Despite holding significant stake directly and an indirect interest through infrastructure major Larsen and Toubro in Satyam Computer Services, the Life insurance Corporation (LIC) seems to be wary of handing out projects to the fraud-hit IT company.

Indeed, the insurance behemoth has dropped Satyam from the list of vendors for a key project, sources familiar with the development told DNA Money. Going by them, Satyam's name was among the shortlisted companies for LIC's front office modernisation plan, but was dropped subsequently.

LIC is working on a major plan to modernise its front office, which currently uses Red Hat Enterprise Linux Version 4.4. The company uses a distributed IT framework on a Cobol platform and is working on centralising it in some locations. The modernisation primarily involves the database migration from Cobol platform and providing web enablement to the data.

Details of the budget provided for this project could not be ascertained, but sources said it is a highly budgeted programme involving several hundreds of crores. Interestingly, though Satyam is known for doing such modernisation jobs, LIC has shortlisted Infosys, L&T Infotech, TCS and Wipro.

Till it was hit by the Raju factor, Satyam was the fourth-largest IT company by revenue after TCS, Wipro and Infosys. In this case, therefore, L&T Infotech has replaced Satyam.

According to sources, LIC had put a condition on prospective service providers to have a clean balance sheet for three consecutive years and Satyam failed primarily on that condition. Satyamites see this as a precursor to the takeover of Satyam by L&T.

Pay cuts at Satyam

A S Murthy, the new Satyam CEO, has set out on yet another cost-cutting measure, this time directly related to the employee payments. In a communication to the employees, Murty said, "In a service industry like ours, the primary costs are people-related, and we are now endeavoring to address that part." The company will do away with the variable compensation policy, an incentive programme implemented to encourage the performers, from April 1, 2009. For the third and fourth quarters of this fiscal, the minimum guaranteed variable pay of 25% will be paid. However, the company has decided to introduce a revenue-linked allowance from April 1 and this would be applicable to associates working in approved billable roles. "Through this scheme, an amount equivalent to 100% of that defined by the former variable compensation policy will be paid on a monthly basis to eligible associates as set out in the policy," he wrote.

KV Ramana/ DNA-Daily News & Analysis Source: 3D Syndication