NATIONAL Australia Bank could be forced to write off millions of dollars invested in its offshoring program as a result of the Satyam corporate fraud scandal.
NAB is one of Satyam's biggest customers in Australia and has already made a significant investment on training and transition costs and redundancy payouts as part of its information technology offshoring (ITO) program.
Satyam founder B. Ramalinga Raju last week admitted exaggerating profitability and assets.
Insiders said the bank would face hefty losses if it brought the work back onshore.
"This initial investment was meant to be repaid over the next five years with lower maintenance costs," one source told The Australian. "If NAB breaks out of the ITO wave 1 contract now, there will be large losses of that initial investment which can never be recouped."
Around 90 Satyam staff service NAB, with about 40 per cent based in Australia.
The bank has offshored key technology functions to Satyam, exposing it to significant risk if this service were interrupted.
"It has literally 'bet the bank' with entrusting its key applications to Satyam," a source said.
"Without these applications being successfully supported and maintained, the NAB could not continue to operate."
The Australian understands it will take at least a year for NAB to transfer the work in-house and that the relevant expertise doesn't exist within the bank to service this.
"Most of the staff displaced by ITO wave 1 have been given redundancy packages and long left the NAB" the source said.
"It would take at least 12 months and considerable expense to bring ITO wave 1 applications back in-house."
The bank has a number of contingency plans, spokeswoman Kerrina Lawrence said, and has a core group of internal and external staff capable of performing the work if required.
"NAB's priority is ... seamless service. All business-critical support is performed by NAB's Australian team members."
Qantas is monitoring its relationship with Satyam, as it has more than $US135 million of contracts with Satyam, according to analyst firm IDC.
Mahesh Sharma | January 21, 2009
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