MphasiSCitibank, BPO, India, Security, Data

The MphasiS-Citibank fraud is a wake-up call for the BPO industry

14 Jun 2005 | (Interview)

Even as India is expected to remain the preferred outsourcing destination for the next five to eight years, the absence of basic data security and data privacy laws will hamper growth of the BPO sector in the country, says Avinash Vashistha, co-founder and managing partner, neoIT, a Bangalore-based IT consultancy firm.

“A number of US and European companies are looking at destinations beyond India for offshoring projects,” he says. Mr Vashistha’s understanding of the practices around the offshore markets provides clients with a custom offshoring strategy, reduced risk, successful transition and sustainable performance contracts that address issues unique to offshore delivery. Speaking to Srinivas R of The Financial Express, he shares new trends in the offshoring business. Excerpts:

What are the current trends in the BPO sector?

The demand for BPO services in functional areas such as finance, marketing, sales, human resources, and administration, will continue to remain high for the next 5 years. Irrespective of the prevailing business and macroeconomic conditions, companies worldwide would be on the continuous lookout for adopting effective measures to prune costs across functions, which would mean more business for BPO service providers across the globe.

Having tasted phenomenal success in delivering low-end BPO services, much beyond their client’s expectation, Indian BPO service providers are poised to move up the value chain. There is a projected CAGR of more than 50% till 2010.

Some of the companies in the US are considering other destinations such as Philippines over India. What is the reason for this?

The reasons are varied and can be attributed to risk mitigation and diversification, optimal use of global sourcing and to leverage centers of excellence. Philippines, Eastern Europe and Mexico provide competitive benefits such as cost, cultural affinity, better security and data privacy framework, catalyst factors, infrastructure, etc, compared to what Indian service providers offer.

Do you think recent instances such as the Mphasis-Citibank cyber crime incident will have an impact on projects coming to India?

neoIT does not foresee any long-term impact. Economic benefits of offshoring and the fundamentals of offshoring will not change. The urgency with which the case has been resolved has shown the world that India is prepared to deal with cyber crime. It will continue to build skills and the technical know-how to counter such future incidents.

How can such issues be avoided?

We believe that this incident is a wake-up call for the industry. While most of the companies have adequate IT security in place, the need to assess and check the individual track record of employees is an important factor. Background checks and building effective methodologies to ’blacklist’ people with less-than-perfect track records will be key in dealing with potentially troublesome team members. It is imperative to go beyond traditional security norms, and address employees on the criticality of security compliances such as BS 7799 and project compliances such as SAS on a regular basis.

Apart from compliance norms, physical security of systems and stringent checks on each individual is necessary. Due diligence on companies is a must before awarding contracts. Companies need to ensure that processes are in place to protect security breaches.

Also, HR policies of the company need to be examined. A vigorous check wherein the company conducts site visits and relies on ’touch and feel’ experiences will keep such events in check.

A recent report from Deloitte Consulting claims that India is going to lose its position as the preferred BPO destination? Any comments?

The Deloitte report claims that outsourcing trend was cresting as the number of unsuccessful deals mounted. However, this was dismissed by users, vendors and intermediaries alike at the recently concluded Wachovia services conference.

The basis of the study sample itself was widely disputed - only “failed” deals were examined and only the user was interviewed - it would be interesting to note that the vendor was not contacted to determine if the issue may have been on the user side. What the study highlights is that sourcing agreements are difficult to write and manage especially over an extended period.

On a separate note, with respect to India and its attractiveness as a BPO destination - India will continue to be the largest outsourcing destination for the next five to eight years. Yet what would come in the way of BPO expansion in India is the absence of basic data security and data privacy laws.

Apart from back-office work, what kind of projects are coming to India?

There has been a significant change during the last two years in the kind of work coming to India. We are now getting work relating to embedded systems, product development, remote infrastructure management, technical support, package customisation and implementation.

However, TCS, Infosys or Wipro are still unable to get large projects. Is there any particular reason for this?

Typically, offshore outsourcing as a business model has structural issues involved when it comes to mega deals - these big deals involve takeover/ transfer of infrastructure, operations and people.

Currently, we are witnessing big deals being split amongst multiple vendors. Specifically to the BPO sector, the deal sizes (offshore) are still quite small.

It is also seen that Indian product companies such as i-flex or Infosys have few US clients for their banking solutions. Is it really difficult for them to address the US market?

My understanding is that competition in the US for banking products is intense. Although Indian firms are making progress, they are forced to compete with very large companies that have long-standing client relationships and sales/marketing budgets that in some cases equal the entire revenue base of the Indian firms.

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