OFFSHORE OUTSOURCING – Outsourcing in a Nuclear Hot Zone

For the moment, tensions between India and Pakistan are subsiding, but the recent threat of war has forced many companies to reassess the risks of outsourcing work to India. The country’s National Association of Software and Services Companies estimated the value of India’s IT-enabled services industry at approximately $13.5 billion during 2000. That translates into many companies maintaining investment in a country that has been teetering on the brink of war. Two-thirds of those companies are based in the United States.

Stephanie Moore, vice president and research leader for Giga Information Group based in Norwalk, Conn., predicts that more companies will diversify their outsourcing, especially to Canada, China, Mexico, Russia and the Ukraine. “There is a new level of risk in India right now,” she says. “The only thing people can do is have valid contingency plans that are actionable and immediately usable. Besides developing backup resources nearby or in another location, a lot are considering cross-training in-house staff so they at least know where documentation is. That’s a big step given the climate of cost containment we’re in now.”

Moore’s advice outlines what William Lewis, senior international liaison at LexisNexis in Dayton, Ohio, has done. “If something happened [in India], I could have everything in the Philippines within a matter of days, missing very little production,” says Lewis. “There are [contingency] plans to relocate workers in India elsewhere around the world. Visas are prepared and ready for people.” Lewis also keeps critical code in the United States and has banned corporate travel to India.

Molly Doland, partner at the law firm Shaw Pittman in Washington, D.C., which specializes in technology business transactions, says she is not aware of anyone who has backed out of India, although there have been discussions about risks and what the different parties are required to do to mitigate them. “All the major players have fairly healthy contingency planning in place,” she says. “It’s not like this hasn’t gone on before, or it was entirely unanticipated.”

India and Pakistan have rattled their sabers since the partition in 1947. Lewis points out that despite contentious internal politics and this ongoing conflict, India has a history of preserving the business environment. Pakistan is in the same boat. “Trade makes the world go ’round,” says Bill Martorelli, IT research analyst with the Hurwitz Group in Framingham, Mass. “It creates stability. Hopefully, the stakes of what could be lost will figure into the Kashmiri situation.”