Operation Satyam, a job half done

The government's failure in quickly bringing to trial Mr Ramalinga Raju and others involved in the Satyam scandal is as spectacular as its success in saving Satyam, the company, says RAGHUVIR SRINIVASAN.

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The singular aim was preserving Satyam, the company, and finding a new owner of repute for it.

On January 7, 2008, Mr Ramalinga Raju dropped a bombshell — confessing to a Rs 7,136-crore fraud — on an unsuspecting market, shareholders, employees and, indeed, even the government. Mr Raju's letter bomb, emailed in inconspicuous fashion to the Bombay Stock Exchange, caused massive value destruction for Satyam Computer's shareholders, created huge uncertainty for its employees and clients and posed a major challenge to the government.

A year later, the dust has settled on the company which was rescued by a brave knight in shining armour in the form of Tech Mahindra. Save for the sword of class-action suits filed by shareholders in the US hanging over its head, Mahindra Satyam, as it is now known, has weathered the worst of the storms that it faced.

There were some high-profile employee exits as also some clients moving on to competitors, but these were largely well managed. In short, Satyam, the company has been saved and is now back on its feet. The credit for this should go to the government-appointed Board, peopled by eminent personalities such as Mr Deepak Parekh, Mr Kiran Karnik and professionals such as Mr T. N. Manoharan, chartered accountant and Mr C. Achuthan, a former SEBI member.

The singular aim was preserving Satyam, the company, and finding a new owner of repute for it.

Today, the members of the government-appointed Board can look back with satisfaction at a job well done. A large part of the credit should also go to the then government which gave the new Board a free hand and facilitated the eventual sale of Satyam to Tech Mahindra by relaxing some regulations.

The imperatives

Yet, Operation Satyam remains a job half done. There were two clear imperatives when the scandal became public. The first was to ensure that Satyam, the company, did not collapse while the second was to get after the perpetrators and facilitators of the scandal and put them on trial. The government's failure in the second objective is as spectacular as its success in the first.

Yes, Mr Raju and a few other characters from the supporting cast are behind bars now, but do we know exactly what happened in the whole scandal other than what Mr Raju confessed to? Do we know how he managed to pull the wool over the eyes of regulators, employees and even the auditors?

Still in the dark

Talking of auditors, do we know what their roles in the scandal were — was it just benign negligence or was it tacit acquiescence? Are we aware of who were the beneficiaries of Mr Raju's swindle, apart from the man himself? In the days following the revelation of the scandal, there were dark rumours of the tentacles of the scam reaching political circles. Do we know if such rumours are true?

The answer to all these questions is a resounding No. A year after Mr Raju's confession, we are still in the dark about the extent of the scam.

But is this how it should be? Should the government not make earnest efforts to get to the bottom of the most serious corporate fraud ever perpetrated in the country's history?

Swift retribution

Corporate scandals and swindles are an integral part of free markets. The very freedom that allows enterprise to flourish and grow is often subject to misuse and abuse by unscrupulous minds. You only have to look at the list of recent scandals in that bastion of free markets, the US. Kenneth Lay and Jeffrey Skilling of Enron fame and, most recently, Bernie Madoff's $65 billion Ponzi scheme fraud and Sir Allen Stanford, are all excellent examples of scams facilitated by benign regulation.

Yet, there is a critical difference between the US and us in this respect. Retribution in the US is swift and the long hand of the law comes down hard on those caught with their fingers in the till. For instance, the Madoff scam surfaced at about the same time as Satyam but Mr Madoff was tried and convicted to 150 years in prison within six months in June 2009. The US justice system is now working to monetise whatever assets that they were able to seize to return at least a part of the money to the victims.

Contrast that with the situation in India where investigations and trials can drag on for so many years that the perpetrators are eventually administered divine justice, as had happened in the Harshad Mehta case. Indeed, How many frauds can you recall that have gone on to eventual conviction and sentencing?

