The Risks Associated With Offshoring Software Development

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Also ahead: a shift in the outsourcing market that will put intellectual property protection in the spotlight. The first wave of software outsourcing has focused on application development and maintenance, both of which have fairly contained levels of risk, outside of the odd rogue employee like Verma. But as companies move more and more types of software development overseas, such as databases and other packaged applications, they need to think about what kind of data they make available for testing. Also, Nasscom members are aggressively seeking out higher-end business process outsourcing (BPO) opportunities, such as call centers and claims processing. India outsourcing did more than $1.2 billion in this type of work last year and expects to generate $16 billion in revenue from BPO in 10 years. These kinds of applications create thorny issues about personal data protection for U.S.-based customers.

Legal eagles such as Bierce say that India and other nations interested in drawing more high-end software work such as BPO need to adopt laws that protect personal information when it’s transferred from other countries. "Software development is easy?you don’t have data protection problems until you start populating a database," Bierce says. He notes that Nasscom is working on such a law, though it failed to generate one in a similar effort several years ago. The push for call centers, claims processing and other back-office work means that U.S. companies must reassess what’s at stake. As offshore vendors deal more and more often with customers and specific customer data, the potential for abuse rises.

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Copyright © 2003 IDG Communications, Inc.

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