The World Bank has banned Satyam Computer Services from providing it services for eight years for alleged malpractices, including bribery. The ban will severely impact the business prospects of the Hyderabad-based company, already battling to retain and attract fresh business in a recession-hit global market where vendor credibility has become critical.
The company last week announced a startling deal to buy at $1.6 billion two infrastructure companies run by family members of company chairman Ramalinga Raju. However, Satyam had to cancel it after a massive investor outcry.
Fox News, which first reported the World Bank move, said Satyam had been banned from providing software services to the global financial institution. The World Bank has acknowledged the substance of the report as accurate.
The size of the World Bank contract awarded in 2003 to Satyam has grown to over $100 million in the intervening period and was due for renewal next year. Satyam was expected to provide solutions like enterprise resource management, document management and messaging.
A Satyam spokesperson, however, said, ?Satyam does not comment on either individual clients or speculation.? The company also refused to say anything on reports that founder & chairman Ramalinga Raju had resigned from the board. A possible successor is Ram Mynampati, member of board and president of the commercial & healthcare business of the company.
Another board member, Mangalam Srinivasan, has been a project advisor with the World Bank. Of the $652.2 million in revenue reported in Q2 09 by the company, around 20% came from such business.
World Bank information security chief Robert Van Pulley acknowledged the ban during a recent meeting with officials of the Government Accountability Project, a whistleblower protection organisation in the US. The World Bank is learnt to have handed over the case to the US justice and treasury departments.
The Fox News report quotes a World Bank official as saying ?improper benefits to bank staff? and ?lack of documentation on invoices? were the reasons behind the ban that will run through 2016. Harshad Deshpande, an IT analyst, said, ?Once a firm is declared unethical, everyone doubts its credibility. Other clients could take a fresh look at their contracts.?