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Gartner: Indian Outsourcer Fraud No Big Deal

A recent incident of outsourced call center fraud in India won't be a significant damper on offshore outsourcing, a research firm says.
A recent fraud incident in India -- where employees of an outsourced call center for Citigroup were arrested for making off with hundreds of thousands of dollars from U.S. accounts -- won't be a significant damper on offshore outsourcing, a research firm said Thursday.

Gartner analysts Frances Karamouzis and Arabella Hallawell said that "frauds of this type can happen anywhere, and are just as likely to occur in an insourced or captive center" in an online brief.

Earlier this week, two more Indians were arrested by police, bringing the total number involved in the fraud to 16. Indian media reports also said that police now believe the fraud began earlier than first thought, and may have raked in more money than the $350,000 often quoted. The fraudsters managed to pry passwords and PINs from Citigroup customers who called into the center, then used that information to pillage accounts.

The bulk of the money has not been recovered.

"Gartner has long predicted that a major fraud case or intellectual-property issue would focus unwelcome attention on the security of offshore outsourcing," the analysts added. "Nonetheless, we do not believe that this highly publicized incident will seriously damage the Indian business process operations industry."

In the short term -- through the end of 2005 -- the Gartner pair believe that the bad publicity will lead to a slight decline in signed deals for Indian outsourcers, but "in the long term it will likely be seen as a minor event."

The concern about security on the part of those hiring outsourcers will, however, give an edge to the larger, most established outsource providers, who have the resources to bankroll additional security.