Monday, June 27, 2005

Outsourcing in India In crisis over scam

NEW DELHI, June 24 -- India's booming Offshore outsourcing industry struggled with new political and security worries Friday after a British tabloid reported that one of its reporters purchased private financial data on British citizens from an Indian outsourcing worker as part of a sting operation.
The Sun newspaper reported Thursday that a reporter posing as a businessman purchased the bank account details of 1,000 Britons -- including customers of some of Britain's best-known banks -- for about $5.50 each.
The worker who allegedly sold the information bragged to the undercover reporter that he could "sell as many as 200,000 account details a month" and declared that "technology is made by man and it can be broken by man," according to the newspaper. The Sun said the worker received the information from "a web of contacts who work in call centers."
The newspaper's report, which was widely covered in the Indian news media, has renewed criticism that outsourcing firms have failed to erect adequate protections against fraud in their zeal to take advantage of the booming demand from foreign companies seeking to lower costs by shifting some office operations abroad.
The incident also has played into the hands of workers and politicians in Britain, the United States and other developed countries who see the outsourcing phenomenon as a threat to employment and prosperity at home and are eager to find ways to discredit it.
The report comes on the heels of another scandal in which several Indian outsourcing workers in the western city of Pune are alleged to have used their positions to steal $426,000 from New York-based customers of Citibank.
"This is California" during the Gold Rush, said Shankkar Aiyar, a business journalist and senior editor at India Today magazine who has written widely on outsourcing. "Everybody who sees an opportunity sets up shop. They want to start fast, they've got a contract in hand, and some of them are taking shortcuts."
India has no monopoly on such fraud. This month, MasterCard International Inc. announced that more than 40 million credit card numbers belonging to U.S. consumers were accessed by a computer hacker who breached security at a processing center operated by another company in Tuscon.
India's National Association of Software and Service Companies, known as NASSCOM, has said the industry was already taking a number of steps to promote better security, including the development of a national registry of outsourcing workers that will help screen out potential criminals. Outsourcing companies in India typically bar workers from downloading or printing information, and often from carrying cell phones or even pens into their work areas.
"The problem is not unique to any single nation," the group said in a statement Thursday. "It is one that can affect any country, and each of us has a responsibility to take on the criminals."
The Sun identified the outsourcing worker at the center of its sting as Kkaran Bahree, 24, a computer expert and college graduate who lives with his parents in New Delhi. It said he provided the newspaper's reporter, Oliver Harvey, with "account holders' secret passwords, addresses, phone numbers and details of their credit cards, passports and driving licenses." The newspaper said that some of the information was contained on a CD and that Harvey's three meetings with Bahree had been secretly recorded and filmed.
The Sun said that Bahree "gathers supposedly secret information from corrupt call center workers in Delhi" and that it had verified the authenticity of the information with "a security expert." The newspaper said it had given investigation details to the City of London police.
Bahree could not be reached for comment Friday. But in an interview with the BBC on Thursday, he denied any wrongdoing, saying he had been asked by an associate to give a CD to the Sun's reporter, did not know what it contained and had not received any payment.
The newspaper said Bahree had worked for several years at Daksh eServices, now a subsidiary of IBM, and currently works for an outsourcing company called Infinity eSearch in the fast-growing New Delhi suburb of Gurgaon.
At a news conference Friday, Infinity's managing director, Rahul Dutt, said the firm had no banking clients in Britain and did not handle financial information for clients, according to the Press Trust of India news service. Dutt said Bahree has worked at the company for about three months and had been given until 5:30 p.m. Friday to give an explanation "about his alleged role in the scam." Calls to the company's Gurgaon office went unanswered late Friday afternoon.
India's outsourcing industry performs a range of customer-service and other back-office functions for Western and multinational firms in areas such as banking, insurance and health care. The industry is creating jobs at the rate of nearly 100,000 a year, and its revenue is growing at more than 40 percent annually, according to NASSCOM. But analysts warn that the industry's rapid growth has stretched the supply of educated English speakers, prompting some companies to lower their hiring standards.