Secure outsourcing: An impossibility or a necessity?

Computerworld - This political season has seen the term offshore outsourcing create as much controversy as WMD.
Concerns over the outflow of U.S. jobs to countries such as India, China, Malaysia, Israel and Ireland have made news in both the business and general press. Underlying the threat to U.S. jobs has been an increasing drumbeat of concern about the outflow of sensitive data and business process information that has followed those jobs.
Outsourcing engenders more than just labor implications. It has security implications as well. We are just beginning to understand the ways in which any company involved in outsourcing must act to manage the associated risk. Our industry has the responsibility to prevent secure outsourcing from being thought of as an impossibility. It must instead be one of the baseline requirements before moving any business function -- or any development -- overseas.
Outsourcing development: Not as cheap as it looks
Take the example of outsourcing application development. Between now and 2007, Gartner Inc. expects enterprise application outsourcing to grow 7.3% annually. Chief financial officers favor this trend, but many of the CIOs and chief information security officers I have spoken with aren't as enthusiastic, since the projected cost savings rarely take into account the extra due diligence that must be performed to validate the security of the delivered applications.
There is growing pressure to build security review and assurance into these projects, and companies need ways to sensibly, consistently and cost-effectively tackle this issue. Here are some ways security is being addressed:
Legislative pressure: California State Sen. Liz Figueroa, prompted by the case of a Pakistani outsourcer employee who threatened to reveal personal data unless she got paid, proposed legislation that would require all outsourced providers to comply with California's privacy and confidentiality laws, the strongest in the nation.
Regulatory pressure: Implementing the Gramm-Leach-Bliley Act, the Federal Financial Institutions Examination Council's IT Examination Handbook InfoBase specifies that a financial institution's vendor management program must establish "security requirements, acceptance criterion and test plans," and should include "reviewing and testing code for security vulnerabilities." The Health Insurance Portability and Accountability Act codifies a "chain of trust," requiring that there be partner agreements to ensure that the same level of security will be maintained at all links in the chain of information moving from one organization to another.
Legal pressure: Risk managers and corporate counsel are increasingly looking for ways to include security requirements in contracts for outsourced application development. Based on requests from our customers, we have worked with a multinational law firm