Business puzzles (me)

India’s outsourcing industry receivers a major blow with the recent disclosure of the fraud at one of the country’s largest outsourcing firms, Satyam Computer Services. Its chairman has recently revealed that the company’s books were forged to make it look more profitable than it actually was. Chairman Ramalinga Raju admitted in a letter (you can read it here) that some $1 billion in cash and assets, which makes the bulk of what the first had declared to own, didn’t exist in reality. Raju resigned saying he didn’t take any money out of the company and that the board members knew nothing of the fraud. What really puzzles me is how on Earth has this been possible with a company which is listed on three stock exchanges, audited by one of the Big Four auditors. The company acts as a back office for major companies around the world, like GE, GM and even the US govt. Not only that it acts as a back office, but it also runs accounting for some of its clients, which is the most striking of all. How did raju managed to foul everybody, even his own employees and colleagues. It is another story I can wait to read in a few months. 
There are other Indian companies which could take onboard the customers migrating from Satyam, but I am sure that US customers, most of which very large companies, with financial problems of their own, would put less trust into Indian outsourcing companies from now on. So from where I am standing the pictures is like this: Companies try to cut some costs and outsource to India, and when the crisis strikes and the same companies try to cut more costs elswhere to survive, they’re hit by their outsourcing partner’s fraud, a sector they thought it was already safeguarded with a partner whom they trusted.  
You can find the full story in NY Times here.  Also, the company’s response to its chairman disclosures can be found here. From another Bombay Stock Exchange filling (here), I found that Merrill Lynch was the Indian company’s advisor – but they’ve terminated the colaboration following the announcement.

Later edit: I enjoyed this story in The Economist.