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Does One Bad Apple Spoil The Whole Bunch?

March, 2009

Early this year B. Ramalinga Raju, chairman and founder of India-based outsourcer Satyam, tendered his resignation due to allegations of financial fraud. Financial Services Outsourcing asked consultants, vendors, and academics to share their thoughts on how the Satyam episode will change financial services outsourcing.

Financial Services Outsourcing: What impact if any will the Satyam scandal have on financial services outsourcing?

GK Murthy, senior vice president, Sierra Atlantic: We've seen similar reactions in other industries tarnished by scandal, and this does not always mean disaster for all the players in these markets. For example, people did not stop buying toys when there were reports of lead from China.

I am sure the financial services sector will look at ways to adapt, and there may actually be some opportunities to improve ways in which they outsource work in the process. The industry has changed significantly and there are no longer huge volumes of commoditized "pay-per-head" work and mega contracts so transferring or transitioning an existing mega contract to another large service provider from the U.S. or India will not be the best strategy.

Let's remember that the Satyam crisis was the result of questionable business practices and clear malfeasance by one set of actors and does not indicate a need for reform in and of itself. So I am not sure I agree that everyone who delivers these types of services needs to change in order to rebuild trust.

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