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Outsourcing Industry Buzz

Satyam Scandal Rocks Outsourcing Industry

Following the admission of a fraudulent accounting scheme and the subsequent abrupt resignation of founder and Chairman B. Ramalinga Raju, India's fourth largest offshore outsourcing company appears to have significant viability concerns.

Satyam Chairman B. Ramalinga Raju has admitted that the company inflated its profits and cash positions for several years and the company has now hired an investment banking firm to 'consider its strategic options' (lawyer speak for sell the company as fast as you can).

Analysts Sudin Apte and John McCarthy of Forrester Research commented in their January 8, 2009 report that Satyam's ability to continue as an independent company is in serious doubt. The IT analysts noted that they expect customers and employees to "desert Satyam as a result of competitive wooing." Apte and McCarthy suggested that IT managers monitor Satyam's performance against service level agreements (SLAs) and immediately consider options of moving systems to other outsourcing vendors or bringing them in-house. "I think Satyam is in a very dire situation," said Peter Bendor-Samuel, CEO of Everest Group, a Dallas-based consulting firm. "If they aren't running out of cash now, it's probable that they will be very shortly."


Outsourced Finance Jobs Spike

Food manufacturing giant Sara Lee's January 2009 announcement of outsourcing the company's finance jobs highlighted an often unnoticed trend of a significant increase in finance position outsourcing. According to The Hackett Group, approximately half of the more than 350,000 back office jobs moving to India and other low cost destination job markets over the next two years will be in the area of corporate finance. These finance jobs will include accountants and accounting staff, controllers and CFOs, tax preparers and book keepers, however, the single most popular corporate finance position outsourced will be data entry focused and in the high volume areas of receivables (billing and invoicing) and payables (voucher processing and disbursements).


HP's Planned Integration of EDS

Hewlett-Packard has finally brought visibility to its planned integration of outsourcing giant EDS. The scope of this acquisition's integration is complex, involving 250 active integration projects, about 10,000 integration milestone events and the reduction of 24,600 jobs. HP CEO, Mark Hurd claims the merging of the two tech companies will generate a combined savings of $1.8 billion. In a clear attempt to allay customer concerns, HP says the majority of layoffs will occur in EDS support positions and not customer facing roles. "The main concern for potential customers is whether an announcement like this will have a chilling effect on the workforce that would normally transcend from the customer to the provider, comments Ed Hansen, partner in the business practice of Morgan Lewis & Bockius. According to Mark Robinson of outsourcing company EquaTerra, "many customers will be asked to accept changes to elements of their service, be it personnel or delivery locations."

Time will tell if the planned integration of EDS is accomplished according to objectives and schedule. To HP's favor, the computer giant has completed over 30 acquisitions in just the past three years and has demonstrated a methodical approach and repeated success. If the HP and EDS combination lives up to its theoretical promise, the new outsourcing company could offer customers a viable alternative to IBM Global Services.




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