Corporate governance

This situation has to change. The biggest motivator for a scamster is the secure thought that he will never be caught and, even if he is, he can keep justice at bay indefinitely. Towards end-December, the government observed what it called “India Corporate Week” and, as always in this country, it was just an occasion for industry bodies and professional associations such as the Institute of Chartered Accountants of India (ICAI) and the Institute of Cost and Works Accountants of India (ICWAI) to make the right noises about their commitment to corporate governance.

What we need are not events or shows such as this as much as action on the ground. Acting quickly in areas that have a critical bearing on corporate governance such as independent directorship and audit committees by clearly specifying their scope of responsibility and their liability is more important than events that only help professional bodies such as the ICWAI or the ICAI to prove their loyalty to the government through full-page advertisements in newspapers.

The government also probably needs to turn its attention to the ICAI, whose reputation plumbed the depths when an incident of booth-capturing was reported during elections to its central and regional councils last month.

Little is known of what the government thought about this unsavoury incident that you would generally associate with antisocial elements.

Punish the guilty

Whether the ICAI has got to the bottom of the role of its members in the Satyam scam is unclear. While Price Waterhouse, the firm that audited Satyam's accounts, has overhauled its Indian set-up, the ICAI has been sitting tight on its findings.

As we mark the first anniversary of the Satyam scandal tomorrow, it would be nice if the government redoubles its efforts to bring to trial Mr Raju and his accomplices, whoever they may be.

If future Satyams are to be avoided, the government has to act resolutely in punishing the guilty and making public the contours of the scandal.

TCS, Infy, Wipro losing contracts to Emerging rivals

BANGALORE: Emerging nearshore rivals, including Ness Technologies of Israel, CPM Braxis of Brazil and Mexico-headquartered Softtek are increasingly becoming attractive for top outsourcing customers such as GE, Citibank and several others seeking to work with local, specialised vendors instead of sending all projects to offshore locations like India.

At a time when India’s top tech firms Tata Consultancy Services (TCS), Infosys and Wipro are redefining their positioning as global services providers by growing their presence in the emerging markets of Latin America, Eastern Europe and Asia, they face stiff competition from these newer rivals.

“For many customers who already have significant presence in offshore locations like India, it’s a risk diversification,” said Jimit Arora, research director of outsourcing advisory firm Everest Group. “Some customers having 70-80 per cent of their offshore resources in India are realising that they need to look at the third category of suppliers that are local and niche,” he added.

Over the past two years, companies such as CPM Braxis, EPAM Systems, Ness Technologies, Softtek, Merchants and Spi Global have emerged as stronger rivals for Indian tech firms, especially while bidding for an outsourcing contract being fleshed out by a ‘first-time outsourcer’.

“When it comes to new business from the first-time outsourcers, these local suppliers may be gaining at the expense of multinational and offshore rivals,” added Amneet Singh, vice-president, global sourcing at the Everest Group. Mr Singh, along with Mr Arora, researched the six emerging suppliers and found that they have been growing at an average compounded growth of around 25% annually during the past few years.

Brazilian firm CPM Braxis, for instance, which counts GE, ABN Amro and Whirlpool as clients, reported revenues of around $567 million in 2008. One of the top four Brazilian banks, Bradesco, is also among the biggest customers for the company.

“Some customers, including Bradesco, would rather work with a local supplier, there’s nothing wrong. For large MNC customers, offshoring continues to be a priority,” said a senior executive at one of the top Indian tech firms. He requested anonymity because his company is currently in a financial silent period.

While these emerging outsourcing rivals are not yet in the big league of mega, multi-year contracts, they are still able to gain business because of their niche and local market expertise. On an average, these companies are able to win contracts worth $2-5 million in annual contract value.

Meanwhile, for Indian tech firms seeking to grow their base outside their home country, these emerging companies also offer potential M&A opportunities.

“Many emerging companies we spoke with believe they can become $1-billion company on their own. However, some admitted that they would be open to inorganic opportunities too,” said Mr Arora.

Indeed, emerging service providers in countries of Brazil, Argentina and Mexico such as Globant, which counts Adidas, Linked IN and Citi among its top customer and has around $100 million in revenues, are increasingly being approached by some Indian tech firms, officials told ET on condition of anonymity.

