Satyam customers should prepare for no deal

Analyst firm Forrester is warning businesses that outsource IT services to Satyam to prepare a plan B as the sale of Satyam approaches.

Forrester has...

Analyst firm Forrester is warning businesses that outsource IT services to Satyam to prepare a plan B as the sale of Satyam approaches.

Forrester has warned its customers to prepare alternative plans in case the company's potential takeover were to fall through as a result of unknown legal liabilities or financial ambiguities.

India-based Forrester analyst Sudin Apte said Satyam's new management has achieved some respite for the troubled firm.

But he added that the imminent sale of the company "brings a fresh phase of uncertainty for Satyam clients, who have been experiencing turmoil and ambiguity about their projects since the fraud was discovered in January 2009."

The company, which is at the centre of a $1bn internal accounting fraud, is expected to make an announcement next week regarding its potential sale.

Apte said the bidders that have emerged and formally submitted a written bid or expression of interest have different backgrounds. Each "offers its own set of pluses and minuses that clients must consider."

"To protect their own interests and ensure continuity of service, clients need to accelerate finalisation of their plan B and keep a close watch on which firm buys Satyam to decide if and when to pull the trigger to shift to that plan B," added Apte.

Many customers announced that they were cutting ties with Satyam following disclosures of a major accounting fraud. But many will wait to see who takes over before actually cutting ties.

Mark Lewis, head of outsourcing at law firm Berwin Leighton Paisner, does not think there will be much movement of customers when the company is finally taken over.

"The pain of moving suppliers in an unscheduled sense is very difficult from a practical and legal point of view."

He said if the company that acquires Satyam is credible and the key delivery people at Satyam remain there is no reason for a customer to move.

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