The massive accounting fraud at Indian IT services provider Satyam Computer demonstrates the perils to U.S. and European companies of outsourcing.
Over the last two decades, American and European firms like GE, Goldman Sachs, Siemens, Morgan Stanley and countless others have rushed heedlessly to outsource their IT work to Indian companies to reduce their costs.
Take Satyam for instanceÂ – At the end of its fiscal second quarter of 2009, Satyam derived 83% of its revenues from the U.S. and Europe. Satyam claims that 185 of the Fortune 500 corporations are its clients.
Besides the obvious hardship to thousands of American and European employees, outsourcing on the massive scale to Indian companies also exposes big corporations to several risks – data theft (not uncommon with Indian BPOs), association with unethical companies like Satyam tends to rub their dubious reputation off on the corporations that are outsourcing, setback to IT projects when massive frauds are uncovered as at Satyam, financial loss and possible theft of their valuable intellectual property.
The risks of outsourcing are far too many.
Our advice to U.S. and European corporations, large and small – the next time you are itching to pinch a few dollars by outsourcing to the Indian IT coolies think hard about the ramifications down the road. Think a million times.
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