satyam

udin Apte, Senior Analyst and Country Head, Forrester, believes employees as well as clients are going to desertSatyam for a range of factors like future uncertainty. “Clients are raising questions about continuity of Satyam as an independent entity. They are also raising questions about Indian governance and accounting, and overall auditing practices.”

According to him, post the Satyam scam, clients are going to grow cold feet as they start looking at offshoring. “The pace of offshoring is surely going to take a hit. Many questions will come in during the evaluation process. Overall, the impact would be further slow growth. This is the last thing the IT industry wants to hear in a tough economic situation.”

Here is a verbatim transcript of the exclusive interview with Sudin Apte on CNBC-TV18. Also watch the accompanying video.

Q: We have your report with us. You must have spoken to a lot of Satyam insiders, employees, as well as Satyam clients. What is the sense you are getting? Is it imminent implosion with the best candidates, best guys walking out for fear of their jobs, or getting wooed out? And the best customers as well moving out because mission critical businesses cannot be left to this kind of wait and watch?

A: I want to first make one sort of a disclaimer in a way. In the last 48 hours we have not been able to access any senior Satyam executive formally. So, really the report hasn’t considered any Satyam interview.

But we have talked to some of the folks informally, some of the developers and team leaders et cetera as well, and we have talked several clients who also happen to be Forrester clients.

Our sense is that both employees as well as clients are going to desert Satyam for a range of factors. For employees future uncertainty all these factors. It is pretty obvious; all media have been talking about it. I really don’t want to go into that. But that is something big.

If whatever I am hearing in the media today morning for example, even the credit card limits have been thrashed that is just going to trigger the employee exodus.

As far as clients are concerned, which is a more serious issue from an industry perspective, the sense that I am getting is that every interaction that I had with the US and European clients, every interaction ends up saying, is it an isolated incident or is this going to happen to a few more companies. So, people do have a lot of questions.

I hope that this is an exceptional situation and Satyam is the only company. But clients are surely concerned, and raising questions about continuity of Satyam as an independent entity, clients are raising questions about Indian governance and accounting and overall auditing practices. So, there are issues on the client side.

Q: If you could put your experience behind what is going on, I am just trying to get yours and Forrester’s view on this, a) If I were sitting in the US, has the big, overall India outsourcing story hit a roadblock or a brake or a speed breaker, b) there is a certain belief that people who are with Satyam will move to Infosys or TCS or Wipro. What about moving to an EDS or Oracle or Sapient – companies that they are close to and used to dealing with?

A: Absolutely. Let me go one by one. On the overall India outsourcing story, there is a bit of goods news on that front. There is no alternative. I’d said in my earlier reports as well – TINA i.e. There Is No Alternative is going to help India because there are no other locations that can offer 60,000-100,000 people for building centers. So, even if you look at larger multinational companies or firms like TCS don’t have 50,000 or 100,000 people in other locations. So, just demographic is going to help India going.

But now we have a situation where clients are going to grow cold feet as they start looking at offshoring and there is no alternative. The pace of offshoring is surely going to take a hit; much more questions will come in during the evaluation process. And overall I think the impact would be further slow growth. This is the last thing the industry wants to hear in a tough economic situation for overall Indian IT, I would say.

Swapping of clients – there is no common answer. There are lots of areas that Satyam operates in, for example engineering services. Now the top one or two companies in India may not be the best suited vendors for that work. So, to whom the work would shift to is a function of who is the incumbent vendor in that account in addition to Satyam because in that case those companies will know the client, client processes, work, business, domain et cetera.

So, who is the incumbent vendor is a key question. The second question is that do they have the bandwidth to offer those high-end SAP capabilities or high end engineering services or auto and aero capabilities. These are going to be deciding factors where they switch to.

The larger clients of Satyam really are in a fix. They cannot really think about ramping up 500-600 ODCs overnight. So, the size of the client and the incumbent vendors and the domain expertise are a variety of factors that are going to play here. I don’t think we can say rampantly that all Satyam clients will move to TCS or Infosys.