Satyam fiasco: Just a ban or a can of worms?

Satyam fiasco: Just a ban or a can of worms?

Is the World Bank ban on Satyam leading us to read too much into the Ethical Quotient of the industry? Some preliminary answers

Pratima Harigunani

Wednesday, December 24, 2008

PUNE, INDIA: When a top tier Indian IT vendor comes under the spotlight for allegations like financial wrongdoings, bribery and sensitive data thefts by an organization like World Bank, it sure raises a lot of eye brows and be a full Pandora's box of questions around ethics.

Talk about responses from various industry quarters and we see that while this may be maintained as a one-off case, there are sure implications for the industry, even if indirect. And it might take some time to clear the fog away for the accusations abuzz, areas like corporate governance, degrees of caution by customers and competitive advantage points sure take the sun shine.

The fact that something like this could have happened is not a positive thing but its coming out has its positive effects, as analysts see it.

"This brings about the loopholes in the system on areas like corporate governance and transparency and at the same time is reassuring that the system is able to track such things, opines Arvind Kher, chief strategy officer, Value Notes, the noted research and market analysis specialist.

"This hints that there are naturally some lacunae in corporate governance systems and one can do something like this even while following the rules is quite a novel revelation It's a very unusual incident being reported and that's why probably getting all this attention."

It has been reported that there is an eight-year World Bank sanctions against Satyam, the computer software service supplier from all business at the bank. The ban is linked not only to financial wrongdoing but also to the ultra sensitive data heists, the report said.

The company is also facing court cases in the US from online and mobile payment services provider Upaid Systems on Maytas acquisition deal and incidental financial developments. The spotlight, deserved or unearned, temporary or long-lasting, would do its job nevertheless.

While, responses on the issue could not be obtained as Satyam declined to comment, the fiasco might switch on many caution seat belts. For Ranjit Satyanath, who is spearheading IT at the retail chain Shoppers Stop, as a customer he would definitely exercise more caution henceforth.

"Though I don't have full background to the case, personally it's a hint for more caution. Normally we do scan proposals properly but now if something of this nature has happened we will keep an eye out and be rigorous on corporate governance ethics, thus scanning all available information about the vendor partners in public domain." he says.

It would be also being a chance for competitors to leverage by talking about their levels of transparency both to existing and prospective customers, he admits. But there won't be anything hugely negative for the industry apart from a little dent on image.

"The industry would not lose impact. No panic but may be some caution is what reaction it should get ready for," Kher reasons.

Viewpoints, both from inside and outside the industry maintain that there would not be a major or lasting impact on overall industry image. In Satyanath's view an isolated case does not bring overall industry under scanner.

"In fact some of the top Indian IT firms like Wipro or Infosys are very well recognized for their ethical standards."

Avoid generalizations and treat the incident as an isolated one, is what the general opinion current gives as a drift.

"It's more of an allegation than an indication. Many such issues have surfaced in the last few years. We have seen singular cases like embezzlement or identity theft or telecom downtime before and the industry has dealt with it. The track record is good. We should avoid the tendency to generalize," advises Kher.

Don't read more into the case, is a common response emerging from all, be it Satyanath, Kher or industry veteran Dr Ganesh Natarajan, Deputy Chairman and MD, Zensar and Chairman NASSCOM who says, "I do not know the details but Satyam is already facing so much.

It's hard to comment on what could have actually transpired but whatever it is, there is nothing generic about it and it has nothing to do with the industry. It is a firm-specific issue. No question marks for the industry." Ganesh Natarajan confidently states.

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