As expected, there has been a lot of talk about the massive fraud perpetrated at Satyam, and the business press has already started using “India’s Enron” as shorthand for the scale of the disaster.

Salil Tripathi, writing in the Wall Street Journal, seems to have detailed the impact of the scandal more eloquently that most other commentators. In particular, Tripathi draws attention to the question most industry watchers are thinking about, but are too scared to ask: Is the “outsourcing to India” bubble about to burst?

As I looked around the internet for more information on the scandal, I stumbled across an article on the Gerson Lehrman Group Expert Network site. Author Paul Massie says: “The revelation of such massive fraud in a company that has been public since 1991 and was considered one of the three or four top Indian outsourcing companies is inevitably going to raise questions about all the other Indian outsourcing companies.  Clients and potential clients are going to be asking the question: ‘If this could happen at Satyam, why not at Wipro/Infosys/TCS/Cognizant?’”

Why not indeed? It’s what Tripathi is concerned about. And after all, PricewaterhouseCoopers audited the books at Satyam – a name known and trusted across the world, in the same way Arthur Andersen was known and respected prior to the Enron collapse.

But the dust has yet to settle on the Satyam scandal. We are commenting on a moving target, as the forensic accountants will need to examine what has been a systematic fraud of accounting overstatement over several years. I tend to feel that this issue is confined to Satyam. I can’t imagine that every other hi-tech Indian company has been mis-stating its margin and revenue in the same way as this one company.

So I don’t feel the Gerson Lehrman comment is really valid or fair. The entire industry won’t collapse because of this fraud. Satyam will collapse for sure, but other players within the industry will absorb their clients – possibly delivering the service from India. But just imagine the nightmare for the service industry in India if another Satyam is found in 2009.