In May I wrote about Infosys’ visa woes. Yesterday, an Alabama judge ruled in favor of Infosys in the first of the visa-related whistleblower lawsuits. It is important to note that this lawsuit was not about whether or not Infosys violated any visa laws, it was about whether Infosys retaliated against the plaintiff, Jay Palmer, for reporting visa misuse to executives at Infosys. The judge, Myron H. Thompson, allowed that although Palmer claimed he was mistreated and abused when he filed the internal whistleblower claim, because Palmer was an at-will employee, he, under Alabama law, has very few employee rights. In his decision, the judge referred to an Alabama Supreme Court decision that found, "Absent a contract providing otherwise, an employee may be demoted, denied a promotion, or otherwise adversely treated for any reason, good or bad, or even for no reason at all."
He went on to say, "Without question, the alleged electronic and telephonic threats are deeply troubling. Indeed, an argument could be made that such threats against whistleblowers, in particular, should be illegal. The issue before the court, however, is not whether Alabama should make these alleged wrongs actionable, but whether they are, in fact, illegal under state law. This court cannot rewrite state law."
Infosys’ continuing visa issues are causing concern for Infosys clients. While at first, the problem sounded isolated and related to a single whistle-blower, the continuing coverage suggests that the problem may be more widespread. Two recent events are increasing client concern. First, there was a CBS Morning News broadcast which seemed to support the original whistle-blower’s accusation. Then, Infosys itself disclosed that the U.S. Department of Homeland Security had found errors in a significant percentage of I-9 employment authorization forms.
To make matters worse, clients are puzzled by Infosys’ lackluster response to these charges. For sure Infosys has denied all charges, but this is not a sufficient response to clients that rely on Infosys to keep the lights on every day. Clients are worried about things such as: the impact on Infosys visa-carrying employees if Infosys does “lose” the whistle-blower case or is penalized for irregularities in its I-9 processing; and the public relations risk if Infosys becomes an election year scapegoat for American job loss. Clients want to understand what the worst-case scenario is and work with Infosys to mitigate potential risks. So far, Infosys’ response has been to re-iterate that there is no risk. However, a good sourcing and vendor management expert knows that he or she needs to do more than hope for the best.
So what should clients do? Well, I will tell you what some Forrester clients have been doing: putting contingency plans in place to insulate themselves and their companies from risk. This includes:
Asking Infosys for documentation about the visa status of all on-site employees.
Ever since offshore outsourcing became popular, employment visas — specifically the L1 and H1 visa — have been a source of debate. Indian vendors have needed them to make their offshore model work. US technical employees have feared them because they threaten to take away their livelihood.
Well, here we are in 2012 and the debate is hotter than ever. The offshore vendors, attempting to accommodate tech-savvy clients’ agility and context requirements, require even more staff onsite in the US. Simultaneously, the US government, struggling to combat unemployment, shore up the dwindling middle class, and get through the 2012 election cycle, is cracking down on visa enforcement. For Forrester clients, this situation has become problematic as their vendors fail to land resources for mission-critical projects and the clients themselves are then compelled to use local contractors to fulfill their onsite needs (one reason staff augmentation vendors are seeing a big uptick in growth).
Forrester clients are looking for more options when it comes to IT service and outsourcing providers, and there’s a new option available to them: domestic outsourcing.
For many years, India has been the answer for large companies that need to save money and increase their IT bandwidth. Indian vendors, in fact, revolutionized the IT services industry by delivering higher quality, lower cost services with a never-let-the-client-down mentality. Now, however, the market has “overcorrected” in terms of outsourcing IT work. Companies, whether they work with a pureplay Indian vendor such as Infosys or a US-based vendor such as IBM, have to buy the bulk of their programming talent from India.
Unfortunately, today, India is not the best delivery location for all IT work or for all companies.
First of all, India is overworked — some might even say tapped out. The excess demand for Indian labor has meant that clients are less satisfied with their offshore IT services:
Costs are escalating and narrowing the gap relative to US costs.
Employee turnover is too high.
Time-to-market is impacted by rework and time zone issues.
C-Player and “fresher” syndrome reduce quality and productivity further.
It is increasingly difficult to land offshore resources onsite using H1B and other visas.
Communications challenges persist and are exacerbated by the increasing use of Agile methods.
Last Saturday, I moderated a three-person panel at the Syntel annual customer meeting in Charleston, SC. While discussing the business's penchant for going around IT to buy IT solutions and services, an astute panel member and CIO said, “IT doesn’t solve business problems, so shadow IT proliferates.” This CIO has spent the last 18 months “consolidating shadow IT” in order to reduce costs and, perhaps more importantly, deliver solutions to the business more quickly and safely than the business can self-provision. Putting a halt to shadow IT is not to punish anyone or to reduce anyone’s power; it is to help the business innovate and grow. Not surprisingly, the key to this consolidation has been establishing a project management office (PMO) comprised of business analysts and project managers who are responsible for understanding business requirements and then developing and delivering solutions to meet those requirements as quickly as possible, using internal staff or third-party consultants or cloud solutions. While the consolidation is still underway, business leaders at this company are already beginning to view this as a value-added service rather than a punishment.
My colleague, Lutz Peichert, recently wrote a blog about the need for continuous risk management as it relates to your IT supplier base. While his focus was more on monitoring software and hardware vendor risk, I want to step up and remind IT services buyers the same thing. As I look at what’s happening in the steaming hot global IT services market and at the increased responsibility and access IT service providers are being given today (see Maintaining Vendor Management Vigilance In The Overheated Global Sourcing Market), I can’t help but worry that a single outage or bankruptcy or fraud or bad acquisition could spell disaster for a client. SVM executives have to continuously assess their IT services vendors’ viability and ensure that they have alternate options in case of vendor failure.
Publicly traded companies are obviously much easier to monitor due to their financial transparency; however there is still potential for fraud (as we saw with Satyam and Longtop Group) or M&A activity that may not be reported in standard sources, but that may leave customers in an unfavorable position. So, for “critical” suppliers in your portfolio, due diligence should include research outside of normal channels – social media, job websites, financial analysts (who have a pulse on M&A activity and the health of the suppliers’ revenues and profit margins).
I am very excited to be back at Forrester. After 2 years of being immersed in the customer experience, I can’t wait to share new insights and advice with both Sourcing and Vendor Management (SVM) clients and the vendors that service those clients. Together we can watch as the consulting and outsourcing market faces yet another tipping point driven by:
· The increasing sophistication of the Sourcing and Vendor Management executive.
· The expanding “cloud “and the need for service aggregation and integration.
· The democratization or consumerization of technology (if users can buy an application for 99 cents to optimize their commute to work, why can’t internal IT build an effective claims processing system with a million times that budget?)
· The increasing importance of contextual knowledge in the building and maintaining of enterprise IT systems.
· The need to expand the idea of global sourcing beyond India and China in order to efficiently harness the requisite contextual knowledge.
In returning to the analyst role, I plan to devote my energies to exploring this transformation and helping clients to exploit newly emerging global sourcing benefits.
Starting next week, I’ll do a weekly wrap up of the interesting things I learned/saw/analyzed during the previous week. This could include vendor briefings, conversations with clients and industry experts, industry events, earnings announcements and/or consulting assignments. On a more frequent basis, I’ll also try to blog specifically about inquiries that I answered during the day or week.