Mumbai attacks and the new realities of outsourcing to India ?
November 28th, 2008
The siege of Mumbai over the last three days has exposed the vulnerability of a prime offshoring location within India and how a handful of people with guns and fanatical mindset can shutdown a vibrant city of 20 million people. It is thankful to see it come to and end for now.
My heart goes out to the loved ones of the people directly affected by the mindless violence and the tragedy and the nightmare they are going through. The constant visuals of information available and the media’s constant, chaotic coverage has not really helped the situation and in fact may have aided what the terrorist wanted in giving their mission a global coverage. It is hard not to expect a 24/7 media in today’s global connected world and where you draw the line in what is right or wrong coverage is still tough to define and an argument which will go on.
There are experts our there which will continue to debate the overarching issues and we will see a number of finger pointing back and forth and people trying to get to the bottom of how and why this happened and desperately trying to identify the bad guys to take some action against. That is not my place to comment.
Is India still a viable outsourcing location ?
Sure it is. The Mumbai incident does create a negative perception around geopolitical risk of doing business in India and a number of risk consultancy organizations will revisit their risk parameters. The reality though of today’s global world is that we will fooling ourselves if we believe that what happened in Mumbai is India specific or location specific. Given the new tactics of modern terror tactics this could happen anyplace be it close to home or far away. So as a corporation looking to go global for what ever reasons, planning, managing and executing operations risk and business continuity gets all the more critical. The issue should not be around finding a totally risk free location ( which does not exist today!) but to be prepared to move if something does happen be it close or far from home. A number of firms learnt this lesson the hard way during 9/11 and what the tragedy in Mumbai now highlights is that this preparedness has to be a constant phenomenon and not just another internal signoff needed to create global operations.
We work with a number of firms who have operations in global locations and are building operations in global locations and primarily in India as a low cost location.
Fortunately none of these firms were impacted and all the employees for these firms have been accounted for. There were minor disruptions which were again manageable given the holiday season in the US. The business continuity plan for one firm had to be activated and people worked from home on critical tasks.
What does this though mean for the firms looking at outsourcing and or running current operations ?
A number of things potentially could happen. The perception in the short term and rightly so, will be that travel to India is risky and a number of visits planned for early part of next year will be re evaluated and pushed back . Fortunately given the start of the holiday season in the US , visits in the December time frame by corporations are already way down and a number of firms don’t engage in travel this time of the year (for budgetary or holiday reasons).
For corporations with existing operations located in India:
1) The first thing to ensure is that the safety of people is not compromised. Any physical security plans in place for people, information and infrastructure are in place and continues to be monitored more proactively and frequently. A number of vendors have spent time and effort to put strict security procedures in place. The reality though of an incident like what happened in Mumbai is that this is not a localized phenomenon limited to Mumbai or New York. This could happen anyplace anytime and there will never be ever a complete fool proof way to prevent it. Being prepared for a disaster is the best you could do.
2) The business continuity plans which organizations typically spend a lot of time putting on paper but never really spent time actually testing will have to be rigorously tested. Brush the dust of the business continuity plans and create and test plans which will work. And yes these will cost money to both the corporations and the vendors in these belt tightening days. Revisit your business case and ensure that you have accounted for these dollars.
3) Firms who have reached a critical mass of operations in India should be looking at spreading their geographical risks and looking at a truly global operations strategy and implementation. The internal operational risk groups within organization will have to rework their political risk parameters and again create more real world scenarios of managing operations. This is not a new revelation and a number of firms are already doing so.
4) Need to re evaluate mission critical processes and controls and support if all are concentrated and based in a single location. Again it does not matter if this is a single location state side or a remote location.
For corporations looking to establish operations in India:
1) There may be a pause in evaluating India and specially Mumbai as a location to do business. Travel to India is going to be affected and the luxury of a ‘five star’ hotel is not going to be comforting enough or feel secure enough all over India. Decisions to travel to India to see vendors and evaluate locations will be on a go slow mode. With the cost pressures in the US and restrictions on travel budgets , this will push back evaluation processes. An option a few of our clients seem to be evaluating are to understand the need to travel so far for a day or two visit and instead rely on experts and get vendors to come over stateside initially.
2) Cost of doing business in India and setting up operations will increase. The’hidden costs’ beyond the basic hourly rate include among other things includes due diligence, security risk assessment, business continuity planning and testing. A number of firms will have to take this into account going forward as they build business cases to showcase cost savings and investment dollars needed for outsourcing.
3) Spend time building checks and controls in processes and identify how you will phase and manage mission critical initiatives and deploy them globally.
4) It will take a whole lot more convincing by the vendors in their already painfully long sales cycle to clients to ensure they have appropriate risk management, continuity plans in place. Indian vendors who will survive will have a true global footprint and not just sales fronts in client locations.
Would again like to offer my sincerest condolences to the people affected by the tragedy and kudos to the brave men and women – be it the elite commandos, the hotel staff or the common man who stood up and helped their fellow citizens during this time of crisis.
Email me your comments at: info@corrystone.com
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