Satyam customer defections and damage control

When it rains, it pours. Just over a month ago, I had turned my eyes toward the Indian IT outsourcing companies, focusing in on any long term opportunities given the Mumbai terrorist incident. It didn't take long for a major storm to hit with Satyam's CEO admitting to cooking up financial numbers. This was right after his company had made an attempt to acquire two other companies owned by his family members. It didn't take long for Satyam's customers to grow weary and possibly defect.

A business week article posted a few weeks ago mentions that Satyam is pretty much in damage control mode trying to assure their customers that they have their act together.

Not suprisingly, Wipro, Infosys, and TCS (Tata Consulting Services) will be doing what they can to seize the moment. Those other companies had better take lead from Mr. Obama not send any gifts to prospective clients :)

The company also has to worry about defections amongst its engineers/coders/systems workforce. Here is a quote from one of Satyam's officials trying to assure customers that everything is ok, "We have told them that there is no need to worry about contracts and that we are here to stay". For a good dose of reality, they had better pay attention to their workforce. Defections of knowledge workers is not easily solved by hiring more off the street. I work in this industry and it is not plug-n-play. Customers concerns may not likely be around the company's governance, but around business continuity with all of the systems they have outsourced to Satyam. No business process or enterprise business system is immune to the risk of a new flock of employees trying to pick up what was left off by previous employees.

So what now? Time to take a look at Wipro and Infosys. And if you're into solid governance and think Obama is going to push for US jobs, you may want to look at IBM which posted a surprising strong quarter and has a deep and established global services division.