Satyam Computer Services Ltd is likely to lose as much as half its customers, some of them to its rivals such as Tata Consultancy Services Ltd (TCS), Infosys Technologies Ltd and Wipro Ltd, after an eye-opener by its chairman that the firm inflated revenue and profits for several years.
At least one partner and customer, Cisco Systems Inc., said a proposed minority investment in a Satyam subsidiary—Satyam Life net —could be in trouble due to this development.
Satyam, India’s fourth largest software firm by revenues, counts bigwigs such as General Electric Co., Nissan Motor Co. Ltd and General Motors Corp., among its 690 clients who use a portfolio of its services. Many of its customers, however, are small firms that give it business of between $1 million (Rs4.86 crore) and $5 million a year.
The smaller customers would find it easy to move their business, said Sudin Apte, country head of Forrester Research, Inc., an independent research company. “But for the larger customers, it is a question on how to transition.”
GE, one of Satyam’s largest customers refused comment while Nestlé and Caterpillar had yet to respond at the time this paper went to press. “Customers would choose those who serve them the best,” said S. Gopalakrishnan, chief executive officer of Infosys Technologies. TCS refused comment.
Satyam faced a serious management integrity crisis since Raju led a move on 16 December to use $1.6 billion of the company’s money to buy two infrastructure firms owned by his family members under the pretext of diversification. The move was forsaken after investors protested.
Since then, customers have raised concerns over business continuity, said Sabyasachi S. Prasad, director of Mindplex Consulting, an offshore advisory firm.
Satyam’s interim chief executive Ram Myanampati in a note to employees said, the new management will meet most customers in person over the next two weeks.
An executive at Wipro said the fraud at Satyam would not impact the entire industry and Western firms would continue to outsource information technology (IT) services from India due to cost, and value would continue.