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12 deals Satyam lost in 2009
December, 18th 2009

2009 was a tough year for India's erstwhile fourth largest IT company Satyam Computer Services. Now called Mahindra Satyam, the year saw Satyam at the centre of one of the country's biggest corporate frauds.

Mighty Satyams fall started when the company's former chairman Ramalinga Raju revealed that the company has been overstating profits for years and that a $1 billion cash and bank balance on the company's books actually doesn't exist.

The scam shocked the industry and left the company's clients and employees in a lurch. However, govt intervened to save the company and in April Satyam got a new owner in Mahindra Group's tech arm, Tech Mahindra.

However, the scam left Satyam's image tarnished and resulted in the company losing several big deals, many of whom went to its Desi rivals TCS, Infosys and Wipro. Here's are some of the big deals that the company lost during the year 2009.

Satyam loses Railways' contract

In January, Indian Railways cancelled a locomotive management system (LMS) contract awarded to Satyam after the company failed to meet the deadline for submitting required financial details and start working on the pilot project.

A Satyam spokesman had then said that the company could not produce the audited financial statements for past three years, which led to the cancellation of the contract.

Satyam had emerged as the lowest bidder for the first in a series of outsourcing contracts worth almost Rs 2,000 crore to be awarded by Indian Railways in January earlier this year.

State Farm terminates deal

US-based State Farm Insurance terminated its contract with Satyam Computer Services in January this year. About 400 Satyam employees working on short-and long-term IT projects at State Farm lost their jobs.

According to reports, State Farm Insurance was Satyam's $50 million (Rs244 crore) client and was among the company's top 10 clients. State Farm's spokesperson Jeff McCollum had then said that the uncertainties surrounding Satyam's future and potential impact to State Farm resulted in this decision.

Satyam had been a "long-time" vendor for State Farm, and was one of several vendors the insurance company uses for this type of IT work.

Telstra cancels deal with Satyam

In March this year, Australian software major Telstra dumped scandal-ridden outsourcing partner Satyam from an applications support contract worth $32 million (Rs 160 crore) a year. The contract is understood to have accounted for about 35 per cent of Satyams revenue from Australia.

Reports indicated that the contract was later awarded to EDS, now part of IT major Hewlett-Packard. The decision was made by a Telstra advisory board, which received advice from a US tender management company.

NAB suspends all new deals

Australias largest lender, National Australia Bank (NAB) suspended all new outsourcing contracts awarded to fraud-hit Satyam Computer Services in February this year.

However, the application development and maintenance work transitioned to Satyam in 2007 and 2008 remained unchanged. NAB had then said that Satyam is in a period of stabilisation and continued to meet existing service level commitments and contractual obligations towards the bank.

A spokeswoman had said, Until the longer-term future of Satyam becomes clearer, NAB will suspend all work currently in the early stages of transition to Satyam."

DSP Merrill Lynch ends deal

DSP Merrill Lynch, a leading financial management and advisory firm terminated its advisory engagement with Satyam after Raju confessed to committing India's biggest corporate fraud.

In a statement, DSP Merrill Lynch said that the company has decided to break up with Satyam after finding some material accounting irregularities. According to reports, Merrill Lynch contributed $40 million (approximately Rs 296 crore) to Satyam's annual revenues.

Satyam loses BSNL order

The year saw Satyam losing another big-ticket client, Bharat Sanchar Nigam (BSNL). The outsourcer lost out an enterprise resource planning (ERP) implementation contract from BSNL for around Rs 250 crore to HCL Infosystems.

BSNL awarded the tender to HCL Infosystems Ltd and was not keen towards Satyam because of the uncertainty surrounding its future.

According to the reports, the reason for Satyams disqualification was the inability to furnish a letter of comfort from a bank, a normal practice in most contracts where the vendor is required to furnish an undertaking from banks that they have the funds to execute the project.

Coke contract goes to HP

Satyam lost another big ERP contract from soft drink maker Coca-Cola to the worlds second largest technology services provider Hewlett-Packard (HP).

Later HP issued offer letters to Satyam employees working on the project. According to reports, Satyam had at least 100 employees working on the Coca-Cola project in its Chennai offshore development centre. Most of them were working in the area of SAP consulting and implementation.

While the overall size of Coca-Colas contract was estimated $100 million for a period of seven years, industry experts said that the ERP piece alone would have fetched Satyam $3.5-$4 million annually.

GlaxoSmithKline not renewing contract

The scam-hit Satyam lost one of its prime customer GlaxoSmithKline (GSK), a global pharmaceutical giant, according to a report in Financial Chronicle. The report quotes Satyam employees working on the GSK contract in London that the company would not renew its contract on ethical grounds.

In a clear indication of the move, Satyam had ordered 350 of its employees working on the project in London to return at their own expense. The contract, on for about six years, was due for renewal in February. A company spokesperson had then said that GSK was monitoring Satyams solvency and its staffing and quality of work done for GSK.

After World Bank, UN too bars Satyam

The United Nations suspended tainted Satyam Computer Services from the Secretariat's vendor database and placed all ongoing contracts with the company under review.

In January, UN Procurement Division's Integrated Support Service Chief Kiyohiro Mitsui had said, "Ongoing contracts with Satyam are currently under assessment." A UN official had then said, "Throughout the system, the various bodies of the UN will wrap up the contracts. The details of it may need to be worked out in the coming months."

Earlier in September 2008, World Bank had barred Satyam from doing any business with it for the next eight years citing "alleged malpractices including bribery".

Applied Materials goes to IBM

Applied Materials cancelled its 5-year US$200 million IT application development, maintenance, and support contract signed in 2007 with Satyam Computer Services.

The company instead went to IBM and signed a new five-year contract with the world's largest computer company for an undisclosed sum. Under the agreement, IBM will provide Applied Materials with information technology (IT) application development and maintenance services.

Abu Dhabi Bank moves to 3i Infotech

According to a report in Economic Times, Abu Dhabi Bank also moved out of Satyam in March this year. The bank reportedly shifted its work to 3i Infotech.

Selective Insurance, SanDisk express worry

Selective Insurance Group, one of the biggest property and casualty insurers in the US in March expressed its concern to replace its outsourcing contract with Satyam Computer Services.

In a report filed with Securities and Exchange Commission (SEC), New Jersey-based insurer said, 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.

Gadget maker SanDisk also 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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