The world's largest maker of construction and mining equipment, Caterpillar, which is also one of the oldest Satyam customers, may be terminating software contracts with Satyam Computer Services.

According to The Economic Times Caterpillar has Satyam to explore a potential termination of its outsourcing contract on concerns of stability and departure of key professionals at the company involved with delivery of outsourcing projects.

It quoted an unnamed Satyam executive as saying that "Caterpillar has approached Satyam with a notification seeking a termination," , who also added "Caterpillar is a very old customer, so I am sure the management and new board members will talk it out."

Satyam Computer Services Ltd had acquired construction equipment maker Caterpillar Inc's market research and customer analytics operations for $60 million in an all-cash deal in April 2008.

The acquisition supported Caterpillar in segmentation, promotions, forecasting, product development and customer survey execution. Basically Satyam had achieved an 'in-sourcing' deal where it deployed Indian staff, at Indian rates to do the same work.

Yesterday while announcing its fourth quarter results Caterpillar stated that the fourth quarter had seen sharp drop in sales and cancellation of contracts.

"Global economic conditions and key commodity prices have continued to decline significantly. Financial markets remain under stress, and our expectations for 2009 have deteriorated. Uncertainty around the depth and duration of this recession makes it very difficult to forecast sales and revenues.

"As a result, Caterpillar is rapidly executing strategic "trough" plans and implementing actions throughout the company to deal with a very challenging global business environment. We have initiated actions which will remove about 20,000 workers from our business and every indirect spend dollar will be heavily scrutinised.

"These actions support lowering our production costs in line with a 25-per cent decline in sales volume and reducing selling, general and administrative (SG&A) and research and development (R&D) costs supporting our machinery and engines business by about 15 per cent."