Last week, the chairman of Satyam Computer Services Ltd., India's fourth largest information technology company, admitted to a stunning fraud. Fraudulent entries in the company's financial statements totaled in excess of US$ 1 billion, as compared to the actual financial state of the company. In response to the fraud, DSP Merrill Lynch Ltd., a local affiliate of Bank of America Corp.'s Merrill Lynch unit, has terminated its advisory relationship with Satyam. The World Bank has also refused to deal with Satyam following recent security breach issues. As the fallout from this scandal develops, customers who rely on Satyam's services are justifiably concerned.
Many technology services are mission critical. Therefore, Satyam customers should proactively evaluate the potential effects of this scandal on the continuity and reliability of their IT services. In addition, customers utilizing other vendors should revisit their agreements to understand the options available should another, similar situation arise.