Exclusive: Cigna puts Satyam on notice

By M H Ahssan

The worst nightmare for Satyam Computers employees has started unfolding. Barely two days after State Farm Insurance announced its intention to terminate its contract with Satyam, US-based health insurer Cigna Corp, one of the biggest Satyam clients, put the company on a three-month “notice’’. This was widely interpreted by employees as a termination of the important contract and plunged the software professionals into a sense of despair. “We are alternating between hope and hopeleness in recent days. This news comes as a shock,” confessed a senior Satyam manager.

Satyam spokespersons, however, asserted that Cigna had given the 90-day notice period for the company to stabilise, failing which it would take its final call. “Cigna wants to know our Plan B,” the spokesperson suggested. There are over a 100 associates involved in the Cigna project. A chunk of employees on the Cigna project work in Satyam’s Bahadurpally office and some work out of its Cyber Space office too.

It is now reliably learnt that various customers of Satyam have started undertaking major risk assessment exercises to assess how best or smoothly they could move to another IT firm — if that is at all required. “Terminating a project cannot be done overnight as customers do not wish to break continuity,’’ said a senior IT source, adding that be it TCS, Infosys or even Accenture, everyone is in a “wait and watch mode’’.

What is working against Satyam is the fact that it does not have any “exclusive’’ contract with any firm, making it easier for its customers to approach rival IT firms that are involved in their other projects. “If there are multi vendors for a customer, the competition is stiff,’’ said a source, adding that “given the large number of people on bench in other IT firms, they will lap up the projects if the customer approaches them’’.

But Satyam’s low-cost service could be its saviour. Industry sources said that the company provided services to some of its clients at as little as $ 10 or $ 11 per hour, per resource. “This is dirt cheap, as good as charity. Billing rates of other IT firms are much higher and this is where customers may feel the pinch if they do wish to move out of Satyam,’’ predicted an IT industry analyst.

After losing two big clients, State Farm Insurance and US-based health insurer Cigna Corp, senior Satyam sources apprehended that the IT major could lose more projects if nothing was done on an emergency basis to stabilise the company by providing with a credit line and putting a heavyweight CEO at the helm of affairs.

Senior officials of the company, however, clarified that a project cancellation wasn’t leading to layoffs with employees of the project being moved to the bench and not being asked to leave the company.

Meanwhile, speculation was rife, that other big projects particularly one with British Petroleum (that had last week sought assurance from the IT firm that its work wouldn’t be impacted) and even that with a multinational bank were in trouble.

The British Petroleum project commands a big headcount with a couple of floors at Satyam’s City Centre office dedicated to the project alone.

British Petroleum did not respond to e-mail sent by TOI seeking confirmation on whether or not it would continue its project with Satyam.