“We have had discussions with both Softtek and Globant, but I cannot comment any further,” said a senior executive at one of the tech firms exploring inorganic growth route for expansion in the emerging markets. Experts believe such fast-growing firms always make a good acquisition target.

“Given where these companies are in terms of their size and capabilities, they do make good acquisition targets for Indian companies,” agreed Mr Singh.

What makes these firms really attractive is their strong presence in some of the fastest-growing markets for software services. For instance, Ness generates about a third, or $170 million, of its revenues from Eastern European markets of Czech Republic, Slovakia, Hungary and Romania.

“One of the more interesting prospects in this region relates to government initiatives, particularly as it relates to a ‘digitisation’ grant for the EU worth more than 10 billion euro, with ‘must use’ clauses by 2013,” observed James Friedman, analyst at the financial broking firm Susquehanna International Group (SIG).

“Ness is competing actively for this work in a number of regions, and expects Eastern Europe may improve by H2 of 2010, still targeting $300 million from this region by 2012,” he added.

Raju made gardeners, drivers rajas

HYDERABAD: In disgraced Satyam boss Ramalinga Raju’s land, even gardeners were made maharajas! Several gardeners, truck drivers and others, who were working in the mango gardens and orchards — belonging to Raju brothers — for meagre salaries of Rs 4,000 to Rs 5,000 per month, have been found to possess more than 50 acres of land worth crores of rupees.

Not only this, these workers were also made directors of several fictitious companies floated by Raju. And a majority of these lands are situated in a single village called Loyapalli of Ibrahimpatnam mandal in Ranga Reddy district.

Records with the Enforcement Directorate (ED) show that the Raju brothers had purchased as much as 4,200 acres of land in this village alone in 2006. Though official records state that the entire land was purchased for a mere Rs 30 crore, its actual price is much more and its present value is not less than Rs 4,200 crore at the rate of Rs 1 crore per acre. The ED has so far attached 312 properties acquired by the Raju brothers allegedly with the Satyam scam money.

In 2006, for example, a 54 acre plot in Loyapalli village was purchased for Rs 36 lakh and was registered in the name of Ch Suryanarayana Raju, a gardener working in the mango orchards of Raju brothers at a monthly salary of Rs 5,000. When the ED sleuths quizzed this gardener on his source of income, he revealed that the land was purchased by the Raju brothers through SRSR Holdings company and the sale deeds and other papers were also lying with them.

“They have just used my name and the question of my paying income tax for this amount does not arise because this is not my income and I never filed any IT returns nor do I possess a PAN card,” the gardener told the ED authorities. Interestingly, after this purchase, the Raju brothers made this gardener a director in several of their fictitious companies floated for holding the land.

The same is the case with K Venkatapathi Raju, another gardener in whose name 54 acres were purchased and M V Suryanarayana Raju, a garden supervisor whose name was used for registering a 56-acre land. Likewise, S V Samba Murthy Raju, a truck driver working with the Rajus has 53 acres of land registered against his name. Samba Murthy Raju was also made director of two companies — Sahayadri Green Lands Company and Devagarbha Agros.

The EDs Hyderabad Zone authorities had attached all these properties.

TCS to step up hiring as info-tech spending takes off

As demand picks up, pricing power will return. TCS has been winning deals.

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— Mr N. Chandrasekaran, CEO of TCS

Adith Charlie

Mumbai, Dec. 30

In what could be a firm indicator of turnaround times for the IT industry, the CEO of India's largest IT services company said fiscal 2010-11 is likely to see his company step up the pace of hiring, give wage hikes, as well as increase capital expenditure.

“We are likely to hire more people next year ( vis-à-vis the current fiscal) and we have also increased the quantum of work done offshore. This means we have to create more facilities going forward,” Mr N Chandrasekaran, Chief Executive Officer and Managing Director of Tata Consultancy Services, said in an interview to Business Line.

Next year's capex for the $6-billion company is likely to be higher than the Rs 1,300 crore earmarked for the current year, a figure disclosed by the group chairman, Mr Ratan Tata, at the company's annual general meeting last year.

