Troubled Indian IT service provider Satyam faces a fight to stay in business following a $1bn accounting fraud that rocked the firm yesterday.
Satyam chairman B Ramalinga Raju yesterday admitted that he had cooked the company's books for several years. The revelation came in a letter to the company last week, in which Raju offered his resignation and confessed to inflating the company's financial figures.
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The company, which has more than 600 customers in 66 countries, outlined its emergency plans at a press conference this morning.
"Our aim at this time is that the business continues and challenges are minimised," said interim CEO Ram Mynampati at a hastily arranged conference to outline its action plans. "We are working 24 hours a day to restore confidence amongst stakeholders," he said.
He said the first thing the company did was to ensure that customers, who have many business critical IT services carried out by Satyam, were assured that services would not be interrupted. "We have reached out to customers to assure them that the business support will continue," he said.
Mark Kobayashi-Hillary, director at the National Outsourcing Association, said the crisis is bound to lead to lost customers for Satyam. "When we have seen this kind of massive breach of trust cases in the US firms there has been a huge flight of customers," he said. "If I was a CIO and a competitor of Satyam called me I would definitely talk to them."
Satyam is in the process of assessing its financial position, but Mynampati admitted it was short of cash. He said staff pay was sorted out for January but did not comment beyond this. He said the firm would need to increase its cash reserves so it could continue to pay suppliers. "We need some assistance as far as cash is concerned," said Mynampti.
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Senior management have pledged to stay with the company to increase confidence amongst the company's 53,0000 employees.
Approximately 40 top managers from various geographical regions have given their commitment to remain in the company in an effort to retain confidence. Mynampati said it would have been easy for any one of them to walk away from the turmoil.
Satyam this morning rejected a resignation from its CFO.
The firm is considering appointing an audit company for immediate investigation into the allegations made by Raju and to establish position of cash and bank balances.
Robert Morgan, director at consultancy Hamilton Bailey, said the business model of companies such as Satyam makes auditing difficult. "Outsourcers' books are unbelievably complex and almost impossible to audit accurately."
"The basic deal parameters changed so dramatically that often it is, for example, impossible to determine allocated as opposed to shared assets, actual staff usage and how asset values are currently being accounted for," added Morgan.
Satyam has acknowledged the need to strengthen corporate governance and become more transparent.
One source said the company is likely to be acquired.