It's not often that I'm disappointed to be proved right. No sooner had I invoked the spectre of Enron in my earlier blog this week – about Satyam, corporate governance and the risks to the reputation of India's outsourcing industry – than Satyam's chairman had resigned in the wake of a billion-pound scandal.

B Ramalinga Raju, Satyam's founder, has quit after it emerged that he and his brother had fraudulently added some 70 billion rupees' worth of business (£1 billion) to the company's books, overestimating the company's worth for several years.

India's "Enron moment" was reportedly hidden by Raju from Satyam's board and auditors; nevertheless, the board is now no more, while the auditors are being investigated. Satyam shares plunged 40 percent today and it is not certain that the company has enough money to pay its 50,000 staff.

Needless to say, the timing could not be worse for Indian outsourcing, and for the Indian and global economies.

India has been a beacon of economic growth and, on the surface at least, outsourcing professionalism in BPO services. That one of its largest and most prestigious companies has engaged in fraudulent practice on such a massive scale will inevitably damage confidence in Indian corporate governance (not to mention Indian outsourcing).

Bear in mind also Satyam's run-in with the World Bank and whispers about a number of business deals: this appears to be no isolated incident at the company.

The sad truth is that, however honest and transparent other Indian outsourcers may be, mud sticks and clients of every size may feel nervous about large-scale exposure to the sector at a time of economic fragility back home.

Sector confidence is easily damaged when any player is found to have behaved unethically. Let us hope that such wholesale dishonesty is limited to a few individuals within this once-proud company, and not indicative of a widespread malaise across a sector that has witnessed explosive growth and cut-throat competition.

So what next for Satyam? It is now an obvious takeover target, whatever its directors may do to steady the ship. However, the repercussions of any swift, economy-steadying buy for long-term competition within Indian outsourcing would make for an anxious 2009 for clients in the West. Would customers want a small number of major players to hold the balance of power in outsourced expertise and business services?