However, Mr Chandrasekaran would not provide concrete numbers as the company is still in the process of firming up its plans for the next fiscal, ahead of its third quarterly results that are to be announced on January 15.

This revival in IT spend is propelling TCS to firm up hiring plans for next year and it is being led by companies in the banking, financial services space across geographies.

Positive indicators

Though companies in sectors such as manufacturing, hi-tech, telecom and manufacturing are still ‘not out of the woods', there are enough indications of things revving up next year, said Mr. Chandrasekaran. “I believe that during the course of the year these sectors will turn positive and deliver growth. The good news is the decline (in these sectors) has stopped,” he said.

TCS expects 2010 to be a better year for the company and the IT industry as a whole. And the growth is largely going to be volume-driven.

“Short term, there may not be a pricing uptake; but I do not expect a (pricing) decline either. As demand picks up, pricing power will return,” said Mr Chandrasekaran.

The good news is that discretionary or optional technology spending among corporations also seems to be making a comeback, especially in the BFSI (banking, financial services and insurance) space. TCS Bancs (its financial products suite), which is “positioned against discretionary budgets”, has been winning deals across geographies, securing engagements even in geographies such as continental Europe that are yet to see an uptake, he said.

Better clarity

“Fundamentally, there is lot more clarity and there is a systematic way of approaching business from the customers' end vis-à-vis last year. We just hope that Europe as a geography also starts showing signs of recovery,” he said.

Starting January, TCS will approach campuses for recruitment for 2010-11. It may be noted that for the current fiscal the company has already given 24,888 offer letters for campus recruits, a good percentage of whom are expected to join, in a staggered manner through the fiscal.

Earlier, TCS had indicated that it had nearly frozen lateral hiring for the current fiscal. That too seems to be changing and the company has increased the pace of hiring laterals or experienced professionals.

TCS, which had clamped down on salary hikes this year, is likely to be more lenient next year. The company is internally huddled in discussions to see how much wage hikes can be implemented next year, said Mr Chandrasekaran.

For the quarter ended September 2009, TCS had reported a 29 per cent rise in net profit at Rs 1,642 crore against Rs 1,271 crore in the corresponding year ago period

Has Microsoft Turned Into The New IBM?

Surfing the web today, I came across a very interesting interview on SeattlePi with Don Dodge, who was Microsoft’s Director of Business Development for the Emerging Business Team until getting laid off last month. During the interview, he revealed his opinions on Microsoft, their current situation and where they’re heading. He also revealed that he thinks “Microsoft is a lot like IBM was in 1985”, going on to say that “after 20 years they are losing the innovation edge.” This got me thinking; has Microsoft lost the ability to innovate after being the most dominative force in computing since the late 1980’s? And if so, why?

I think a key to the solution is the sheer amount of things Microsoft does. When you think of the number of markets Microsoft compete in, you can understand that it’s extremely difficult, maybe impossible, to dominate every market. Not only do Microsoft develop and maintain the Windows OS, they also compete in the market for smart phones with Windows Mobile; the gaming market with the Xbox 360 and internet search with Bing.

Microsoft only dominate one of these markets with Windows – even with competition from Mac OS X and Linux, 88.5% of the world’s population uses Windows on their PC’s, which is beyond monopolisation… Despite this, 62.2% of computer users are using Windows XP, which completely supports Dodge’s accusations that Microsoft aren’t innovating as much as they were before. Rightly or wrongly, Vista was never a favourite of consumers as it had a lot of bad press on and off the web. In my opinion,
Windows 7 is a solid operating system, and when I’m using Windows, I use Windows 7.

When comparing the progress of Windows to its nearest competitor, how has it advanced since Windows XP was released in 2001? When Windows XP was introduced to the world, Apple had just released Mac OS X 10.1, and compared to Microsoft’s monopoly, Apple wasn’t in a good position with many criticising 10.1 for its bad performance. The next time we saw a consumer OS from Microsoft, however, was in January 2007, and the results weren’t worth the 6 year wait for many…

In the same time, Apple had released Mac OS X 10.2, 10.3 and 10.4, with Leopard coming 6 months later. So what were Microsoft doing in those 6 years? To the average user, there wasn’t much reason to upgrade from XP to Vista, because people were all too familiar with XP – why switch to have software incompatibilities and an unfamiliar interface?

