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Story URL: http://www.silicon.com/research/specialreports/offshoring/0,3800003026,39129586,00.htm

Call centre theft won't hurt Indian outsourcing
It won't be a big deal in the longer term, predicts analyst Gartner

By Steve Ranger

Published: Friday 15 April 2005

Fears about the security of Indian outsourcing are unlikely to damage the industry in the long term, if the industry acts now to counter these perceptions, according to analyst Gartner.

Earlier this week, the Indian offshore outsourcing industry was rocked by revelations that call centre workers in Pune have been arrested for allegedly looting $350,000 from the accounts of Citibank's US customers.

Gartner said that it had long predicted that a major fraud case or intellectual-property issue would focus unwelcome attention on the security of offshore outsourcing.

But it said in a research note: "We do not believe that this highly publicised incident will seriously damage the Indian business process outsourcing (BPO) industry. Frauds of this type can happen anywhere, and are just as likely to occur in an insourced or captive centre."

But the analyst house said the "entire Indian offshore industry ecosystem", including vendors, the National Association of Software and Service Companies, local law enforcement and the Indian government must act quickly to counter any perception that Indian BPO poses a security risk.

Gartner said the incident will increase business development cycles for offshore services this year – leading to a slight decline in signed deals – but in the long term it will be seen as a minor event.

But it added: "Security concerns will, however, increase the competitive advantage of the largest, most established providers, which can commit greater resources to security."

Gartner said companies should perform comprehensive security due diligence before outsourcing onshore or offshore. It said companies should assign a team to manage security and privacy issues through the entire life cycle of a sourcing agreement, and should demand detailed service-level agreements that focus on specific security issues such as identity and access management controls.

But the growth in Indian outsourcing may have peaked, with Infosys Technologies, India's third largest IT services company, predicting revenue growth of between 28 and 30 per cent in its next financial year, compared to 50 per cent this year.