IT's graveyard is full of victims of governance

Satyam Computer isn't the first big IT company to be hurt by their compromises with corporate governance. Several companies
have been dealt severe blows in the past, either because they took liberties with corporate ethics or chose to diversify into unrelated areas.

Pentafour Software was No 3 in Nasscom's ranking of India's top 20 IT companies in 1998-99. Two years later, the two companies that it was subsequently split into Pentasoft and Pentamedia Graphics were Nos 9 and 10 respectively. Today, they have almost disappeared, at least partly on account of their moves to acquire a resort and set up multiplexes, thus losing focus on delivering animation and software solutions.

DSQ Software was ninth on the 1998-99 list, 15th on the 2000-01 list. Today, its promoter Dinesh Dalmia is in a Kolkata jail. Kalpathi Suresh of SSI set up a real estate arm, and eventually cashed out by selling the software services and software education businesses.

"We find this happening all the time with people coming into IT with a background in traditional Indian business," says Avinash Vashistha, CEO of IT investment advisory firm Tholons. He says they tend to bring with them "poor corporate governance practices and corruption".

Everybody agrees that IT still is the cleanest industry in India, partly on account of the global client base, and partly because leading companies like Infosys, TCS and Wipro took proactive steps to create high governance standards to meet client requirements. Some hold up Wipro chief Azim Premji as a great example of somebody who did not get into the "traditional business" trap, despite having come from that background.

"Transparency in Indian IT is the best. Infosys and Wipro lead the pack in corporate governance," says Harit Shah, IT analyst with Angel Broking. He thinks it's unfair to put Satyam and Pentafour in the same bracket, but he admits the Satyam episode shows people will not tolerate any nonsense.

Firms set up or run by IT professionals, with a passion for technology—most notably Infosys and HCL—are seen to face fewer problems. Analysts say those that are started by others should ideally professionalise the management at the earliest. "Professionals don't have the guts to do what others from traditional business backgrounds do. They know it's bad," says Vashistha.

source: http://timesofindia.indiatimes.com/Business/India_Business/ITs_graveyard_is_full_of_victims_of_governance/articleshow/3954168.cms