Security a High Priority while Outsourcing - Experts
Date: 25th September 2004

Outsourcing in recent times has gained high grounds due to the success factors such as slashed prices, around-the-clock operations and 24/7 production cycle that adds to overall productivity. India being in the forefront where Outsourcing to other regions is concerned.

However, it has been noticed that when it comes to outsourcing IT operations to countries such as India and China companies often fail to take into account cultural differences that may affect their security, according to experts attending the Gartner IT Security Summit in London today.

It is not about a minor issue like breaking into someone else' s mailbox but areas such as unauthorized access to firewall, special software's and other high-end security areas. This casual attitude toward privacy could have serious consequences when it comes to protecting corporate data, warn experts. Most of the high-end processes involve intellectual property rights, for which the Indian legal system doesn’t offer any protection. The situation is quiet different globally. Most of the US Outsourcing firms require their employees to sign an employment agreement that prohibits them from carrying, or transferring in any way, the company’s source code out of a development facility. And there are strict laws to protect the outsourcing firm's interest in the case of any breach of IPR contracts.

Source code is the most important intellectual property of any software vendor and theft of code means serious risk for any software manufacturer. An exposure of the source code to the external world can potentially risk years of research and development investment. With direct access to the source code, competitors stand to gain a direct access to the underlying technology as well as various product secrets or even potentially redistribute the illegally obtained source code as a competitive product. An additional issue with source code is that with the threat from terrorist organisations looms large, a transferred or sold data to hackers means the program can be altered and redistributed as the original to cause lot of damage not only to the Outsourcing company but to millions of computers wired to the networks.

Lawrence Lerner, senior technical architect of the Advanced Solutions Group at Cognizant Technology Solutions Corp said his company advises its clients to document its processes while outsourcing and get all parties involved to sign off on procedures to ensure transparency. As a result of high demand by Western companies looking to reduce costs, some outsourcing service providers in India and China are growing rapidly, hiring thousands of new employees in a month." When you are hiring 5,000 people at a time, you need to make sure that they all adhere to the same standards," Lerner said. Mentioning the rules and regulations in the Contract while, hiring is the only way of ensuring that security and regulatory compliance concerns are met.

Priyanka. S.

Insurance Outsourcing Gaining Ground

India has become one of the most popular destinations for outsourcing insurance processes and top insurance companies in the US and Europe—Cox Insurance Holdings, Aviva Life Insurance, AXA Sun Life have moved their processes to India based captive or third party outsourcing firms.

According to the Global Insurance Outsourcing report released by the Value Notes Outsourcing Practice, which looks at outsourcing, currently around 63 percent of India’s insurance outsourcing revenue comes from the US. Some of the top players in the insurance vertical are WNS, HTMT, EXL, ICICI, One Source and GTL.

The report emphasizes the potential for insurance outsourcing with over 1,500 property and casualty insurance companies and 1,300 health insurance companies in the US alone.

Globally, the banking, financial services and insurance vertical is the fastest growing segment in outsourcing. Several large Indian service providers have, thorough organic growth or acquisitions, set up centers in the US, Canada and other places that qualify as ‘near shore’ outsourcing destinations.

Jesmine

U.S Study Sings Praises Of Outsourcing To India

It might be touted as the next best thing that ever happened to the IT industry, but lending credence to all the brouhaha surrounding outsourcing, especially to India, is a new study conducted by researchers at the University of Michigan Business School and the University of Pennsylvania’s Wharton School. The study has estimated that the average annual decline in quality-adjusted price for software projects developed offshore is about 14 percent or 56,000 dollars per project.

The outsourcing movement in software development is driven by a strong cost saving motive. In order to improve both quality and cost, some of the successful outsourcing software vendors have adapted and disciplined their development processes to squeeze costs out of the system. The study further added that, as the potential for further cost savings declines over time, reducing other sources of client dissatisfaction becomes more salient.

The study explored potential sources of customer dissatisfaction and how outsourcing vendors might address them. For example, more experienced development team members command higher wages and raise project execution costs, so vendors have an incentive to staff projects with less experienced members who are paid lower wages.

Some of the outsourcing locations such as India can also be a source of high variance in quality as local firms compete to bid the lowest price for overseas projects. Therefore, as global companies attempt to benefit from access to offshore resources, it is important to assess the process capabilities and the quality of training infrastructure of their offshore partners.

Jesmine