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Scandal in India creates opportunity for Dallas firms

Discussion in 'Political Zone' started by Garland powerplay, Jan 27, 2009.

  1. Garland powerplay

    Garland powerplay Active Member

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    Scandal in India creates opportunity for Dallas firms

    09:03 PM CST on Tuesday, January 27, 2009

    By VICTOR GODINEZ / The Dallas Morning News

    For once, an Enron-style case of corporate fraud could be a boon for American companies.

    The Associated Press
    The founder of Satyam Computer Services in Mumbai has admitted falsifying profits of the outsourcing giant. Dallas- area companies hoping to pick up Satyam clients include EDS, Perot Systems and Affiliated Computer Services. But while the meltdown at an Indian outsourcing firm is a multibillion-dollar opportunity for its U.S. competitors -- including those in Dallas -- it's an opportunity that could be short-lived.

    The catalyst for this land rush came earlier this month when the founder and former chairman of Satyam Computer Services Ltd., based in Mumbai, resigned after admitting to years of falsifying profits and claiming a cash balance of more than $1 billion that did not exist.

    The scandal has rocked the Indian outsourcing industry, and Satyam officials have acknowledged the departure of several large, unnamed clients.

    Analysts say Satyam had deals of varying size with more than 150 Fortune 500 companies.

    Although the scandal itself is not a big concern for U.S. outsourcing firms, the possibility of scooping up billions of dollars in business from nervous Satyam customers certainly is.

    And outsourcing companies in the Dallas area -- Perot Systems Corp., Affiliated Computer Services Inc. and the EDS division of Hewlett-Packard Co., to name a few -- could be among the biggest beneficiaries of Satyam's troubles, experts say.

    "It's a feeding frenzy right now," said Ben Trowbridge, chief executive at Alsbridge Inc., a Dallas-based outsourcing consulting firm.

    "Every vendor out there is pounding away at their customers."

    Peter Bendor-Samuel, chief executive of Everest Group, another local outsourcing consulting firm, said he's heard from several Satyam clients and the outsourcing companies eager to woo those nervous customers.

    "There's a lot of opportunity," he said. "The guys in Plano, ACS and EDS are engaging right away. They have war rooms up. Everyone has war rooms up."

    "There's going to be $2-plus billion of work that's going to shift from Satyam to someone else in two to four months."

    And that time frame is the rub, experts say.

    The Satyam collapse is a mini gold rush, but all the good claims will be staked out and strip-mined quickly.

    Law firm Morrison & Foerster, which tracks the global outsourcing industry, said in a recent report that "Indian services providers may be impacted by a 'flight to quality' as Western customers react to the recent high-profile Satyam scandal."

    But U.S. outsourcing firms will have to move in quicker than they're used to doing, Trowbridge said, and ditch the traditional marketing campaigns that take months to assemble.

    He said Satyam's Indian competitors -- outfits such as Infosys, TCS and Wipro -- tend to be faster at chasing their prey.

    "The opportunity for U.S. companies is to use their reputation and cultural affinity [to Satyam's U.S. customers] to move rapidly and try to acquire some of this business," he said.

    "But the risk is they won't move fast enough and be aggressive enough."

    There's little expectation that the Satyam collapse will do long-term damage to other Indian outsourcers or to the overall trend of American outsourcing companies transferring jobs to India and other low-cost countries.

    Wipro, for example, reported last week that its third-quarter revenue grew 25 percent to $1.35 billion.

    But even if India does eventually regain its stature as an outsourcing destination, there is a brief opening for U.S. companies to exploit.

    "The work is likely to be done in India, but there is some advantage to being a U.S.-based firm in this time frame," Everest Group's Bendor-Samuel said.


    *Satyam recently confirmed that State Farm Insurance Co. has canceled its contract.

    *Indian news media have reported at least six unnamed Satyam clients are looking to leave, including two in health care.

    *Dallas-area outsourcing companies such as Affiliated Computer Services Inc. and Perot Systems Corp. have strong health care expertise.

    *Satyam worked with clients in a variety of industries and claimed to have 185 customers among the Fortune 500.

    *Some analysts say more than half of Satyam's $2 billion in annual revenue comes from U.S. corporate customers.

    *A spokeswoman in India for General Electric Co. said GE is still working with Satyam "at this point."

    *Satyam was generally seen as a provider that specialized in winning customers by underbidding its competitors.

    Victor Godinez

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