On the mobile front, having used all three main players in the smartphone market right now (Windows Mobile 6.5, iPhone OS and Android), I’d only consider using iPhone OS or Android. Microsoft’s got a lot of catching up to do, and has fallen behind Apple and Google in terms of innovation and ease of use.

Navigating around a Windows Mobile device often feels far too long winded, with menus and menus of choices it’s simply not as user friendly as the iPhone or Android, even with HTC’s custom interface. Add this to the numerous delays of Windows Mobile 7, there’s no way I’d buy a Windows smartphone right now.

Having gone from the innovator to the company playing catch up with every other major player, Microsoft needs a new direction to wow people again. They’re very much in the gaming market with the Xbox 360, and hopefully we’ll see some pushes towards a better search with Bing in 2010 – how about a consumer friendly surface-like device? Competition for Apple’s tablet anyone?

PricewaterhouseCoopers Executive Director Resigns

NEW DELHI --Auditing company PricewaterhouseCoopers, or PwC, Tuesday said Executive Director Dinesh Kanabar and some tax executive directors have resigned.

"We have appointed Ketan Dalal and Shyamal Mukherjee as the new joint leaders for PwC's tax and regulatory practice," PwC said in an emailed statement.

PwC didn't give a specific reason for the resignations or the dates of the same. It didn't divulge the names of the tax executive directors who had stepped down, nor mention how many.

Price Waterhouse, the Indian affiliate of PwC, has been under the scanner because of its previous links with Satyam Computer Services Ltd., whose founder and then chairman, B. Ramalinga Raju, revealed a massive fraud at the Hyderabad-based company earlier in January.

Price Waterhouse audited Satyam Computer's financial statements from the quarter ended June 30, 2000, through to the quarter ended Sept. 30, 2008. The audit house subsequently said its accounts shouldn't be relied upon.

Two of the auditors--S. Gopalakrishnan and Srinivas Taluri--were arrested in January in connection with the Satyam Computer case.

PwC has said that since then it has been making "a significant investment in training and taking other steps to further enhance audit quality" in India.

Earlier this month, PwC named Gautam Banerjee as the chairman for its India auditing business after Ramesh Rajan stepped down from the post.

Millions in Britain face pay freezes, salary cuts in 2010

LONDON: The new year is going to be a cold one for the salaried class in Britain as millions of people are likely to see their spending power slashed again in 2010 due to salary cuts and pay freezes, a media report says.

"Millions of people face a second year of pay freezes or salary cuts next year dashing hopes that the end of the recession will ease the squeeze on family budgets," the Sunday Times said.

Up to two-thirds of companies in the private sector are planning to freeze or cut pay next year -- a substantial increase compared with this year, the newspaper said.

Quoting a poll by the British Chambers of Commerce (BCC), the daily said 58 per cent of company directors were planning wage freezes during 2010 and another 5 per cent planned to cut pay next year.

This grim forecast has, however, enraged union leaders and brought a series of strike-threats for slashing workers' spending power for the second year running.


Unions said the state of the economy should not be used as an "excuse" to impose pay freezes by companies continuing to make profits.

Derek Simpson, Joint General Secretary of Unite, the biggest trade union in Britain with two million members told the Sunday Times, "Our members have been prepared to share the pain and take pay freezes this year. But we will challenge any attempt to freeze pay in companies that are making profits next year."

British Airways, Hewlett-Packard, Fujitsu, Swinton insurance and Ladbrokes have already announced plans to freeze pay next year.

Citing BCC Director General David Frost the daily said, "we face a tough year ahead -- it will be a really long haul. The stark reality is that business finances are still under incredible pressure and they are doing everything they can to keep hold of cash."

Despite signs of economic growth, millions of consumers face a bleak 2010.

