Offshore Outsourcing Concerns

With all of the recent excitement going on with Satyam and some concerns in the past of data theft, are US based businesses going to switch back to an in-house model or look elsewhere for IT and business process outsourcing?  Can the offshore model continue to work, and if so, what do companies need to do to protect themselves?  For Satyam in particular, who really is to blame?  Let me try and answer each. 

First, will companies continue to outsource work offshore?  Most likely, but the cost advantages of off-shoring will decrease as better internal oversight is needed and more comprehensive review of the outsourcing companies is required.  With the current recession, cheaper labor is available onshore, and may make it more advantageous for businesses to bring their outsourced work either back in-house or at least back onshore where they can keep a better eye on them.  I believe some companies will bring some work back home. Others will diversify, and move work to other countries, but that has its own inherent risks.

Some of the more popular outsourcing countries have their own issues.  Here are a few:

• China – fear of data and intellectual property theft
• Russia – see China
• Brazil – stability of government
• Israel – stability of region

Any company with outsourced work must make sure it has Business Continuity Plans in place in the event that something happens to their outsourcing provider.  This needs to be an integral part of the company’s overall BCP.  This is not easy or inexpensive, but must be done. 

Companies can diversify their outsourcing contracts across multiple providers, but this has issues as well.  Coordination of work can lead to an adversarial work environment as the different providers fight for work and blame.  A strong corporate lead and stringent SLA’s and processes must be in place in order for this to work successfully.

For Satyam in particular, the Indian government was lax in their oversight, and PriceWaterhouseCoopers India seemed to drop the ball as well.  So how could a company have protected themselves in this instance?  Quite frankly it is difficult, unless you send in your own internal audit team to review the books and operations, which would negate any cost savings achieved with outsourcing in the first place.

Infotegrity provides services to help you figure out how you can make sure you are protected.  We offer managed services as well as consulting around outsourcing, outsourcing management and business continuity planning.  Please contact us to see how we can help you protect your business and maybe save you some money along the way.