The Hindu Business Line : Factors that are worrisome for BPO sector

EVEN as the domestic business process outsourcing (BPO) industry is trying to deal with American poll-year political rhetoric against the export of jobs, a March 29 report carried by CNET News.com about offshoring has caused a degree of discomfiture among vendors in India.

The report, by Mr Mike Yamamoto, Staff Writer of CNET News.com, says that the growing US demand for offshore services from India is raising the cost of labour in the latter country, causing American firms "to begin eyeing China, Romania and other options."

It adds: "Even if companies turn to other countries for outsourcing, India would by no means be in dire straits. India's offshoring business is more advanced than those of other countries and has unique benefits. Many executives of Indian companies also believe political changes will help their industry start developing technologies of its own."

The BPO industry is feeling a bit sheepish on two counts.

For one, industry analysts say that it has been aware for quite some time now that Eastern Europe and China have the very same competitive advantages that India does - low cost labour and a vast pool of trained personnel. Moreover, as the `Offshore Romania 2003' report by Pierre Audoin Consultants (PAC) released late last year points out, Romanian workers, in addition to being well educated and highly skilled workers, are perceived to have a better understanding of Western European culture than their Asian counterparts.

In fact, companies domiciled in the European Union countries have already shifted a good deal of their outsourced work to East Europe while those in the US are in the process of doing so.

For the other, analysts point out that that it is extremely unlikely that the domestic BPO outfits, their claim to being more advanced than those of other countries notwithstanding, will not be able to write off the business diverted to East Europe and China and go after jobs higher up the value chain because of the concerns shared by most companies of the West about data security and intellectual property rights issues.

As of now, India does not have third party safe harbour certifying agencies and data is transferred on the basis of an assurance given by a vendor to the client of adherence to the Directive on Data Protection principles.

The European Commission has an outright ban in place on the transfer of personal data to non-European Union countries. The US has a somewhat more relaxed approach... for now.

In addition, American and European companies are becomingly increasingly worried about the laxity of the legislative environment in India.

The general consensus is that the Information Technology Act of 2000 and the modified Copyright Act which came into force in the same year need to be tweaked quite a bit... .and that intellectual property rights laws have to be enforced. Industry leaders have, in recent months, been advocating the adoption of certification under the information security management systems (ISMS) evolved by the British Standards Institution to provide guidance on organisational aspects of risk assessment and control.

The certification, referred to as BS7799-2.2002, covers security related issues such as network security, data sanctity and terms of data utilisation and should prove of great value in allaying fears of identity theft, among other things.

Identity theft is a big issue these days - and likely to get bigger when those in the US opposed to offshoring use it as a stick to beat the industry with.

It may be recalled that in February, a US Congressman, Rep. Edward J. Markey, had shot off letters to various federal and state agencies, raising the privacy issue and alleging that off-shoring represented a grave risk not only to American jobs but also to privacy.

In his letters, the Congressman contended that the outsourcing of call centre jobs to overseas companies represented a danger to financial, medical and other sensitive information pertaining to American citizens.

Rep. Markey, the senior Democrat on the Telecommunications and Internet Subcommittee and co-chair of the Privacy Caucus, said: "There is no assurance that privacy will be protected when personal data is transferred to offshore companies that are beyond the reach of US law enforcement, and the federal government needs to wake up to the risks that this presents... The implications for identity theft by gangs, breaches of homeland security by al-Quida, and criminal misuse and abuse by multinational corporations are frightening."

As it happens, the Indian BPO industry also finds data security and intellectual property rights issues distinctly worrisome.

Industry sources point out that all it takes is one incident of identity theft or leakage of sensitive data for trust built up over years to collapse.