking they should move on, before they’re laid off. Satyam’s customers know this and will be getting nervous. If they’re smart, and the logistics make sense, they may even be looking to hire the Satyam people direct.

From Satyam’s perspective, this makes an already difficult position almost untenable. Some people consider that Satyam is unsaleable in its current condition. If it does get sold, expect them to be snapped up at fire sale prices.

More immeadiately, what contingency plans do existing Satyam customers have in place ? Is this an opportunity, in the US and Europe at least, for more familiar names to claw back some business ? IBM, Accenture and CSC all have the cost saving benefits of a global workforce, but also have the perceived benefit of a ‘local’ name.

But what does this mean for the Indian outsourcing industry in general ? My experience is that, even before this episode, customers need far better levels of oversight over both their vendors financial robustness, and the processes governing work quality.

Questions will be asked about the ability of the ultimate provider of services to deliver according to SLAs (both financial and quality), and what is being done by the outsourcer and / or the ultimate provider to enforce financial and QA criteria, given the attention now being focused on this area.

As India’s Enron unfolds, more questions will arise.