Satyam in danger of losing clients: Analysts

According to brokerage Edelweiss, given the current scenario, Satyam's technology clients might cut back incremental business to the Indian outsourcer as a result of the controversy.

"In this environment, vendor credibility is also important, not just vendor capability," the brokerage said, adding that while the World Bank's decision is a blow to Satyam, it will not affect the credibility of other Indian outsourcers, as each outsourcing company is evaluated on its own merits.

According to Sabyasachi Satpathy, co-founder of Mindplex Consulting, Satyam's decision to use its cash reserves to buy unrelated businesses without any transparency did not bode well for its governance. "If the focus of the company is going to change, there will be a significant risk for the clients. While outsourcing the IT contracts to vendors, overseas clients take decisions based on the reliability of the vendors. The long-term sustainability of a service provider is a very critical factor for any client before they start engagement with them. This, of course, is the reason why a service provider is required to take their clients into confidence before making any strategic decision, which might deviate from their long-term goal," he said, adding it will take some time for Satyam to restore confidence both in the market as well as in its client base.

According to HDFC Securities, "Satyam has brought disrepute not only upon itself, but also on corporate India."

While Anil Advani, research head at SBICAP Securities said that customers might reconsider their decisions fearing a possible takeover of the company and a potential management change, R.K. Gupta, managing director of Taurus Mutual Fund, said, "There is huge pressure on Satyam to improve its corporate governance norms."

"Following the World Bank's decision, Satyam's reputation for maintaining high standards of corporate governance and data security has taken a blow and it is doubtful whether it can continue to attract the business of Fortune 500 clients, governments and multilateral agencies such as the World Bank," an independent analyst said.