Monday, January 12, 2009

A service provider takes a fall

Satyam, a major Indian supplier of IT and business process outsource services, has shocked their customers by admitting that they have been cooking their books for several years (more than a billion dollars is missing). It seems quite possible they will go out of business, though efforts are being made to salvage the company.

Losing an important supplier is a major concern to all companies who outsource and is often cited as a reason for keeping work inside, but the infrequency with which this sort of thing happens, and the tremendous benefits of outsourcing non-core functions, proves to me that it is a risk worth taking.

There will also be those who point to it being a "foreign" firm and use that as an excuse, but this sort of thing is not exactly unknown in the US and Europe (Enron, Ahold, etc). Well-run Indian (and Chinese, and other) firms will emerge stronger as a result of tighter scrutiny.

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