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Security Risks in Outsourcing: No One in Asia Seems to Care
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May 02, 2005 (Computerworld) -- Both India and the Philippines are the subject of long-standing travel warnings from various embassies. Some say India is on the verge of nuclear war with Pakistan. In the Philippines, terrorist bomb threats are all too common. Is it any wonder that Gartner Inc. cites security as a "key concern in outsourcing"?
If you look only at the screaming headlines, it's difficult to understand why so many intelligent people are building outsourcing operations in these apparently "unsafe" countries. But if you speak with the people actually leading the operations in Asia, you get quite a different perception of the risks involved.
John Standring is the Manila-based general manager of the IT outsourcing facility for Safeway Inc., a huge U.S. supermarket chain. He says that while there are security risks in the Philippines, they aren't much different from those of any big city anywhere in the world. He believes that with proper security measures, there is little to worry about. It seems to me that this same advice would be appropriate for anyone visiting New York or Washington for the first time.
Shaun Paterson, vice president of operations at the large outsourcing facility of New York-based Thomson Financial, takes a similar view. He feels that the streets of Manila are "safer than those of London" (England is his home country), and he says female friends visiting from Britain feel the same way. As someone with many years of experience in IT and business process outsourcing (BPO) in the Philippines, Paterson feels qualified to say that security risks are, at most, trivial.
Almost all experienced managers I have spoken to make similar assessments. Some have said that the risk of personal injury is higher while driving a car to the airport for an overseas trip than it is being in the overseas country. One American manager made the point that he can't understand why there aren't travel warnings for the U.S., since there is clearly a greater proven risk of terrorist attacks there. It seems to him that there have never been comparable terrorist attacks in either India or the Philippines.
That all sounds good, but business process outsourcing is still a new concept to many people. Managers wishing to pursue outsourcing programs must spend a lot of time justifying their plans to skeptical department managers who face the loss of their staffs. Security risk is always flaunted as a "key concern" in any outsourcing project: What happens if a bomb destroys our facility and kills our people? Will our senior staff be kidnapped? Aren't these countries very corrupt? On and on.
Another approach to explaining away the issue of country risk is to go back in time to an earlier generation of offshore outsourcing. Let's talk about electronics.
Intel Corp., Philips Electronics NV, Toshiba Corp. and Texas Instruments Inc. are a few examples of electronics companies that have operated billion-dollar facilities for decades in the Philippines. Last year was Intel's 30th anniversary in the country. During that period, the company has seen a tedious parade of armed insurrections, volcanic eruptions, electricity blackouts and corruption scandals.
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