Wednesday, August 17, 2005

Offshore Outsourcing: you get what you pay for...

Yesterday, the Australian Broadcasting Corporation exposed a very interesting scandal on their news program Four Corners, about a black market in which the personal details about bank customers can be purchased from workers employed at offshore outsourcing companies in India. In this exposé, an undercover journalist with ABC was able to purchase a shocking amount of personal information about Australian citizens for about $7 each: passport numbers, credit card numbers, ATM card numbers, and the like. Enough information for any enterprising criminal to steal the identities of any of these innocent people.

A similar situation happened recently in Britain, where the Sun newspaper was able to buy personal details of a thousand Britons for about $4 each.

Why does this not surprise me?

In my career, there are two sayings I have always seen to be true about business. The first is, "there is no such thing as a free lunch." The second is, "you get what you pay for."

This is not the first time that offshore outsourcing has resulted in intellectual property concerns. Last year, the world-leading networking company Cisco Systems settled a copyright infringement lawsuit they had filed against China's Huawei. Huawei has been making cheap knock-off routers that bore more than a striking resemblance to Cisco routers for a few years. In the settlement, Huawei admitted they had actually used a stolen copy of the source code of Cisco's flagship IOS operating system in their software.

Offshore outsourcing may look attractive on the surface, but when you start outsourcing critical business functions in sensitive areas, you run the risk of failure, and of having intellectual property underpinnings of your business stolen.