Industry news

CSC has received four task orders to support the Department of Defense’s (DoD) ‘High Performance Computing Modernization Program’, providing technical operations as well as user support and outreach services at two DoD sites. The combined value of the task orders is more than US $82 million if all options are exercised over six years. The task orders were awarded by the General Services Administration under the Federal Technology Service’s Millennia contract.

CSC’s High Performance Computing (HPC) Center of Excellence, which has supported the DoD sites since 1996, will perform the work under two task orders at each site: the U.S. Army Corps of Engineers’ Engineers Research and Development Center in Vicksburg, Miss., and the U.S. Air Force Aeronautical Systems Center in Dayton, Ohio. CSC will support the centers’ high-performance capabilities with services ranging from site preparation, system administration, and equipment installation and integration to providing help desks, managing user information and providing scientific visualization support.

“Few companies can provide the scope of services that CSC can in such a technically demanding and leading-edge environment,” said Bob Scudamore, vice president of CSC’s HPC Center of Excellence. “We look forward to continuing our support of these sites.”

India’s Ministry of Corporate Affairs has announced the appointment of a new board at troubled Satyam, including the ex NASSCOM president, Kiran Karnik. The company said in a statement that it hopes to: “ensure the company's continued operations, maintain customer confidence, and restore investor trust.”

The new members are:

Deepak S. Parekh, Chairman of HDFC Bank

Kiran Karnik, former President of NASSCOM

C. Achuthan, Director at the National Stock Exchange, former Member

SEBI, and former Chairman of Securities Appellate Tribunal.

Commenting on the appointment the company said, "The new members are eminent and accomplished leaders, recognized in India and around the world for their expertise in finance, law, administration and the IT services industry. Satyam's leadership team has complete confidence in them, and pledges to work closely and in full cooperation with the new board.”

The board is expected to meet within the next 24 hours.

"This is a vital stabilizing development for Satyam, and it marks the beginning of a new chapter in the company's history. It is the best news we've received in the past four weeks," a company spokesperson added.

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?

Capita Life & Pensions has announced a five year partnership with Steria, which will see it provide offshore IT application development and support services for Capita’s life and pensions clients.

John Torrie, Steria UK CEO, commented, “This is an important partnership for Steria and strengthens our position within the IT outsourcing market.”

Craig Rodgerson, Capita Life & Pensions IT director, said, “Our overall objective was to manage our IT expenditure, so that we could offer our clients the most cost effective service possible.”

No financial details were released

Unisys Corporation, a worldwide IT services company, has received a one-year outsourcing contract from Dr Pepper Snapple Group, one of the largest beverage companies in the Americas.

Unisys will provide managed services for 5,000 Dr Pepper Snapple Group IT users in the Americas.

Virginia Guthrie, CIO of Dr Pepper Snapple Group, commented, “Partnering with Unisys for outsourcing services helps Dr Pepper Snapple Group keep IT costs in line and streamline operations.”

No financial details were released.

TCS has launched a development centre TCS Kalinga Park in Bhubaneswar, Orissa.

TCS Kalinga Park, which is being developed over 45 acres of land, is the latest addition to the company’s global delivery repertoire. The first unit of the facility with a capacity of 1,000 seats has been made operational in the first phase. Upon completion, the facility will have a total capacity of 7,000 seats.

Mr. S. Ramadorai, TCS CEO & Managing Director, commented: “With a strong education eco-system and plentiful talent, Orissa has emerged as a key resource base for TCS in the region. The new center will also increase our access to skilled professionals and students from in and around Bhubaneswar.”

The head of India's Satyam Computer Services resigned on Wednesday after saying that the outsourcer’s profits had been inflated, sending the stock down more than 80 percent and roiling investor confidence, according to a report by Reuters.

Ramalinga Raju, founder and chairman of Satyam, said in a statement the company's profits had been inflated over recent years but no other board member had been aware of the financial irregularities.

"The gap in the balance sheet has arisen purely on account of inflated profits over a period of the last several years," Raju said.

The Economic Times has reported that Tech Mahindra, has approached Satyam Computer Services, India’s fourth-largest IT services company, for a cashless merger, according to a person close to the development. If the merger goes through then the resulting organisation would be the third largest IT services company in the world.

The full article can be found here

IBM has signed a US$5 million IT services agreement with Kotak Mahindra Bank Limited (Kotak), one of India's leading banking & financial services providers.

IBM will design, build and maintain data center as well as the converged IP network infrastructure. The solution is forecasted to save Kotak over US$1.2 million in operational efficiency and reduced energy costs over the next five years.

Vikram Sud, Group COO of Kotak Mahindra Bank Limited, said, "In our aspiration towards building a world-class, integrated banking and financial services institution, we are rolling out several initiatives which include a shared services utility model to leverage economies of scale and adopting more environmentally friendly processes including the reuse of materials, waste recycling and using renewable energy sources."

So 2009 is upon us: I hope you had a well-earned break over the festive period and have returned to work having shaken off some of the gloom of last year – despite the freezing conditions sweeping the UK.

How is the new year shaping up so far? Well, Indian services giant Satyam ended last year badly and those bad tidings have failed to bring comfort and joy in 2009.

Over Christmas a long festering private dispute flared up in public between Satyam and the World Bank over Satyam's alleged provision of improper benefits to bank staff, and other issues concerning Satyam's relationship with companies in whom some senior managers reportedly had investments.

Satyam has been declared ineligible to bid for World Bank work for eight years (temporary suspension occurred in February last year).

On Christmas Day Satyam formally requested that the World Bank immediately withdraw its public statement, and requested that the bank “issue a new statement apologizing to Satyam for the harm done to the company due to the Bank's actions, and that it provide Satyam with a full explanation of the circumstances related to the Bank's inappropriate statements”.

This came less than a month after the acquisition of Maytas Infra and Maytas Properties was called off – a purchase that had also resulted in legal action from a Satyam client, which alleged it would not have been paid if the acquisition went ahead. Dr Mangalam Srinivasan, an independent director of Satyam, compounded the company's woes by resigning on Boxing Day.

“While none of this is helpful to Satyam, it is also likely to cause wider market repercussions,” says Ovum, citing the credit crunch, bank recapitalisations and the alleged Madoff $50 billion Ponzi fraud scheme, all of which have conspired to damage public confidence in both the finance and services sectors.

It seems that the burgeoning IT services sector in the East will inevitably face similar regulatory and compliance problems to those that characterised the worst excesses of the pre-bust Western economy earlier this century – and at a time when public confidence is low.

Either way it is essential that such public disputes as that between the World Bank and Satyam are resolved swiftly and, above all, clearly.

Elsewhere, public-sector outsourcing is back in the broadsheet headlines once more: first, in the form of the outsourced 2009 SATS exam marking (you will remember last year's debacle – do we look forward to better news this year?), and second, in the form of yet another vast, unpopular and misconceived government outsourcing deal: the 'super database' of all UK citizens' email and Internet traffic.

I will tell you now that I believe the scheme is worse than useless, is hopelessly misguided and poorly thought-through; it will do little to improve security and much to undo public confidence in the privacy and security of their data, and will actively roll back civil liberties; it will vastly exceed its proposed budget, prove massively unpopular, discredit our industry once more, and probably be abandoned in two or three years' time having wasted billions of pounds of public money. There, I've said what most people are already thinking.

Perhaps someone in the industry will speak up before we reach that point? I doubt it: but rest assured we'll be covering the story here.

Happy 2009!