World Bank Keeps Losing Outsourcers, Data, And CIOs

Posted by Bob Evans on Jan 13, 2009 09:43 AM

With banks like this, the old cash-under-the-mattress investment philosophy is starting to look pretty good: The World Bank has announced the ban of outsourcer Wipro for four years, shortly after having done the same to Satyam. So it's bouncing core IT partners, is still reeling from massive data breaches, and has a new acting CIO. If the World Bank were a stock, would you buy?

"Wipro, one of [India's] biggest outsourcing firms, was blacklisted by the World Bank for 'providing improper benefits to Bank staff,' " Forbes.com has just reported. If that transgression sounds familiar, it should -- it mirrors the language the World Bank used last month when it announced Satyam's 8-year ban, which I blogged about late last week.

In both cases, the blacklisting centers on stock grants given by the outsourcing companies to World Bank executives, and in both cases one of those executives was a former World Bank CIO named Mohamed Muhsin, who served until 2005. Muhsin was hired in 1997 and appeared to serve with distinction until he left the organization in 2005 under a range of allegations tied to his dealings with Satyam.

Meanwhile, The Wall Street Journal reported this morning that Wipro's ban from the World Bank occurred in June 2007. The Journal also said that bank officials confirmed that it was former CIO Muhsin who was involved in the stock offers from both Satyam and Wipro.

This whole situation is compelling because while many global businesses will be re-evaluating their policies regarding third-party service companies in the wake of Satyam's financial scandal, the Wipro conflict with the World Bank is not at all symptomatic of a problem within the Indian software industry but rather another indication that the World Bank has a very great need to get its IT shop in order. That would include hiring an experienced, decisive, and eagerly transparent CIO; establishing proper oversight of that CIO and all IT operations throughout the top-executive ranks at the bank; and establishing a new philosophy across the organization that reflects the significance IT should have on all facets of the World Bank's operations, its credibility, and its capability to remain a viable force for global financial aid throughout the 21st century.

Late last month, when word of the Satyam ban became public, Satyam defiantly denied any wrongdoing and demanded an apology from the World Bank. But those protestations were quickly forgotten when word surfaced last week of the massive financial fraud perpetrated over several years by Satyam founder and chairman Ramalinga Raju, and for a couple of weeks the World Bank and its IT operations stepped out of the news cycle.

But now, on top of the news about Wipro, the World Bank is trying to manage the overhaul of its entire IT department, operations, and policies with a new acting CIO who lacks IT-management experience. According to an announcement on the Web site of the Government Accountability Project, former World Bank CIO Guy-Pierre De Poerck last month was reassigned to the HR department:

On Monday, December 8th, Michel Maila, Vice President for Risk Management at the International Finance Corporation (IFC), was transferred suddenly to the World Bank Group as Acting Chief Information Officer (CIO). The decision was announced to the Information Solutions Group (ISG) at the Bank on Monday evening, with no prior consultation or discussion, leaving many puzzled staff members in the chain of command.

So with its IT operations in disarray, the World Bank has appointed an acting CIO who is "a financial risk-management analyst, not an IT expert." But the good news for Maila appears to be that he won't have responsibility for cybersecurity, according to the statement: "In the wake of information system breaches at the Bank, responsibilities for information security were shifted from the CIO on November 25th to a new IT Executive Coordinating Council, chaired by Juan José Daboub, Managing Director. The CIO's remaining duties are correspondingly diminished."

In upcoming posts, we'll take a look at reports of the data breaches the World Bank has suffered over the past year in something of a case study of how a large global organization is handling a series of high-urgency management and technology challenges. Also, the World Bank announcement of the Wipro ban is here, and a full list of "debarred" firms is here.