‘Bail out Satyam to save outsourcing’

The Indian government should bail out scandal-tainted Satyam to avert a cataclysmic blow to the outsourcing industry, which is inevitable if US operations of Satyam’s clients are disrupted, warns tech entrepreneur-turned-academic Vivek Wadhwa. 

In an exclusive interaction with DNA in Hong Kong on Saturday, Wadhwa, who is now an adjunct professor at the Pratt School of Engineering at Duke University, said: “If Satyam goes down or if it doesn’t pay its employees, it’s going to disrupt operations of American businesses. That could be fatal for outsourcing… It would completely shatter faith in Indian outsourcing.” 

Wadhwa’s alarmist views are not shared by Forrester Research Vice-President John McCarthy, who told DNA that while Satyam’s clients have reason to be worried, the fear that other companies could have similar problems is a “gross overreaction”. But his rationale is compelling.

“American businesses are betting their own survival on their outsourced systems, even on their call centres and so on,” says Wadhwa. “If, say, Citibank’s operations are disrupted, it will not outsource any more projects.” And the mood of the anti-outsourcing lobby in the US, already ugly, could turn real nasty, he reckons.

The Indian government “should look at providing bail out Satyam, taking ownership if necessary and appointing a new board of directors, just so the company can make payroll.” The government should take Satyam as seriously as the US administration took AIG’s near-collapse in September, he adds. “This should be treated as a national priority for India. That’s how serious it is.”

“If Satyam doesn’t make payroll next month, it’s going to be a disaster… because the moment it starts impacting day-to-day operations, you’re dead. In the outsourcing industry, the most critical asset is your people. The moment your people are looking for jobs, it’s over.”

There’s of course the chance of a new buyer, but it should happen soon enough, says Wadhwa. In fact, he argues, even one of the other big Indian IT firms should seriously consider buying up Satyam “because their own survival is at stake… You can’t have a hiccup here.”

Before the Satyam fiasco, Wadhwa had in fact been arguing that the US recession would benefit India because companies in the US were desperate to cut costs “and there will be a second wind of outsourcing.” But Satyam “could shoot that down,” he say.