Competition is stiff in the outsourcing industry, which is why outsourcers really have to perform in order to not just meet their clients’ expectations, but to exceed it. Not to mention the sometimes extremely harsh public scrutiny that outsourcing companies are subjected to. Outsourcing companies are a dime a dozen now, and it’s easy to go from one to the other, especially if the one you’re with doesn’t deliver. Just take a look at the Satyam (NYSE:SAY) – Punjab & Sind contract, which has now become the Wipro (NYSE:WIT) – Punjab & Sind bank contract.
Last year, the news came out that Satyam had voluntarily reneged on their contract with Punjab & Sind Bank. The contract was supposed to be for a term of 10 years and was signed in 2006. The original deal was for the implementation and maintenance of the banks Core Banking System (CBS). In 2007, Satyam was unable to meet their agreed deadline, incurring a penalty fee that they paid to Punjab & Sind. Unfortunately for the company, when they next failed to meet the deadline, this time on January 2008, the company had already gone bust, forcing Punjab & Sind to reassess their contract and consider other options.
It was when beleaguered company Satyam was acquired by company Tech Mahindra (NSE:TECHM) on April of the following year, that the decision was made to finally end the contract with Punjab & Sind bank, a decision that was made voluntarily by Satyam and resulted in the company paying for damages resulting from the twice-delayed project.
Lucky now for Punjab & Sind Bank that they have been able to start anew once again with a new ten year contract, this time awarded to Wipro, who interestingly enough, was the second highest bidder back in 2006 after Satyam. As of now, Punjab & Sind Bank is the only other public sector bank that has not begun the process of implementing CBS, which just goes to show that the bank must have a lot of areas lined up for improvement.
The New Wipro-Punjab & Sind Bank contract was signed last 24th of February, 2010, with the contract emphasizing the significance of the bank’s objective to become an RS 100,000 crore bank by 2011. As the press release states, “Wipro will be responsible for System Integration, provisioning and management of Finacle core banking solution and enterprise applications.” Finacle is the core banking, e-banking, Islamic banking, treasury, wealth management and CRM software provided by Infosys (NASDAQ:INFY).
It was lucky for Punjab & Sind that they’ve now been able to rise from the experience and focus on their own company’s improvement. It’s tough luck for Satyam that the new deal has shifted the focus back to them, calling attention to how they dropped the ball, so to speak, on the supposedly very lucrative deal. As I said, outsourcing companies are a dime a dozen, but then, if you’re the one who made a mistake, then you can expect all eyes are going to be on you, even now, almost half a year later, and Satyam must still feel the heat.
Author: Audrey B.