5 IT Outsourcing Tips in the Wake of Infosys’s Visa Fraud Settlement

Following its agreement to pay a record $34 million to settle claims of visa fraud and abuse at its U.S. outsourcing clients, there’s little doubt that Infosys will take a hit to its reputation. It’s hard to estimate the ultimate financial impact on the $7.4 billion company, says Michael Kushner, managing director with outsourcing consultancy Alsbridge, but it could cause problems with deal pursuit and renewals.

“Infosys clearly will take a reputational hit, and that’s something competitors are likely to exploit,” says Esteban Herrera, partner with outsourcing consultancy Information Services Group (ISG). “The company will have to work hard to regain trust through transparency and compliance in its staffing practices.”

But what about customers of the Bangalore-based IT service provider? They, too, could face reputational, financial, and legal risk.

“Something like this could not have been happened without clients having at least some knowledge of the goings on,” says Hansa Iyengar, a sourcing and vendor management analyst with Forrester research.

In the wake of this latest news, all outsourcing customers should take several steps to protect themselves and bolster their outsourcing relationships:

1. Talk to your vendor. Outsourcing consultancy NeoGroup, which has been monitoring the allegations against Infosys since 2011, is advising clients to closely monitor the situation and talk to Infosys about what went wrong and how similar instances can be avoided in the future. Now would be an opportune time to have such discussions with all IT service providers.

2. Conduct an HR audit. Undertake a full inventory of supplier resources on your accounts or ask your vendors to do so, advises NeoGroup. Identify all visa statuses and expiration dates. Specifically make note of B-1 visa holders.

3. Review billing. Make sure that B-1 visa holders are not performing billable work, but are only onboard for meetings, contract negotiations, or short-term training. Work with providers to transition any on-site support that does not meet visa requirements of your account.

4. Monitor immigration reform. Interact regularly with internal government relations teams to stay on top of immigration bill developments and develop contingency plans accordingly.

5. Reconsider pricing models. “Clients are to blame to some extent as the major reason for this kind of ‘cutting corners’ by Infosys is the intense pressure on costs that comes from the clients’ side which constantly pushes vendors into a corner,” says Iyengar. “The present market conditions are such that there is hardly any more room for pushing prices downwards. Enterprises need to wake up to the fact that when they demand more value from the vendor, they’ll need to bear the associated costs.”

Stephanie Overby is regular contributor to CIO.com’s IT Outsourcing section. Follow everything from CIO.com on Twitter @CIOonline, Facebook, Google + and LinkedIn.