Satyam scam: Infosys, IBM, Accenture may benefit most

Source: The Economic Times
Infosys Technologies is expected to gain the most among the top Indian IT players from Satyam’s loss of credibility. Although there will be no shift towards one single provider, Infosys’ reputation as a firm with high corporate governance standards as well as its US listing is expected to stand it in good stead when customers make a choice, said analysts.

On Wednesday, when Ramalinga Raju confessed to cooking Satyam’s books, Infosys was among the few IT stocks that ended higher. The stock was up 1.7% to Rs 1,187, as compared to Wipro and TCS that ended almost flat at Rs 243.30 and Rs 503.70, respectively. HCL Technologies, the other top player, was down 15%.

"The senior management of Infosys has come out quite aggressively in the media on maintaining high corporate governance standards," pointed out Ascendia Consulting principal analyst Alok Shende. However, the hitch to this could be Infosys’ premium pricing, which some analysts said was 10-15% higher than Satyam’s rates. This, along with a substantial customer overlap, could work in the favour of the number one IT exporter, TCS.

"It is not going to be as easy as that to say any one vendor will benefit. TCS probably has the largest overlap of clients. General Electric (GE), General Motors and Citigroup are all clients of TCS as well as Satyam. Citigroup is also a client of Infosys but it is small," said an analyst with a foreign brokerage. Infosys had stopped servicing GE because it was unwilling to compromise on its billing rates and provide services at the discounts GE was looking for. This one of the reasons why GE had moved more work to Satyam, recollected an analyst.

Apart from Infosys, the US-headquartered India-based Cognizant Technology Services is also well poised to take advantage of the situation.

Overseas brokerage Stifel, Nicolaus & Company, Inc said in a report that Cognizant could have an edge over Infosys if it emphasises its US domicile status, as opposed to Infosys which is domiciled in India. "In e-mails to employees, management is already highlighting its US-listed status, and compliance with Sarbanes Oxley laws," according to a report from brokerage firm CLSA. Wipro had also sent e-mails to all salespersons asking for aggressive messaging to customers that Wipro is ready to take on operations running at Satyam, according to CLSA.

IBM and Accenture, which have a significant offshore presence, will be the biggest gainers, said some analysts. IBM has around 75,000 employees in India and Accenture, around 35,000. "Best positioned to benefit from such a situation, we believe, are the large, global, well-known MNCs like ACN (Accenture) and IBM. We consider them of tier-1 calibre in terms of offshore capabilities, but their size, stature, brand, global reputation, and high-level client relationships (particularly ACN) differentiate them, in our view, and will make them more attractive to worried clients than even the tier-1 offshore firms like INFY and WIT (Wipro)," said an analyst at Stifel Nicolaus.

These analysts believe the MNCs stand to benefit more because they are large (with the ability to take on Satyam’s revenues), established and with "sterling reputations" and "recognisable brands" that put them in the best position to reassure worried clients.