Big Integrity Hits for Indian Outsourcing

January 23, 2009

The outsourcing industry has been rocked by the news of financial scandal at Satyam Computer Services Ltd, the massive India-based IT services provider. In the days since Satyam’s chairman admitted to falsifying financial statements and overstating company assets by more than a billion dollars, I have received several invitations to urgent Webinars and meetings to discuss how this will affect BPO and IT services buyers, businesses, customers and investors.

This week, the World Bank banned Wipro, another leading Indian IT service provider, from its contacts for the next four years. While debates rage over whether the World Bank has overreacted and whether Wipro was unethical in offering company shares to World Bank employees during its IPO several years ago, damage is done. Customers are worried. India’s shiny veneer as the world’s leading offshore destination is cracking.
I think the frustration I feel as an IT outsourcing industry professional is the same felt by anyone who works in an industry marred by fraud. At its very core, outsourcing is about trust–trusting an outside provider to take over a function or project and manage it with the greatest of skill, efficiency and integrity. The industry has taken a terrible integrity hit this January 2009.
In the short term, I believe some businesses will pull their outsourcing business from Satyam–just as Merrill Lynch quickly decided to end its advisory role with the company. The taint is too large and the distrust too strong. Wipro customers may worry and maybe a few will leave. The question for the industry is how far back will customers pull? To other outsourcing providers or all the way back in house?
In this economy, the fear factor is high but so is the need to maintain highly efficient operations. I believe businesses want to and should continue outsourcing IT services; they will just need more information and to bring greater scrutiny to the selection and oversight processes.
What businesses also need to do is diversify geographies. There are competent outsourcing firms and viable locations the world over. Working with more than one outsourcing provider in more than one location can be a strength in a world of unpredictable events and challenges.
I regularly give talks on how businesses should go about selecting their outsourcing providers, and I believe the process should always be an intensive one. For businesses eager to increase outsourcing geographies, take time to explore outsourcing integrity issues with potential providers. Below is a mini integrity cheat sheet–a list of the issues to delve into intensely with any potential outsourcing provider, near-shore or offshore.
Make Sure You Understand…

  • Confidentiality practices
  • Data management
  • Intellectual property protections
  • Security systems and processes
  • Strategies for managing security breeches and compliance failures
  • Strategies for managing service continuity and backup plans when disruptions occur
  • Performance measurement and reporting

For outsourcing providers, now is an important time to reach out to your own clientele and remind them of the performance, integrity and service your organization is providing. Go ahead and spell out the results you’ve delivered in numbers and milestones. Many of today’s worried customers need to be reminded that their local team is taking good care of their needs and that outsourcing is delivering bottom-line value.