- Diversify your risk: It may be wise to consider splitting similar work or processes (if there's sufficient scale to warrant) among multiple service providers Avoid placing all eggs in one basket.
- Cost can't be the only decision driver: Clients may have veered toward attractive gaps in Satyam's price positioning versus their peer group.
- Resilient Capacity: Two other top decision drivers, aside from cost, should be capacity and capability. A resilient global delivery capacity is paramount for customers given the unavoidable risks of terrorist attacks, corporate scandals, constant geo-political threats and other man made or natural disasters that have the potential to disrupt business operations. Equally important is for customers to choose providers that have the technical and domain capability to leverage apart from just the cost and capacity (we, at TPI, call it the 3C Framework for Successful Sourcing Strategies).
- Real Business Continuity & Disaster Recovery Plans: These plans not only need to be written but periodically tested to ensure that they meet standard requirements and will help avoid disruptions in critical business functions. Independent review by a third party can also help to reassure management that their plans meet standards and will achieve its purpose of managing a disaster situation if invoked
- Controlled/Flexible Contracts: Customers must insist that contracts contain sufficient flexibility and control for issues that may arise. This cannot be over emphasized as it becomes more than just a contingency clause in contracts.
- Data privacy/security: Customers should employ independent teams (their own or a third party) to monitor the physical and logical safety of data that providers access under the scope of a contract. Annual reports on the security practices in place at offshore delivery centers can be of immense value to management to detect any lapses or potential issues sooner.
- Captive Centers: The Satyam situation has invoked reactions by those in favor of captive set ups, but I don't believe that's the right way of looking at it. That, in my view, is just an opportunistic argument supporting those who favor captives over third party relationships. While captives have their advantage in terms of offering better control to the parent, they are being scrutinized for their ability to compete with third party providers especially for services that are now offered by the market in a matured way.
Satyam Debacle: What can we learn from it?
I learned two lessons pretty early on: avoid making mistakes that have fatal consequences and learn from those mistakes to avoid falling victim to them in the future. In my previous blog entry "Corporate Governance Takes the Cake", I mentioned that these mistakes can recur in any industry/country due to a wider collusion of stakeholders.
We can learn a thing or two from the Satyam situation (and the recent terrorist attacks in Mumbai) to avoid falling victim to them in the future. It is appropriate to point out that these are generalizations rather than "one size fits all" solutions and hence may not apply to all situations.
