UN Bars Satyam From Outsourcing Work - InformationWeek

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UN Bars Satyam From Outsourcing Work

World body says it plans to terminate existing deals with troubled outsourcer.

The United Nations plans to terminate its outsourcing contracts with scandal-plagued Satyam and will bar the outsourcer from bidding on future work, according to a report published Tuesday.

"Throughout the system, the various bodies of the U.N. will wrap up the contracts. The details of that may need some fine-tuning, it may need to be worked out in the coming months," a U.N. official said at a press conference, according to Dow Jones Newswires.

The news comes just days after it was reported that Satyam generated thousands of fake customer invoices as part of a scam to falsely inflate revenues and profits. India's Economic Times, citing sources close to India's Central Bureau of Investigation, said on Sunday the agency has retrieved more than 7,000 fake invoices and numerous other spurious documents over the past several weeks.

The upshot: The total size of Satyam's deception is now approaching $2 billion, according to the paper. Investigators originally put the number significantly below that, based on statements from Satyam officials.

On Jan. 7, Satyam chairman Ramalinga Raju admitted falsifying the company's cash position by as much as $1 billion while overstating quarterly earnings and revenue by up to 28%. Satyam also may have faked employee numbers and other data. Raju tendered his resignation and has since been arrested and jailed. He's now in the custody of CBI, India's equivalent of the U.S. Federal Bureau of Investigation.

Other Satyam officers, and two employees of PricewaterhouseCoopers India, also have been detained in connection with the case.

Increasingly nervous Satyam customers are looking for alternatives in case the scandal-scarred outsourcer is unable to restore internal stability or find a buyer with pockets deep enough to see the Indian company through its current crisis.

One of the latest Satyam customers to eye alternatives is Selective Insurance, the 47th largest property and casualty insurance company in the United States. Selective has outsourced about a quarter of its IT staffing requirements to Satyam, but it may be looking for other arrangements in light of Satyam's woes.

"We believe we would be able to manage an efficient transition to a new vendor and not experience a significant negative impact to our operations in the event that we no longer retain Satyam in their current capacity due to the financial issues they are currently experiencing," Selective said in papers filed Feb. 27 with the SEC.

Gadget maker SanDisk recently warned investors that Satyam's troubles have put its business operations at risk and that it may need to look for a new IT services vendor.

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