The Indian IT outsourcing industry, which is thriving on the goodwill and reputation it has built over a period of time among the global clients, is expected to bear the brunt of the Satyam episode in coming quarters.

The industry, which is also passing through one of its lows in the wake of the ongoing global financial downturn, expects that clients will now be more cautious, despite Satyam’s case being an isolated one.

“I think, the people who outsource works to us will ask more questions, and this is very natural. It will take due course to improve. However, Satyam does not represent the whole Indian IT industry, this is just one individual act. However, we need to talk to our clients and give them assurances,” said T V Mohandas Pai, director of human resources, Infosys Technologies.

Suresh Senapati, CFO, Wipro, adds: “This has nothing to do with the industry and the nature of business. This is just an isolated case and can not be assumed as a trend in the Indian IT industry. However, this of course, will make the customers more suspicious and could have some impact because of this development.”

Unlike other sectors, the Indian IT services sector is too much dependent on global customers since the domestic market is yet to come to a standard level. Most of the companies rely on the US for more than 60 per cent of their revenues, followed by Europe about 20 per cent.

While outsourcing a contract to an Indian IT outsourcing company, the clients do a due diligence, which includes a thorough observation of the focus, intent and size of the company, and the projects they have already executed for other clients. Any suspicious activity on the part of a vendor is enough to instill a sense of fear since most of them work with the service providers on a long-term basis. Industry sources say that companies are making all-out efforts to keep their clients in good faith.

“The industry needs to bring back confidence among the clients, the ways of doing may differ from company to company. Each company need to figure out how they will handle such a situation,” added Rostow Ravannan, CFO, MindTree.

Sources believe, while the affected company (Satyam) is expected to loose out many of its existing clients, this will have some ripples among the industry as a whole.

Research firm Forrester says close to 35-50 per cent of the clients are expected to walk away from Satyam. This, however, can have a positive impact on other Indian IT services companies, which can grab many of the clients apprehensive of financial fraud by the company.

“Such kind of development makes the affected company more vulnerable while at the same time it provides a lot of opportunities for the non-affected companies. This of course is an opportunity for us and we might see a lot of their (Satyam’s) clients approaching us,” said Senapati of Wipro.

The movement of clients from Satyam to other IT vendors is, however, not expected to be easy. Clients will start reviewing the exit clauses in their contracts with their Indian providers. They are also likely to conduct a more microscopic due-diligence for large deals thereby deferring the decision on upcoming vendor contracts.

“The industry speculation about Satyam’s demise is likely to alarm clients and they will be looking at the first opportunity to exit from any business-critical engagements. Those with infrastructure, outsourced to Satyam, will be the first to make the transition to another provider,” said Sabasachi Satpathy, co-founder of Mindplex Consulting, an outsourcing advisory firm.

Sudin Apte of Forrester asserts that after this shocking disclosure, “Around 30-50 per cent clients would review their deals with Satyam”. These, he explains, are primarily the 100-odd ones that have deals of around $1 million or lower.

Nasscom President Som Mittal said: “The IT-BPO industry has high sets of corporate governance and this is an isolated case of governance failure. The blame of such an isolated incident should not be put on the entire country or industry because such issues have taken place in Europe and more recently, in the US.”

Source: Business Standard
http://news.in.msn.com

US economy is facing a downturn period. The economy that has been the driving force for the economies of other developing nations is in its slump time. The calculations say that this downfall of US will affect the IT industries and other sectors of the most nations.
The analysts are calculating the effect of US recession on Indian Economy and its various sectors. They are reckoning the effects of this downfall period on Indian Exports, IT developments, growth in Software sector and BPO sector. There is news that expose US call centers are not much involved in proactive customer service.
The experts are foreseeing these factors as the opportunities for Indian BPO industry. They are advising that Indian BPO sector should place itself in the US BPO shoes to reinvent the services of the customers that otherwise use the US services.
The BPO sector will keep on booming as it is an essential service. The fact that besides many promises, Indian IT industry is slowing down and the effects could be seen in its current policies. There have been shrinking absorption of labor and decline of many other services can not be argued. But the reports clarify that this will not be same for the BPO sector.
The reports state that Indian BPO sector has the potential of reaching US $1.6 billion by 2008 and US $50 billion by 2012, with this recession continuing. This sector will add 2.5% to India’s GDP growth. It will provide employment to about two million people.
But achieving all the success depends on the way BPO players will take the change. They have to remain focused to grab the opportunities that US recession has offered them. This growth factor is dedicated to the arising prospects in domestic sector.
The BPO industry can turn to the evolving break in domestic market. The reports expose that the domestic BPO market had grown by 50% over the last five years.
This rate is much faster than the growth factor of overall Indian BPO market. Even in this downturn period US will be the biggest markets for Indian BPO services. To sustain this growth factor and remain the booming industry, there are some challenges that BPO sector has to face successfully.
The biggest challenge is the appreciation of rupee against dollar. All the billings for BPO are done in dollar where as the expenditures are maintained in rupee.
This time is the major sustainability test for BPO sector. At the concluding note, Indian BPO sector will continue to boom in the adverse conditions also. It will have the significant growth in coming years and will bring large revenues for Indian Economy. It will polish the shine that India is having in Software sector.