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The Satyam Effect On The Offshore Outsourcing Industry


  • The Satyam Effect On The Offshore Outsourcing Industry

The offshore outsourcing boom began in 1990’s with U.S and U.K firms hiring offshore companies enlisted as “Cobol” programmers in India to combat the scare of the Y2K (with the change in the codification etc.). That was the epoch-making beginning of the IT offshore outsourcing dream in India that has now become a full fledged industry generating millions of dollars in revenue and providing employment to hundreds of Asians across India, Thailand and China.

The NASSCOM (the National Association of Software and Service Companies) puts the figure as $50 billion revenue earned in 2008 alone and says that this trend is robust and irreversible, with the outsourced services spawning into various new industry verticals.

This is exactly how Satyam’s dream began too and what a magical journey it was! Moving from one success to another covering milestones after milestones; this small firm became the third largest offshore outsourcer to big corporations in the US and U.K. Until its promoter and co-owner B.Ramlingam Raju decided to come clean about the financial swindling done by him to show inflated profits and siphon away company money into real estate building that just crashed!

One company’s fall does not make an industry crumble!
Well if outsourcing critics think that the financial frauds of one offshore outsourcing company will pull down the whole industry then nothing could be farther away from the truth! Infact, Satyam’s loss is definitely its competitor’s gain!

The business buzz is that the customer’s who deserted Satyam or reneged on their contacts have already signed up with Infosys or other big Indian Outsourcing firms!

Although the ripples were felt in the IT outsourcing industry, it only made people more cautious about accounting systems and about keeping their financial records straight. It does not talk about the failure of Indian outsourcing.

The consulting giant, Forrester’s predicts that the multi- billion dollar industry of offshore outsourcing in India will grow at an astounding 29 percent per annum despite the world-wide recessionary stance.

However, Satyam did manage to scare away a few small time outsourcer or those small businesses that were considering outsourcing, but the main clients across industry portals are still intact. The business of outsourcing processes or technology depends largely on the customer-partner trust which sure has received a setback especially in financial accounting, credit card handling, banking, billing, purchasing and customer relations. But, again that depends on the companies’ personal equation with the client and how well they can do “crisis management” and rebuild their image vis-a-vis the backdrop of this scam.

The Satyam scandal has occurred at a time when the outsourcing industry was at its high road to great competition from other low-cost offshore outsourcers like China, Mexico and Brazil. Yet the distinct Indian advantage remains, that India has a tremendous pool of talent and a huge English speaking populace!

But, most analysts are certain that the Satyam debacle and the current global economic plight will not alter the fundamentals of offshore outsourcing which is likely to be as attractive to clients in US and UK as before! Hail outsourcing!