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Outsourcing Industry Buzz

Satyam Scandal Leaves Company Looking For Buyer
January 2009

India's fourth largest offshore outsourcing provider appears to have little cash and big viability concerns following the admission by founder and Chairman B. Ramalinga Raju of a fraudulent accounting scheme, inflated company profits and falsified financial statements. Ramalinga has since resigned from the company. Satyam has now hired an investment banking firm to "consider its strategic options", which generally implies seeking a buyer to acquire the company.

Forrester Research analysts Sudin Apte and John McCarthy wrote in their January 8, 2009 research report that Satyam's ability to continue as an independent company is in serious doubt. The analysts commented that they expect clients and company staff will "desert Satyam as a result of competitive wooing." Apte and McCarthy also recommended that Satyam customers monitor the vendor's performance against service level agreements (SLAs) and immediately evaluate moving systems to other outsourcing vendors or bringing them in-house. According to Peter Bendor-Samuel, CEO of Everest Group, a Dallas-based consulting firm, "I think Satyam is in a very dire situation ... If they aren't running out of cash now, it's probable that they will be very shortly."

Outsourced Finance Jobs Peak
January 2009

Food process manufacturer Sara Lee's January acknowledgement of outsourcing the company's finance and accounting jobs highlighted an often unnoticed trend of increased back office and finance position outsourcing. Research firm Hackett Group notes that approximately half of the more than 350,000 back office positions moving to India and other low cost destination job markets over the next two years will be in the area of corporate finance. These finance jobs will include various back office roles such as book keepers, accountants, controllers, CFOs and tax preparers. The most popular finance positions outsourced will be data entry positions which deal with the high volume receivables (billing and invoicing) and payables (voucher processing and disbursements) transaction processing.

Hewlett-Packard's Planned Combination of EDS
October 2008

Hewlett-Packard has finally brought visibility, and some clarity, to the planned integration of outsourcing acquisition target EDS. The scope of this acquisition's integration is complex, involving 250 active integration projects, about 10,000 integration milestone events and the reduction of 24,600 jobs. HP CEO, Mark Hurd claims the merging of the two tech companies will generate a combined savings of $1.8 billion. In a clear attempt to allay customer concerns, HP says the majority of layoffs will occur in EDS support positions and not customer facing roles. "The main concern for potential customers is whether an announcement like this wills have a chilling effect on the workforce that would normally transcend from the customer to the provider, comments Ed Hansen, partner in the business practice of Morgan Lewis & Bockius. According to Mark Robinson of outsourcing company EquaTerra, "many customers will be asked to accept changes to elements of their service, be it personnel or delivery locations."

Time will tell if the planned integration of EDS is accomplished according to objectives and schedule. To HP's favor, the computer giant has completed over 30 acquisitions in just the past three years and has demonstrated a methodical approach and repeated success. If the HP and EDS combination lives up to its theoretical promise, the new outsourcing company could offer customers a viable alternative to IBM Global Services.