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Indian regulators are promising a full inquiry into share dealing in Satyam. Politicians dissolved the board and are promising to replace it with new directors within a week.

The furore is an unwanted distraction for India’s companies. Together with rivals Infosys, Tata and Wipro, Satyam took the competition for customers to more established names like IBM and Accenture. Initially its biggest weapon was cost, but it also developed expertise and a willing workforce trusted to handle sensitive data. That trust will be hard to win back.

“Global corporations will be reviewing whether they should be single or dual outsourcing, as well as whether they should take some sort of equity stake to give them more visibility of what is going on,” said Johnson.

Raju embodied a new breed of Indian entrepreneur. His global vision was married with a voracious appetite for the philosophy texts of Karl Marx and Karl Popper. He spent millions on philanthropy to improve life in deprived villages in Andhra Pradesh, where he was born.

On top of health and education programmes, his idea was to set up data centres alongside paddy fields, giving poverty-stricken locals the chance to join the digital revolution. It also made good business sense. Sending work from Hyderabad to the villages saved Satyam as much money as an American firm outsourcing to India, he said.

Away from the IT sector, his other business interests were raising eyebrows. He became heavily exposed to commercial property through building projects in Hyderabad.

The first warning signs came in mid-December. Satyam announced the $1.6 billion acquisition of two property companies controlled by the Raju family. Although passed by directors, it was scrapped within hours after an investor revolt. Raju refused to say who had valued the businesses.

Institutions thought it was an attempt to raid Satyam’s cash pile — money that turned out not to exist. For Raju it was a final effort to right what had gone wrong through a series of miscalculations. “The aborted acquisition deal was the last attempt to fill the fictitious assets with real ones,” his letter admitted.

Raju had pledged his 8% Satyam stake in return for loans, which were being called in by institutions feeling the squeeze in the credit crunch.

Over Christmas, directors resigned and the World Bank barred Satyam from doing business with it for eight years. Satyam had been providing unauthorised benefits to bank staff, and documentation that tracked fees paid to contractors was in disarray. Raju had little option but to come clean.

Problems had already emerged for some. A small, British-based mobile-technology firm called Upaid alleged that Satyam provided it with forged documents in a patents filing that resulted in it losing a court case against chipmaker Qualcomm and the American phone giant Verizon. Upaid is seeking $1 billion in damages.

“We are saddened but not surprised by the nightmare unfolding for other Satyam customers and stakeholders,” said chief executive Simon Joyce.

Only last October, Satyam’s European head, Keshab Panda, was promising that it was close to signing £1 billion of new business. Such pledges have undoubtedly been compromised by his boss, an entrepreneur who took a series of short cuts — and guaranteed its demise.

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