Value added tax (VAT) is set to rise to 17.5 per cent this week, unemployment is expected to increase further and City forecasters predict interest rates to rise later in the year. Personal tax allowances will be frozen in April when the new 50 per cent income tax rate also comes in, the report added.

Britain is predicted to have moved out of recession during the final quarter of this year, the last of the leading European economies to do so.

Infosys set to get K'taka contract on T&D losses

The Rs 380-crore tender is part of the Accelerated Power Development and Reform Programme of the central govt.

Infosys Technologies, India’s second largest software services company, is close to winning a Rs 380-crore contract from the Karnataka government’s electricity supply companies, aimed at stemming transmission and distribution losses.

The contract is being awarded as part of the Accelerated Power Development and Reform Programme (APDRP) initiated by the central government.

Industry sources indicate that Infosys has emerged as the lowest from among 11 bidders, including Wipro, TCS and KLG Systems. A company spokesperson declined to comment.

Indian software service vendors are all vying for a piece of the Rs 10,000-crore of contracts under the APDRP, more so as this is a programme which could be expanded later. TCS and HCL, Infosys' big rivals, have won similar contracts on addressing T&D losses in other states.

Infosys has been stepping up its India presence during the past 18 months, setting up a separate India business unit. It has so far bagged three major projects in the government sector. Earlier, the company had won a project to set up and manage a central processing centre for the income tax department and one from the ministry of commerce to develop an eBiz portal to help provide one-stop services to industry.

The company has also bagged a pilot project to roll out an Integrated Coach Management System for the Indian Railways. Though the initial (pilot) project cost is small, its success will determine the schedule on when the railways will go for floating the final tender for the project, estimated to be Rs 210 crore.

Cognizant picks up 700 Anna varsity students

Time to celebrate: Jubilant Anna University students celebrate their getting job offersfrom Cognizant Technology Solutions, in the presence of Dr P. Mannar Jawahar (right),Vice-Chancellor, Anna University, and Mr R. Ramkumar (second from left), Vice-President, Corporate Communications, Cognizant, at the university premises onTuesday.- Bijoy Ghosh

Hindu

Chennai, Dec. 22

The US-based Cognizant Technology Solutions offered jobs to over seven hundred students of Anna University on Tuesday. Though this was less than the 1,000 offers that Cognizant made last year, Dr P. Mannar Jawahar, Vice Chancellor, Anna University, is happy.“The numbers may be less from Cognizant, but we are still happy considering the downturn in the software industry,” he told Business Line.Cognizant was the first large recruiter this year in the university that includes the College of Engineering, Guindy, Madras Institute of Technology, Chrompet and Alagappa College of Technology.While Tata Consultancy Services, which is also a large recruiter, is visiting the campus on Wednesday, over 55 more companies across various sectors plan to visit in the next few days, he said.

The starting salary offered by Cognizant remained unchanged from last year, at Rs 3 lakh a year. Around 1,640 students took the test, of whom 1,345 were shortlisted and 700 were offered jobs, Dr Jawahar said.Before Cognizant, ‘core and dream' companies such as Caterpillar and Larsen & Toubro that offer a starting salary of over Rs 4 lakh have given job offers to around 300 students, he said.

MindTree: Looking for Buys in $50 Million-$100 Million Size

BANGALORE -- MindTree Ltd. is looking for acquisitions valued at $50 million-$100 million to help in its bid to post $1 billion in revenue by 2014, the Indian software exporter's chief executive said.

"I would think, maybe 20% of our revenue would come from acquisitions as part of this $1 billion vision," Krishnakumar Natarajan, who is also the managing director of the company, told Dow Jones Newswires in a recent interview.

The company had reported $269.1 million in revenue in the last fiscal year ended March 31.

The company is looking for acquisitions to expand its infrastructure management and package application businesses, Mr. Natarajan said. MindTree's last major acquisition was in 2008, when it bought product-related testing services firm Aztecsoft for $90 million.

Bangalore-based MindTree specializes in providing services to the manufacturing, banking and financial services sectors. Like its peers, it is slowly recovering from the effects of the global economic slowdown as technology spending makes a modest return in developed nations.