War may prompt firms to delay offshore work

Computerworld - WASHINGTON -- The Iraq war's impact on offshore outsourcing could be similar to what happened last year during the crisis between Pakistan and India, when for several months there was a decline in offshore contracts and a renewed focus on contingency planning. Once the threat declined, outsourcing to India largely returned to normal.
But if the Iraq war is protracted and U.S. interests, such as India's outsourcing centers, are attacked by terrorists, then U.S. businesses will likely pull operations back in-house, said Debashish Sinha, an analyst at Gartner Inc. "There is an infinite number of variables that could affect this," Sinha said.
Meta Group Inc. last month predicted that offshore outsourcing would grow 20% annually, and Dean Davison, an analyst at the Stamford, Conn.-based firm, said he's not expecting that growth rate to be "significantly hindered" by the war.
But Davison, who canceled a trip to India he was planning to take this week, said his forecast could change if the war prompts global unrest. "If this expands ... then all bets are off," he said.
The war is already having a short-term impact on outsourcing, primarily because of travel concerns.
For instance, Telvista Co., a Dallas firm that provides offshore services in Mexico, decided to reschedule a conference planned this week in San Diego after numerous clients canceled travel plans because of the war. "There's a reluctance to travel, even in the U.S.," said Suzy Weaver, Telvista's vice president of operations.
But analysts expect businesses to continue with their longer-range offshore planning, if warily.
Baltimore-based investment management firm T. Rowe Price Group Inc., which manages more than $140 billion in assets, does a significant amount of its new-application development, platform rehosting and application management work via an India-based outsourcing firm. The war so far has not affected its overseas work, said Ram Mouli, the company's vice president of technology planning and development.
"The challenges during a war-type emergency are the issues related to travel from and to India by the on-site resources," Mouli said. But future projects that are under consideration, such as application hosting and the setting up of a disaster recovery site in India, may be reconsidered. "We are re-evaluating these projects, as we are worried about the war and the long-term effect on system and application access," Mouli said.
Marty Clague, president and CEO of Covansys Corp., a Farmington Hills, Mich.-based company that provides offshore services in India, said he expects some trip cancellations and deferrals in offshore work. But being ready for problems is partof offshore planning, he said.
Covansys has server farms in the U.S. connected to centers in India that routinely back up data and could be used to transfer projects. The firm also has employees in India who have visas and are ready to travel to the U.S. in the event of an emergency, said Clague.
Reporter Jaikumar Vijayan contributed to this report.

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