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by Vault Consulting Editors | January 30, 2009

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It doesn't take much of an expert to realize that times are a-changin' in the Indian software and outsourcing market. Anyone who's glanced at this blog over the past month has no excuse for not knowing the problems currently affecting Satyam Computer Services, and the fact that auditing standards haven't been all that they should be. In short, the discovery of the fraudulent activities at Satyam has cast something of a pall over the entire Indian IT sector.

It's important to recognize, then, that it's not all doom and gloom in the Indian IT world. Since Satyam's implosion, HCL Technologies -- led by Vineet Nayar -- has risen to fourth place in the list of India's largest software firms, and despite the economy HCL's future looks bright -- at least from where we're sitting. Earlier this week, the company posted its results for the second quarter ending December 2008, and they made some pretty impressive reading. Year on year net profits were up 12.1 percent year-on-year, on the back of a 37.1 percent upswing in revenue. And those results don't reflect the acquisition of UK firm Axon in December 2008, suggesting there may be further growth to come. Little wonder, then, that CEO Nayar -- in Davos for the World Economic Forum -- is feeling bullish, despite the economic outlook.

So bullish is Nayar, in fact, that he's even said he'd consider snapping up Satyam as a "strategic acquisition" -- something that would need to make it past the Indian government in the event of any kind of bid being made. In the meantime, word reaches us that HCL has retained KPMG to take a look at its books and make sure there's nothing untoward there. The move can be seen as a reaction to allegations of collusion between Satyam and its auditors, PriceWaterhouseCoopers, in perpetrating that now-infamous $1 billion fraud -- something that has destroyed investor confidence in the whole sector. No prizes for guessing why HCL is so keen to have an independent auditor: PwC had been doing the job since 2003, raising legitimate questions for investors over their accuracy. The appointment of KPMG, then, is a good step in allaying those fears, and providing the kind of transparency that will bring investors back.

Meanwhile, in other news this week, Booz Allen Hamilton announced that it has once again secured the services of Washington heavy-hitter and national security expert J. Michael McConnell. Having most recently served the outgoing Bush administration as Director of National Intelligence, Mr. McConnell also served as Director of the National Security Agency (NSA) under George Bush senior and Bill Clinton. A previous stint at Booz Allen Hamilton, meanwhile, saw him working as a senior vice president at the firm?the same title he will adopt when he rejoins the company. And his service to his country might not be over yet, either: he's been invited to advise President Obama as a member of the President Intelligence Advisory Board. How's that for a resume?

--posted by Phil Stott

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