Trade Secret Theft

Computerworld - Taking work offshore may cut costs, but it still comes with a not-so-hidden price. Asian countries, including the No. 1 outsourcing destination, India, have weak or untested intellectual property laws, inefficient courts, and financial and public records mechanisms that make it difficult to conduct employee background checks.
That doesn't mean that intellectual property sent to reputable offshore developers is more likely to be stolen and sold than it is here. Sophisticated U.S. and Canadian companies have lost valuable intellectual property in their home countries because of dishonest employees and hackers. Employees in India and elsewhere aren't any more dishonest than workers here. But because overseas court systems and laws aren't as strong as in those the U.S. and evaluating potential employees is more difficult overseas, the odds of intellectual property theft could be higher.
U.S. businesses are also sending valuable code to regions of the world with high piracy rates. In China, for instance, 92% of the software installed on computers is pirated, according to a recent study by IDC and the Business Software Alliance. (But China is trying to overcome the piracy stigma; see QuickLink 49092.) In India, the piracy rate is 73%, and in the U.S., it's 22%, the lowest rate in the global study.
Physical Lockdown
Imagining the ways a company can lose intellectual property is similar to playing a war game. The possibilities for physical and network-based thefts are endless. Even in protected environments, employees can memorize credit card data and sell it. Product development work can reveal a company's plan for new services. Back doors can be built into programs.
This issue has given rise to a practice by outsourcing firms, particularly in India, to create walled compounds that resemble government intelligence agencies . The compounds have guards and gates, multiple levels of security checks and locked-down information systems without any ports or drives.
U.S. companies couple those physical protections with development methodologies that make sure no one person sees all the code. "The code, in the aggregate, is not at risk," says Nate Lentz, president and CEO of Verticalnet Software Inc., a maker of sourcing and supply chain software in Malvern, Pa.
But Lentz says he also wants to minimize the risk that his outsourcer's employees will leave the company. High turnover can hurt productivity and add risks as well. Lentz treats the outsourcers' employees as "dual employees," by including them in companywide e-mail distributions and town hall meetings. "It's our belief that that kind of structure makes them feel much more a part