SATYAM EV JAYATE

Seeing the events of the day, this quote flashed in my mind. Hence the title to this blog.

Mr. Raju, once heralded in the US to be as dangerous as Osama (because Satyam was taking jobs away from US), has turned out to be Hero-to-Zero in a matter of a day.

To the IT-junta, this was never a revelation. "Window-dressing" as it is called in our industry, has been happening for some time now. The fiscal year in US and the fiscal year in India do not overlap. So, there are cold quarters in US where Indian companies have to show consistent revenues and vice-versa. So, some additional assets from previous quarters are adjusted towards missing assets from the current quarter or missing assets from current quarter are adjusted against more-than-expected assets from next quarter. All this is done with honest interests to provide a consistent revenue pattern and avoid wild fluctuations in the share prices. And it is fine as long as there is no carry-forward of the manipulations across fiscal years.

Sadly, it does not work that way. The ever-growing demand from shareholders makes the companies take that dangerous stride and inflate the numbers beyond the Lakshman-Rekha called as the fiscal year end. Then the Ramayana takes plane. More and more hot air is pumped into the balloon. This hot air makes the balloon fly higher, than it can do safely, making everyone happy. But, soon the hyper-inflated balloon is stretched beyond its capacity and a small pin (Maytas deal going sour) causes it to burst.

So, as RS puts it, its a discovery and not an invention. And it would have not been uncovered at all, had the MAYTAS deal not gone sour. Probably, a bruised ego and a stained reputation pushed Mr. Raju in doing this.

All said, the whole reason underneath this fiasco (and the potential many others still under the covers) is the greedy shareholder. They need to understand that IT companies cannot yield high revenues and huge dividends quarter after quarter and year after year. It is easy for a company to reach from 1 million to 10 million in 2 years, but it is not possible for the same company to reach from 1 billion to 10 billion in even 5 years. But under pressure from the shareholders and stake holders, such things had to happen and will continue to happen.

Once a high-paying sector where freshers were hired at 20 thousand rupees a month has now shrunk to a stage where getting 8 thousand a month is considered lucky. College passouts choose an employer purely based on the pay and not on career prospects. MBAs are made to work as clerks.

Not sure whom to blame here -- the hunter or the hunted? Because, while the hunter (shareholders) was enjoying chasing the prey (IT companies and employees), the prey itself was enjoying the luxuries during the chase. Rather, the prey itself allowed itself to be chased faster and faster.

The only truth is, the cup once thought to be made of crystal has now turned out to be made of brittle glass instead. And it has cracked.

2 comments:

Sneha said...

No matter who is to blame for , I feel bad for the employees who will be impacted.

Shubha Prashanth said...

Nikhil, well written. But I wonder if the shareholder is to be blamed for. And I agree with Sneha that whoever is responsible, the worst affected are the employees and it has also tainted the Indian IT Industry as a whole.