Source: Financial Times, February 17, 2005
Citigroup to set up 'ethics hotline' for anonymous staff feedback on bosses
Citigroup staff will be able to dial in to an 'ethics hotline' and give anonymous feedback on managers as part of a plan aimed at preventing further regulatory and legal problems.
The world's largest financial services group will also change the way pay and performance is appraised and strengthen internal controls.
Chuck Prince, chief executive, said the goal was to be 'the most respected global financial services company'.
The move follows a string of setbacks including the forced closure of Citigroup's private bank in Japan.
Citigroup has also paid or put aside almost $10bn (€7.7bn) to cover the costs of legal actions related to its alleged role in corporate scandals such as Enron and WorldCom.
Mr Prince believes investor concern about the scandals is the main reason for the group's lacklustre stock price over the last couple of years.
The problems prompted some investors and analysts to question whether the group was just too large and complex to be managed effectively.
Mr Prince said he was 'very excited' about the anonymous staff feedback on managers, and he has pledged tough action against executives that tarnish Citigroup's reputation.
Source: Financial Times, January 9, 2009
High-profile clients consider alternatives
Tentative support mixes with concern
Some of Satyam Computer Services clients are considering shifting back-office operations to other companies to avoid any service disruptions in the wake of the scandal that engulfed the company this week.
Clients yesterday generally praised the services offered by the Indian information technology and software outsourcer. But the confession by B. Ramalinga Raju, the group's founder, that he had falsified accounts for 'several years' shocked the hundreds of blue-chip companies, which include Unilever, Cisco and GE, that entrusted their data to Satyam.
'Satyam clients will naturally be concerned, and many will be forced to review contracts and talk to other suppliers ...about potentially taking over work from Satyam,' said John C. McCarthy, principal analyst at Forrester Research.
Nestlé, one of Satyam's clients, told the Financial Times it had been guaranteed by Satyam that its service would continue as normal, but the group admitted that it was exploring other options to avoid any problems in the future.
Fifa, the governing body of world football, including the 2010 World Cup in South Africa of which Satyam is the official IT provider, told the FT that it was monitoring the situation and would react to any developments.
Qantas, the Australian airline, which has five years remaining on a seven-year contract with Satyam, said it was monitoring the situation and would do so daily until the situation was resolved.
Source: Financial Times, January 23, 2009
India's outsourcing clients on the lookout for red flags
The Satyam scandal has prompted a new vigilance at overseas companies looking to contract out work
Source: Financial Times, January 23, 2009
Clients will now have to do more due diligence. Satyam's clients are already beginning the review process. Although most will not comment publicly, one big client, Nestlé, says it is considering 'alternative options' to Satyam and expects no disruptions to its operations. Another, US-based State Farm Insurance, has terminated its contract with the outsourcing group.
As these and other companies seek new partners, industry insiders and analysts say there are a number of 'red flags' to watch out for. One is whether a company is 'owner-driven' or is truly run by professionals, according to S Ramadorai, chief executive officer of India's largest outsourcing group by revenue, Tata Consultancy Services.
The management of TCS and the industry number two, Infosys Technologies, is not dominated by a single family but by professionals. Satyam, on the other hand, was controlled by the Raju family, albeit with a small stake.
Others say it is wrong to dismiss outsourcing groups just because they have dominant family shareholders, who are known in India as 'promoters'. The 'promoter' phenomenon is so common in India that this would rule out most companies.
Surjeet Singh, chief financial officer of Patni Computer Systems, controlled by the Patni family, says it is more important to look at internal management practices, in particular the structure of the board audit committee and other functions. Another comfort factor is the presence of a strong institutional investor, particularly on the board.
'People should put Satyam into perspective and not paint everyone with the same brush,' Mr Singh says.
Another factor to watch for is whether a company and its controlling shareholders are focused on the business of outsourcing or whether they have other interests. Satyam's controlling family had invested heavily in their Matyas real estate and infrastructure businesses. The first sign that something was amiss was when the outsourcing group tried to buy these companies. 'IT outsourcers should remain focused on their sector,' says Sudin Apte of Forrester Research.
The main lesson from Satyam, however, is that when doing business in India, companies can no longer rely on spoon-fed figures derived from a Google search by an analyst and a few meetings with management.
'It's very much like the security checks after Mumbai terrorist attacks,' says Niren Shah, analyst with Kroll. 'Post-Satyam, now everyone has to exercise extra care in doing the proper due diligence.'
Source: The Australian, June 27, 2008
Outsourcing makes small-business sense
Going online can help avoid the IT headaches. Faced with the challenges of running a small business, growing numbers of owners are opting to rid themselves of one of the biggest: their information technology systems.
Rather than battling with the vagaries of software, servers, networks and security, many firms are outsourcing everything to an external service provider.
From an economic perspective, IT outsourcing can make sound commercial sense for a small business.
Instead of purchasing and managing hardware and software, IT resources are accessed on demand, with the business only paying for the resources it needs.
Outsourcing IT can pose risks, the biggest stemming from the fact that critical data has to be entrusted to an external organisation. Should that organisation go out of business or suffer a security breach, the impact could be disastrous.
But outsourcing is appealing for many businesses because it removes the need to deal with complex and rapidly changing technologies.
The core applications needed to keep operations functioning are hosted and managed by the service provider and accessed remotely as required. All that is needed is an internet connection.
'The problem for many small companies is that they do not have a clear idea of exactly what technology they need, particularly if they are in a start-up phase,' says Anoosh Manzoori, managing director of IT services company Vigabyte. 'An outsourced approach gives them the option of getting things up and running without needing to make capital expenditure.'
Vigabyte offers so-called virtual servers that companies can access over the internet and use as though they were located on their own premises. Access is offered for a monthly fee and the power and capacity of the servers can be expanded as demands change.
The outsourcing approach can work regardless of the size of the firm. Manzoori says his customers range from 'one-man bands' to large firms with employees in multiple locations.
Of all the IT functions outsourced by small companies, one of the most popular is customer relationship management (CRM) systems. One operator, Salesforce.com, reports growing demand for this type of software from companies operating in a diverse range of industry sectors.
As well as a CRM system, Salesforce.com hosted platform is also used to create an online customer ordering system, streamlining administration and ensuring prompt responses to requests.
What is your personal opinion of business scandals like ENRON, WorldCom, Ahold and recently in 2009 'India's Enron' at Satyam (outsourcing company in Hyderabad)?
Do you believe an 'ethics hotline' will help to solve (ethical) problems in management?
Would you rank 'ethical skills' as a (new) competence of managers high on your priority list?
Do you believe that more legislation and more rules are key elements in improving organizational ethics?
What is the real point for improvement in your opinion?
What effects has the Satyam's scandal had on earlier outsourcing decisions of companies like Unilever, Cisco, GE, ABN Amro, etcetera?
Is outsourcing indeed making small-business sense? What do you think?