Page 2 of
2 India's IT edge
eroded by terror and
crime By Sudha
Ramachandran
consultants are more
cautious in their assessment.
"While the
threat is indeed not something that IT or any
other industry sector can afford to ignore," the
threat is not "scaring them to the point of
quitting India", B S Nagaraj, manager of public
policy and risk management at Hill &
Associates (India) Private Ltd, told Asia Times
Online. He said that although there have been
major terrorist attacks in Mumbai and Delhi in the
past, "to our knowledge, there are no instances of
any multinational
company quitting India only
because of the threat of terrorism".
He
said that "typically, multinational companies
operating out of emerging markets like India have
lower risk tolerance than their home-grown
counterparts. But if the threat is specific [as in
the case of Infosys], both Indian and foreign
companies operating in India would have reason to
worry."
While terror threats of a general
nature might not be scaring companies, the cost of
beefing up security is an issue of concern. IT
and BPO companies are stepping up arrangements to
secure themselves. Even the smallest companies
have moved beyond relying merely on guards to
acquiring electronic surveillance and
access-control systems. And companies, especially
those operating in such areas as Noida, are said
also to be showing some interest in securing
kidnap and ransom (K&R) insurance cover for
their senior management executives.
Some
are calling for monitoring of employees. A senior
official at Private Eye (Pvt) Ltd, an agency in
Bangalore that provides personnel and equipment to
multinational companies such as Hewlett-Packard,
Philips and Delphi, said upgrading physical
security and controlling access to facilities
alone is not enough, as the threat to security
could be from within. "Companies screen employees
before hiring them. But it has to be an ongoing
process," he said.
Obviously, all this
will cost more money.
According to
Stratfor, "Security costs to companies involve not
only cash outlays for physical security upgrades
and technology, but also manifest in terms of
contingency planning and salaries for in-country
security staff. Demand for qualified and
well-connected security managers in India has
increased dramatically over the past two years.
This trend is driven not only by perceptions of
growing risks, but also by cannibalization within
the corporate sector, with companies poaching
security managers from one another. (The poaching
trend also has indirect implications for cost
structures, as it leads to escalating salary
offers and expectations. Of course, that's a good
thing for security managers, but bad for the
bottom line.)
"Corporate bean-counters
will be watching these costs carefully and will
factor them into risk/benefit analyses. The
tolerance for risk varies from company to company,
of course; but should the terror threat
necessitate increased security for employees and
facilities, or should the kidnapping threat
require protective details, armored cars and
expensive K&R insurance policies for
executives, or should the theft of intellectual
property and the personal data of customers
require expensive efforts to vet and monitor
personnel and IT security safeguards, the
cost-efficiency ratio that has favored India for
so long eventually could begin to tip in the other
direction."
Hill & Associates is less
worried, however. "Multinational companies have so
far not really invested heavily in securing their
assets and personnel specifically against the
threat from terrorism. Even if they do, the costs
of operating out of India would surely outweigh
the benefits," observed Nagaraj.
It is
only BPO companies that are handling low-end tasks
that need to be worried in the near future, as it
is low cost that keeps them in business. This is
not the case with high-end outsourcing, which is
what many Indian BPOs are doing.
While
cost is an important driver of high-end
outsourcing, what really matters "is the
capability, rigor, resources, rapid turnaround
times and the ability of the outsourced partner to
adapt to client's requirements and processes and
deliver to specifications", Hemendra Aran, chief
executive officer of Aranca, an end-to-end
provider of custom investment, business and
economic research, has argued.
And
software professionals in Bangalore are even less
worried. They insist that India's advantage is not
just about getting work done cheap; it is about
high-tech skills that few other countries can
match.
Mounting security threats
notwithstanding, Indian companies and
multinationals are not reaching for the panic
button yet.
Sudha Ramachandran
is an independent journalist/researcher based in
Bangalore.
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