Outsourcing fraud
Satyam Computer Services, a leading Indian outsourcing company that serves more than a third of the Fortune 500 companies, significantly inflated its earnings and assets for years, the chairman and co-founder said Wednesday, roiling Indian stock markets and throwing the industry into turmoil.
The chairman admitted that $1 billion of the assets on the balance sheet were non existent. Satyam is a player as back office provider for some of the largest banks, manufacturers, health care and media companies in the world, handling everything from computer systems to customer service. Clients have included General Electric, Nestlé and the United States government. In some cases, Satyam is even responsible for clients’ finances and accounting.
“What started as a marginal gap between actual operating profit and the one reflected in the books of accounts continued to grow over the years. It has attained unmanageable proportions as the size of company operations grew,” the chairman wrote. “It was like riding a tiger, not knowing how to get off without being eaten.”
The outsourcing industry has always been an sensitive area. Is this a blow for the outsourcing industry that will impact its (short term) future?
http://www.nytimes.com/2009/01/08/business/worldbusiness/08satyam.html?_r=1&em
