FOLLOWING THE Satyam fraud scandal which flung the outsourcing sector into disarray, businesses should think very carefully about their IT outsourcing strategy, a technology lawyer has advised.
Middletons partner Cameron Abbott explained that the Satyam shock, in conjunction with the global financial crisis and the terrorist bombings in Mumbai, has rocked business confidence in Indian outsourcing.
"Satyum ... is one of the household names in Indian outsourcing. It was a big event and it leaves people wondering 'If it can happen [to Satyum] maybe it can happen to the others?'," he said.
According to Abbott, getting lawyers involved early can help minimise the risks and maximise the benefits of outsourcing. The biggest mistake businesses make, he said, is not getting lawyers involved when the crucial supplier decisions are being discussed.
"The ones I see born shaky, stay shaky," he said. "By the time they've gone and sought out the specialist expertise the process is often well advanced ... and a lot of the key procurement decisions have already been made," he said.
This is problematic, he said, because these important decisions are often made without a proper understanding of the sophisticated nature of the IT outsourcing sector, and many business decision makers seeing outsourcing merely as a cost cutting measure. In reality, Abbott said, the majority of complex IT outsourcing transactions comprise an element of "transformation" - businesses are not only seeking to cut costs, but to adapt their processes to achieve industry "best practice".
Abbott explained that the various outsourcing providers have different expertise and offer different solutions incorporating varying degrees of "transformation", and when deciding which provider to use, businesses should engage someone with the requisite expertise and knowledge of the market.
"Lawyers need to get involved and design the process from the beginning and understand why the company is outsourcing and match that with an understanding of the market - who provides services that will match up well," he said.
- By Zoe Lyon
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