Satyam's customers are not jumping ship en masse
following the $1bn fraud scandal that hit the supplier, but are
considering their options and ensuring they have a back up plan.
Those that have said they will drop Satyam may change their minds
depending on who acquires Satyam.
Despite reports to the contrary, Satyam's competitors are not
seeing anexodus of major customers. Satyam's major clients are
ensuring they have an alternative if they are forced to replace
Satyam rather than going through the pain and taking the risk of
changing suppliers.
Since Satyam former chairman B. Ramalinga Raju, admitted he had
falsely reported the company's results to the tune of $1bn,
there have been reports that customers have been leaving in their
droves.
This week it was claimed in several news
reports that the company had lost 46 customers since news of
the fraud broke.
Satyam is currently going through a
bidding process where interested acquirers are looking at
confidential information and proposing takeover plans. Companies
such as IBM, Hewlett-Packard and CSC are said to be interested.
Mark Lewis, partner and head of outsourcing at law firm Berwin
Leighton Paisner, says with the exception of a few US firms that
immediately said they would cut ties with Satyam he does not know
of any that have actually made the split. He believes many of the
companies that have said they will drop Satyam will wait until it
is acquired before actually doing so."
"You can make a decision based on governance, ethics and the
need to appear to support good corporate governance. In theory that
is good, but the practice of migrating services is not easily
done," says Lewis.
"They will wait to see who acquires Satyam. It will probable be
a blue chip company and in the meantime the Indian government will
ensure Satyam is run properly because there is a lot at stake."
Bindi Bhullar, head of marketing & alliances Europe at HCL,
says he is not seeing Satyam's major customers drop the supplier.
"Lots of people are looking at a plan B and are talking to other
suppliers but as far as I am aware none of Satyam's big customers
have made the split."
He says there will be certain userswho will get nervous and
sever ties, but changing suppliers is not straightforward. "It is
not easy to change suppliers, because there are always detailed
contract negotiations which can be very complicated
He says most major customers will have these contracts and will
probably prefer to stay with Satyam and wait for it to be sold.
"But the longer this goes on the more uncertain customers
become."
Andy Gallagher, consultant at sourcing consultant Compass
Management Consulting, says Satyam is still actually low risk
compared to starting from scratch with a new supplier. "You have to
balance the risk of continuing to do business with Satyam against
the risk of changing suppliers."
"They will wait until they know the answers to two questions,"
adds Gallagher. "Who will buy Satyam and how long can Satyam
continue to provide service to us?"
"The risk is reasonable low at the moment and until they get
answers to the two questions, businesses are putting all their
efforts into developing a plan B. They are getting it ready but
will notinvoke it until they know it isviable and what the real
risk of doing business with Satyam is."
He says many companies were caught flat-footed by the Satyam
crisis and as a result did not have a contingency plan. "They do
not want to jump from the frying pan into the fire."
Satyam is under the wing of a national government and is likely
to be acquired by a strong company. Businesses may have to be seen
to distance themselves from a company that has seen a massive
internal fraud, but when it comes down to business it could be more
risky to replace them with an alternative supplier.