Satyam – whats next?
We have all ready the Satyam story – India’s Enron. What a tragedy! Satyam was one of the most respected and largest IT services firms in the world. And now after hearing this news, who would you trust?
First of all, my heart goes out to those Satyam associates that really helped build Satyam into a leading IT services organization. It is sad to see the efforts of those hundreds, maybe thousands of people who really put their hearts and souls into building the organization into what it is today.
Second the investors. IT in India has been considered to be a clean and honest industry. They have been the torch bearers of business ethics in India. No other Indian industry can be said to be as clean, honest and transparent as the IT industry. This coming from a company like Satyam puts a black blot on the corporate governance landscape in India.
There has been speculation regarding the fate of the company and its clients. Rightly so. If I were either working with Satyam as a client or an associate or even a vendor, I would really not know what to do next. I am sure one of the larger companies would come forward and try to get whatever is left of Satyam. Not that it is an easy thing to do. The first question (out of so many) is the worth of the company given the gross over reporting of profits, revenues and cash in hand.
This is a lesson for the other participants of the Indian IT revolution, including InfoBeans. We need to have great transparency in corporate governance, create an honest corporate culture and most important – just be honest to ourselves. Without this a a lot of effort of a whole lot of people would go down the drain. Overnight.
To those who might feel surprised by this development in the India IT industry, I have just one thing to say. We are surprised as well. This is not how Indian IT operates and we still have shining examples of conduct par excellence in corporate governance (notably Infosys and TCS). Let us not take this as a rule, this is a glaring exception. Nasscom, India’s premier IT industry body has already moved to delist Satyam as a member and they have been stripped off numerous rewards they received in the past.
Whatever said and done, most likely, the Satyam brand may die an untimely death. This is a sad for the Indian IT industry.
Here is the letter of Satyam Chariman Raju to the board.
As luck would have it, I studied SATYAM in ‘08 and used their financial statements as a case study of US GAAP. Indian GAAP and IFRS global accounting standards. I remember marveling at the Company’s impressive financial results and growth potential. You see, post-Enron, we expect that auditors and analysts have become adept at rooting out all the shennanigans. I find it curious that Mr. Raju alone could keep a $1B scheme aloft. In the other current fraud scheme Bernard Madoff concealed his $50B fraud because be controlled all the “chips” and produced the accountings himself. But, Mr. Raju had an army of good financial employees. He had Big 4 auditing firm PriceWaterhouse attesting to the systems and numbers. And, (we used to think) the S.E.C. was breathing down his neck.
To me, poor integrity and poor decisions made at the corporate finance level do not take away from the 15,000+ great people and work product in the core business operation. Some units of the business can survive and continue to deliver. Others may be sold off to generate cash. Unfortunately, $1 BILLION of non-existant CASH spells disaster for all lot of people and their paychecks and careers.
Companies need to come clean, Now! Do the right thing. Down-size to right-size. And forget about trying to be the next Wipro or Infosys. Be the Best in your sphere. And provide great work and jobs for decades to come.
Mike
Mike Gerlicher
January 8, 2009 at 5:30 pm
If the recent reports that the Satyam Founder siphoned money are true, its good news for all stake holders. Visit my blog at http://www.satyam-news.blogspot.com for more.
Janit
January 19, 2009 at 6:51 am