Satyam: A warning to IT outsourcers everywhere

Well holidays are nearly over.  The beard lasted two weeks or so before I decided to go back to my good old cleanshaven self.  At least I know now that I’m about two weeks from a dreadful beard and three weeks from a really bad one.

First topic that catches my eye at the moment is the Satyam issue.  I nearly choked on my weet bix the other day reading about the absolute gall of the Satyam conglomerate by basically making up 90% of their cash reserves.  I think it may be a lesson for people that outsourcing to another country may seem good on paper (that is, cheaper), but when its entire governance regime is completely different there are going to be some hurdles that just can’t be met.

It will be interesting to see if this becomes a house of cards and all the other IT outsourcers out there are doing pretty much the same thing.  I noticed incidentally that the auditors, PWC, are suddenly distancing themselves from their Indian affiliate.  It will highlight the role of the auditors, once again, as watchdogs not bloodhounds, and further that it is virtually impossible for an auditor to find out something if a Director is looking to hide facts and lie.

Still I’ll not be surprised to discover that there is a major case to answer at PWC for an audit that clearly missed something. And of course Ernst & Young gave this bald-faced liar an award as entrepreneur of the year not all that long ago.  I have a theory that it is incompatible to have an audit and assurance role and to hold that role at the whim of the very people who can cause such an audit to be based upon a pack of lies – it isn’t going to be helpful to hide behind standards and process reviews when a bad outcome like this happens.

And still, I wouldn’t be an audit partner under the current regime for quids.

As for people who are IT outsourcing as well as offshoring, I’m sure they’ve got a bit of a tight knot where their stomach used to be hoping that their IT outsourcer is not doing the same thing (or, if they are with Satyam, how the hell they’re going to extract themselves from the mess).

Image from Flickr User jill – glossy veneer.  Some Rights Reserved.

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