Insurers on Watch as Satyam Scrambles

The corollary to the fraud-ridden Satyam Computer Services Ltd. is being felt across a host of companies spanning several vertical industries now forced to examine their service contracts with the India-based outsourcing firm. CIGNA, says the Wall Street Journal, is one such company.

CIGNA, citing vendor confidentiality agreements, did not comment on its contract with Satyam. But the health insurer’s spokesman did admit that the company was closely watching the events surrounding the outsourcer’s actions, however, and that the company has already developed “detailed contingency plans."

On Wednesday, Satyam is reported to have denied an Economic Times report that said CIGNA had given the Indian software exporter a three-month "notice" before terminating its technology outsourcing contract.

Satyam found itself in the midst of scandal after founder Ramalinga Raju resigned as chairman earlier this month, revealing that $1 billion of cash that had been reported on the company's books did not exist. As Satyam scrambles to secure funding to pay salaries and other bills, it said it planned to announce before January 28 details of funding to tide it over until the end of March.

On January 19, Insurance Networking News reported that State Farm had terminated its contract with Satyam outright.

Meanwhile, other clients also have sought contingency plans if things don't stabilize at the Indian outsourcer in the next three months, a spokesman said in a Reuters report on Tuesday. "In a few isolated cases, customers have been engaged with us to understand the process of transition," the spokesman said in an emailed response.

On January 20, Bloomberg reported that U.S. regulators also are investigating Satyam. Officials at the Securities and Exchange Commission have talked with investigators in India and plan to coordinate their investigation, the Bloomberg report said.

Meanwhile, suitors are eyeing their prey. Vineet Nayar, CEO, HCL Technologies, which posted a rise in fiscal second-quarter net profit of 12% over a year ago, told India’s Business Standard that his firm is “open to a strategic acquisition” of Satyam. 

According to Nayar, the two companies’ client overlap is minimal. “As for Satyam employees, we will welcome them with open arms with all humility as they are a part of a high performance team,” he said. And mid-sized Indian outsourcing firm Infotech Enterprises said in a Reuters report on Friday that some Satyam customers have approached it for services.

For reprint and licensing requests for this article, click here.
Core systems Workforce management Policy adminstration
MORE FROM DIGITAL INSURANCE