6. The potentially misleading "admission" letter may raise unwarranted concerns regarding the financial viability of offshore outsourcing
Apprehensions have been voiced regarding whether the Satyam scandal is a "one-off" or a precursor to future failures of outsourcing vendors. In his letter of resignation last week, Raju claimed that he inflated Satyam's earnings in order to conceal margins that were dramatically below industry norms. However, as many commentators have observed, there is reason to believe that this "admission" itself is misleading and that Satyam's cash shortfall will be traced not to any deficiencies in the company's revenue model, but rather to self-dealing. Accordingly, for all of the gratuitous disruptions it has caused to the outsourcing industry, it does not appear that the Satyam scandal will discredit the industry's financial viability.
Shaalu Mehra is a partner at law firm Perkins Coie LLP and chairman of the firm's outsourcing and India practices. He can be reached at SMehra@perkinscoie.com.
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