January 14, 2009
Implications of the Satyam fiasco
Satyam fiasco was a shocker for me. I have been closely monitoring it for quite some time as a scam of this magnitude can have a ripple effect in the Indian IT industry. There has been thousands of reactions from all over the world. I logged in to twitter to see how the story unfolds, as it is supposed to be the real time micro-blogging media to tract instant reactions.
Not to mention the micro blogging platform was teeming with activity and tweets about satyam and the term #satyam was the highest referenced term on twitter.
There were few comments that caught my attention.
And this is why these comments were very shocking. I immediately thought of two possibilities (but I was not convinced) -
Possibility 1:It was a casual remark
It is understandable.
However with the influence that Thomas has on Internet, I feel such casual remarks (at least something which has negligible probability) should be avoided. It will not only result in a hype, but also spreads negative vibe about an industry in general which employs more than over a million professionals.
Possibility 2: Thomas meant it!
In this case, first of all, I am deeply hurt, because I never expected such comment from a global visionary who wrote the book "A friend in every city".
Second, let me emphatically say that this is not the end of an industry. Also generalizing an industry due to some events is not a mature way of looking at things. And, if a scam of this magnitude can 'finish' an industry, then we would not talk about:
- Power business after the Enron scandal.
- Banking / Investments business after Lehman Brothers fallout.
- Bandwidth business after Worldcom went bust.
The culrpit is not an industry. Then why talk about the industry. The culprit is the greed which is driving few professionals with extraordinary power to misuse it. In my opinion this is just another scam driven by personal greed and peer pressure. We should not read much into it and move on.
Again, the losers have been shareholders, who are aware of that they are investing in a risk based equity model. At least this is better (comparatively) to the scams where companies went down with savings, debt instruments and required bail-out from taxpayers money. And yes, those industries are still there!
Software outsourcing industry is here to stay, since it has proven benefit model, which is resulting in solid growth for every stakeholder involved. It is balancing the work-compensation balance in the flattening world and resulting in an inclusive growth of the global economy.
So, I very much disagree with Thomas on this.
What may be the aftermath of the Satyam fiasco:
- I think the Satyam scam will lead to major improvement and overhaul of regulatory framework which will plug the loopholes that has resulted in this scam.
- People will look at their bottom line more often and work on improving the efficiency there. (Considering that Ramalinga Raju did not siphoned out the money and inflated the figure only to sustain the peer pressure)
- There will be temporary 'loss of faith' of retail equity investors, which may elongate the bearish trend on Indian stock markets for a slightly longer period. However,these may change overnight!
- It also reminds that new companies need to continuously emerge. The companies who are stalwarts today may not be like that forever. There is a life-cycle and to remain on the top, India need to throw up interesting growth oriented companies at regular intervals. They cannot remain dependent on the "fab four".
Of course there are more implications than what I can get together in few minutes. So feel free to add your views..