Hyderabad: The fraud-hit Satyam Computer Services Ltd may have lost as many as 13,000 employees, or a quarter of its workforce, since January with some of these people leaving the software firm for better opportunities and others being poached by clients who have chosen either to terminate their contracts with the firm or not to renew them.
Satyam’s workforce decreased to about 40,000 by the end of March, from 53,000 at t he start of the year, said a senior executive at the Hyderabad-based firm that’s trying to find a strategic investor to purchase a controlling stake in it. The official didn’t wish to be identified.
The firm, now run by a government-appointed board, has been at the centre of India’s biggest corporate fraud investigation since founder B. Ramalinga Raju on 7 January confessed to having misstated accounts to the tune of Rs7,136 crore over several years.
The company is now in the middle of a competitive bidding process to sell new shares equivalent to a 31% stake. The winning bidder, who will infuse much-needed funds into Satyam, will have to make an open offer to shareholders to buy an additional 20%.
“It is not uncommon for clients wanting business continuity to retain the same team, even when they switch vendors,” said Arvind Pandit, director at consultancy Hay Group. “However, the numbers being mentioned in the case of Satyam is very specific to the situation and not a very general phenomenon.”
Satyam chief executive A.S. Murtyhadn’t responded to emailed questions from Mint by the time this edition went to press.
At least one firm, US-based iGate Corp., has already withdrawn from the bidding process citing continued client and staff losses at Satyam.
“There have been at least seven-eight such instances recently, where Satyam employees have left along with clients, who ended their relationship with the company,” said a project manager at Satyam, who declined to be named as he isn’t an authorized spokesperson.
According to Satyam employees Mint spoke with, the internal computer software that staffers use has been stripped of a functionality that enables them to find out the company’s latest staff strength.
“Till 10 days ago, when we could still find out the staff strength, it used to be around 46,000, but since then, there have been several hundreds of employees leaving with clients, especially those who were serving notice period till 31 March,” the project manager said. “We estimate the current staff strength to be around 42,000-43,000.”
Clients who have recently walked away with Satyam staff, according to the project manager, include US-based health insurer Cigna Corp., financial services firm Merrill Lynch (now with Bank of America Corp.), engineering services firm Oceaneering International Inc.and tech firm Cisco Systems Inc.
Australian telecom firm Telstra Corp., Swiss pharmaceutical firm Novartis AGand US insurer State Farm Insurance Co.also took away Satyam staff, the manager added.
Satyam had a team of 500 employees, known as associates, working on the Cigna account, while between 250 and 300 associates each were handling the accounts of the other six clients.
“Usually, such rebadging happens when the customer specifies to the new vendor that it wants to retain the current vendor employees for the project, as it helps avoid project delays,” said the Satyam project manager.
“When State Farm Insurance decided to terminate its contract with Satyam, it chose to go with another of its vendors, HTC Global Services, which was specifically told to take onboard nearly 200-plus Satyam employees who were working on the State Farm Insurance account.”
HTC Global has a delivery centre in Hyderabad, where Satyam is located.
Rebadging refers to the practice of hiring employees of one technology vendor by another vendor for servicing the same client in cases where the first vendor has lost its contract with the client. In the information technology outsourcing sector, clients usually have a non-poaching agreement with their technology vendors as part of the contract. Rebadging helps clients work around this restriction.
Another Satyam employee, who has spent 10 years at the firm and also didn’t want to be named, said staff departures need not always be a case of rebadging.
Satyam staffers were sometimes being taken on as employees at captive units of multinational clients to continue working on the same project. “There have been instances where the clients reach an understanding with Satyam at the time of ending vendor relationship, so that employees will also benefit in view of the extraordinary situation that is prevailing at Satyam,” this employee said.
According to the Satyam project manager cited earlier, when Merrill Lynch decided not to renew its contract with Satyam, Bank of America, which took over Merrill last year, hired nearly 250 Satyam employees who were servicing the account. Bank of America has a captive unit in Hyderabad.
Asked about Bank of America hiring Satyam employees, a Singapore-based spokesperson for the bank declined comment, saying it is “in the process of verifying facts”.
Asked about Ciscooffering employment, either directly or through a different vendor, to Satyam employees, Cisco Systems India Pvt. Ltdspokesman Varghese M. Thomassaid in an emailed statement: “As any prudent company, we are evaluating appropriate risk mitigation strategies. Cisco’s primary aim is to see the continued delivery of services from the Satyam team to enable us to meet our business requirements.”
Mint is yet to get responses to email queries sent to Cigna, Oceaneering, Telstra, Novartis and State Farm.