Foreign Intrigue: Continuity Is A Legitimate Concern

One of the biggest challenges facing offshore IT services companies is convincing customers their data will be secure with a company thousands of miles away, in a country with a different language and culture, run by a government whose regulations and concepts of intellectual-property ownership may be alien to those in the United States.

The conflict between India and Pakistan is perhaps the biggest security problem for Indian companies. Most have taken steps to reassure customers, such as opening operating centers throughout the world, including data centers and redundant servers in lower-risk locales; performing data replication to home sites; and installing fiber optics and satellite communications systems. Wipro Technologies, for example, has a backup center in Chennai, far from where fighting with Pakistan has occurred. Satyam Computer Services Ltd. plans to set up a business-continuity center in Singapore, its first outside India. Some firms are certified under the British Standards Institute's BS7799, a set of controls for security management that's recognized as a worldwide standard.

Companies doing business with offshore outsourcing companies should build security protection into their contracts, says Jason Epstein, an attorney with Baker Donelson Bearman & Caldwell who specializes in outsourcing. Most contracts contain a "force majeure" clause that essentially excuses both parties from liability for issues outside of their control, such as acts of God, war, terrorism, and epidemics. But companies doing business in potentially volatile regions should carefully negotiate the terms of that clause, he says.

A contract also should include detailed business-continuity procedures. And it's important to be aware of a country's intellectual-property laws. "You want to make sure that there's not some law that trumps everything you've put in the contract," Epstein says.

Concerns about intellectual property, as well as security and business continuity, could make or break some emerging regions, particularly China. The country's IT labor force is even cheaper than India's, and several companies, including Satyam, are building facilities there for offshore programming. But Michael Doane, an analyst with Meta Group, says a controlling Communist government, the lack of English-language skills, and weak enforcement of intellectual-privacy rights should make business-technology executives think twice about working in China.

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Illustration by Ken Orvidas