I keep telling myself that I’m going to stop writing about the troubles at Satyam, but it seems like more shocking stuff keeps coming out.  In the latest bit of corrupt behavior, the Wall Street Journal reports that Mr. Raju actually skimmed money from the company through payments to 13K phantom employees:  (Sorry, subscription required)

“The disgraced former chairman of Satyam Computer Services Ltd., B. Ramalinga Raju, used salary payments to 13,000 fictitious employees to siphon millions of dollars from the Indian outsourcer for land purchases, prosecutors said Thursday.

Prosecutors in the southern Indian city of Hyderabad, where the technology-outsourcing firm is based, told a criminal court that Satyam has only about 40,000 employees instead of the 53,000 it claims.

Prosecutors claimed the money, in the form of salaries paid to ghost employees, came to around $4 million a month. The money was diverted through front companies and through accounts belonging to one of Mr. Raju’s brothers and his mother to buy thousands of acres of land, the prosecutors said.”

It just keeps getting better.

Technorati Tags:  Satyam, China Outsourcing

The Wall Street Journal (sorry, subscription required) reports that Wipro is expecting things to get worse:

“Wipro Ltd. […] warned that revenue from its software-services business would decline.

Wipro, India’s third-largest software exporter by revenue after Tata Consultancy Services Ltd. and Infosys Technologies Ltd., also said it has fewer clients than in the previous quarter as the financial crisis deepens.

While some of this may be specific to India, what with the latest “troubles” there, I’m also hearing scattered reports of similar prospects among the leading Chinese software/IT outsourcing companies.  In fact, many of the Chinese firms are starting to seriously shift their focus to winning domestic business.  Hold on to your hat…

Technorati Tags:  China, China Outsourcing

Over the many years that I’ve been working in China outsourcing, the Indian competitors have always had one recurring theme.  Sometimes they dress it up in different ways, but it always boils down to something like, “India’s business ethics are completely consistent with western standards.”  This is usually followed by some attempt to create fear, uncertainty and doubt about the business ethics in China.  I’ve never believed this baloney, and I’ve just been waiting for the truth to come out.  Now it’s busting out all over the place.  The latest issue involves Wipro and the World Bank.  According to a story in the Wall Street Journal: (sorry subscription required, but the story is literally everywhere)

“In another blow to India’s already-reeling technology industry, the World Bank disclosed it had barred two Indian outsourcing firms, Wipro Technologies and Megasoft Consultants Ltd., from doing work with the bank’s headquarters.”

One of the best parts is the lame failure to accept responsibility from Wipro’s CFO:

“If we knew about [the World Bank’s debarment policies], we wouldn’t have done it,”

Yeah, right.  The same story notes that the institution also smacked Satyam in September:

“The bank had barred Satyam in September for eight years, also for allegedly providing ‘improper benefits to bank staff,’ but the bank didn’t announce that until December.”

I’m certainly not claiming that China is perfect, but let’s not tolerate this “Chinese companies have questionable business ethics” nonsense from our Indian friends for another moment.

Technorati Tags:  China, China Outsourcing

Normally, I try to avoid doing two posts in a row on the same subject, but this is just too amazing, and I fear that it will have profound impacts on the global outsourcing industry.

According to Reuters:

“The company’s [Satyam’s] market value has shrivelled to $330 million (217 million pounds), from more than $7 billion six months ago.”

The story continues:

” admission that profit had been overstated for years and that about $1 billion, or 94 percent of the cash and bank balances on Satyam’s books at end-September, did not exist. …

…at the net level it must have been a loss, which makes it extremely unviable. They have been borrowing to pay salaries, which means they have no cash at all…”

Every time I see another item about this sordid affair, I issue a huge “thanks” that it wasn’t one of our leading Chinese vendors.

Technorati Tags:  China, China Outsourcing

Many of us involved in China outsourcing have been a little envious of our competitors from India.  At times, their success seemed almost unbelievable.  Apparently, it was not to be believed.

According to the Wall Street Journal: (Sorry, subscription required, but the story is pretty much everywhere).

“The admission by Satyam Computer Services Ltd.’s chairman that he concocted key financial results sent shockwaves across the information-technology sector, raising questions about how the scandal will affect the company’s customers and rivals.

B. Ramalinga Raju, founder and chairman of one of India’s largest IT companies, resigned Wednesday after admitting to falsifying company accounts and inflating revenue and profit figures over several years, sending the company’s shares tumbling and triggering a probe by India’s capital market regulator.”

It will be interesting to see whether this scandal has any impact on the trust relationships that the Indian outsourcing industry has established with its clients.  One hopes that news like this will encourage more companies to consider the very viable alternatives available in China.

Technorati Tags:  China, China Outsourcing

Since my 2008 predictions were so utterly wrong, I decided to take a pass on the opportunity to embarrass myself again for 2009.  Instead, I’ll let other’s embarrass themselves.

The IAOP has five predictions:

• Outsourcing will stay closer to home (they suggest that China will be challenged by “closer-to-home” locations)
• Global uncertainties will create outsourcing volatility
• Professional expertise will be valued
• Strategic companies will prosper
• Social responsibility and green will be outsourcing themes

Alsbridge CEO Ben Trowbridge gives us thirteen more trends for 2009 (I edited some of these for space):

• Organizations will shift strategy, taking a longer-term view of sourcing options instead of a one-time decision on which functions to outsource or move to a client-owned offshore center.
• Security concerns will grow. The range of offshore locations to consider for outsourcing will expand due to security concerns in India.
• Currency changes will be positive for the buyer. The cost of outsourcing will continue to be attractive and become slightly cheaper due to currency and GDP shifts in low-cost locations.
• Inflation of outsourcing costs in India will effectively stop. Employee wages in India will stabilize and remain steady, keeping the cost of delivering services from rising.
• Work will be streamlined. Systems designed to structure work and reduce facilities’ costs by utilizing remote workers will improve and evolve further, allowing low-cost U.S. locations to be tapped for work that needs to stay inside the U.S.
• The complexity of the outsourcing decision will grow, driven by the twin concerns of economics and security.
• Time will become a new factor in sourcing decisions. Budget concerns will drive a need for faster sourcing processes, using streamlined steps confirmed by quantitative pricing data. In some cases, this may be a sole-source process.
• Systems and process standardization will continue to commoditize work and allow many more vendors to be considered for niche outsourcing needs. The process of managing a larger group of vendors will be key.
• Provider selection is changing. It will take greater effort to cut the field to four finalists who receive the request for proposal (RFP).
• Mergers and acquisitions will continue. EDS was the big name in play last year. Who will it be this year?
• Human resources outsourcing will struggle as vendors sort through the complexity of client needs and their own requirement to standardize.
• The offshore mix in infrastructure will grow as vendors improve their capability to remotely manage centralized computer centers.
• Chief Information Officers will search for the right mix of value, cost and service quality. This will drive reevaluation of the mix of what is outsourced.

There, I have my first post of the year and I don’t need to worry about looking like an idiot when 2009 draws to a close.  OK, maybe I do, but that’s another story.

Happy New Year!

Technorati Tags:  China, China Outsourcing