Services opportunities

Some possible good news from Satyam over the weekend, as the company's board announced that it is very close to securing funding to see it through to the end of March

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By  Mark Sutton Published  January 26, 2009

Some possible good news from Satyam over the weekend, as the company's board announced that it is very close to securing funding to see it through to the end of March. While the interim board has yet to confirm anything, its the sort of message that Satyam's customers need to hear, if the Indian services company is going to survive.

There's also growing speculation around possible buyers, although it still seems to me that the company needs to put its house properly in order before any would-be buyer would risk a major investment. In the meantime, there will inevitably be more fall out at Satyam, as staff, and perhaps some customers, look to find a stable alternative sooner rather than later.

The good news for India is that at least it looks like Indian operations will pick up any business that decides to leave Satyam. According to Forrester, 80-90% of Satyam's top 50 clients are already working with other Indian IT majors, and are likely to turn to them for a back-up plan.

As far a long term prospects for outsourcing companies go, both in India and other markets, there is yet more noise from US politicians calling for an end to offshoring. Senator Charles Grassley, an opponent of H-1B visa scheme has said that companies, particularly Microsoft, should cut H-1B visa holders before firing US staff, and should cut back on offshoring of jobs outside of the US.

The calls sound like a lot of hot air though. The new boss Obama hasn't shown any overtly protectionist policies, and while his manifesto said he will encourage R&D in the US and for the benefit of the US, many of those H-1B visa holders are actively contributing to the R&D efforts of American companies.

We are also still waiting for Obama to make his own announcement, and appoint his national CTO, who may give a better idea of policy direction in this area. Taking jobs 'back' to the US may look appealing on paper, but the elections are all done, and economic revival for the US won't necessarily hinge around pushing the Fortune 500 into expensive on-shoring.

Closer to home, there might be some potential for Middle East outsourcing and services companies to take up some of the slack from Satyam, but, not much, I think, and the fall out could be more of a hindrance to the emerging services sector.

It might be the case that if the Satyam saga damages confidence in India, then international customers might look to alternatives to the Indian market, such as Egypt and Jordan for a replacement. Gartner has ranked Egypt in its top 30 outsourcing locations, citing government investment in talent and education as its key strengths, along with multi-lingual staff, and advantageous location.

But given the Satyam situation, potential customers who a wary of India aren't going to be looking at costs, talent or time zone – they are going to want stability and a strong regulatory environment, and that piece of the puzzle is not yet in place in Egypt.

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