India's outsourcing industry faces a shake up in the wake of the £1 billion Satyam fraud scandal, but remains "one of the safest places to outsource" predicts Wipro.
As the implications of the Satyam fraud crisis sink in, clients of Indian IT services firms are concerned about regulation of the industry and their service levels, Wipro's head of consulting Kirk Strawser told Computerworld UK.
Despite rocked confidence in the Indian IT industry, the outsourcing firm has moved to reassure customers that it is conducting business as usual.
It has been over a month since Satyam's former chief executive Ramalinga Raju's shocking confession that the company's revenue and profits had been falsely constructed for years. Industry commentators have said the scandal could damage the Indian outsourcing industry and cost customers.
Wipro and other Indian outsourcers have been impacted by the crisis, as well as a general market slowdown as customers tighten IT budgets or defer decisions in an economic crisis.
Strawser said Wipro would emerge unscathed by the Satyam case.
"Satyam is not going to have an enormous effect on us,” Strawser said.
And Wipro's earnings report on 20 January painted a positive picture, as the outsourcer reported quarterly profits up 25 percent at £963 million, defying the current economic crisis and forecasting a steady services revenue in the quarter to come.
Yet, as the economic malaise continues, there's likely to be more pressure on IT services providers and outsourcers to meet tighter service level agreements (SLAs), Wipro conceded.
"It will probably have the effect [on all outsourcers] of tightening service level agreements, and companies will conduct more due diligence when outsourcing," Strawser said.
When asked about whether Wipro’s own clients had requested tighter SLAs, Strawser would not elaborate further.
Instead, he said that India had been a “role model” for corporate governance standards. “Our customers have been with us during these times and do understand that these incidents are exceptions and not the rule,” he said.
“We have been reassuring and educating our customers on our philosophy which is not to just follow defined standards but to continuously improve, along with putting in sufficient checks and balances.”
Pascal Matzke, vice president at analyst house Forrester Research, said Indian offshorers were facing an increasingly difficult battle to retain customers. "The Indian value proposition is being lost," he said. "First they offered the low cost, then the quality - both valid arguments - but now the European and American firms are more level in terms of resource."