Slipping out of our grasp

Abusy week on the outsourcing front.

On Thursday, Infosys Technologies, one of India's largest outsourcing firms, said it's setting up a consulting subsidiary in Fremont, -- a move intended to deflect U.S. ire about jobs and services traveling abroad but which in fact merely makes it easier for Infosys to attract new clients in this country.

A day earlier, none other than IBM said it's acquiring one of India's top outsourcing firms, Daksh EServices, making Big Blue a major player in the exporting of business functions. The deal was announced 40 years to the day after IBM unveiled its first general-purpose mainframe computer, highlighting how much U.S. industry has changed in the interval.

Then we have Bank of America telling employees on Monday that it will cut 12,500 jobs as part of its merger with FleetBoston Financial while work proceeds on creation of a new facility in the Indian city of Hyderabad. America's second-largest bank expects to begin processing customer transactions at the site by next month.

"Outsourcing is a fact of life," said Cynthia Kroll, a UC Berkeley economist. "These things all show that it's likely to continue."

This week's developments also underline the fact that as more services are shipped overseas, the scope of U.S. consumers' personal data traveling the globe is exponentially growing -- accompanied by an increased risk that confidential information could fall into the wrong hands.

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"The risk exists and must be dealt with," said Beth Givens, director of the Privacy Rights Clearinghouse, a San Diego advocacy group. "The fact that security breaches may not fall under U.S. law is a grave concern."

There's the rub. Strict U.S. privacy laws have no jurisdiction abroad, leaving overseas workers essentially on the honor system when it comes to safeguarding consumers' data.

In establishing a new subsidiary in this country, India's Infosys says its plans to hire as many as 500 employees over the next three years should defuse resentment about jobs and services leaving the country.

"As we are looking to expand our global footprint, we are creating local employment in the countries where we operate," Nandan Nilekani, Infosys' chief executive officer, told reporters in Bangalore.

Be that as it may, the vast majority of the company's more than 20,000 workers remain in India, and that's where the bulk of contracted work will be done. Five hundred jobs may be created in this country, but those jobs will be focused almost exclusively on sending work abroad.

IBM, meanwhile, is hoping to give Infosys a run for its money by acquiring Daksh. A purchase price hasn't been disclosed, but published reports place the amount at anywhere from $150 million to $200 million.

Daksh, with 6,000 employees, already provides call-center operations and other services for a variety of corporate clients, including Amazon.com, Sprint and Citigroup.

"This is a very important part of what our customers are looking for," said Ian Colley, an IBM spokesman. "We need to be in India to be able to do that."

This deal is significant for a number of reasons, not least because IBM's stature will be seen by many potential outsourcers as conferring a new level of legitimacy on the practice. Companies that might have been sitting on the fence may now feel that if it's good enough for Big Blue, it's good enough for them.

At the same time, the acquisition of Daksh represents an if-you-can't- beat-'em-join-'em turning point for U.S. business. With the tide of outsourcing taking on tsunami proportions, IBM may be the first of a series of American heavyweights cutting themselves in for a piece of the action.

Daksh is also interesting because the company recently opened a subsidiary in the Philippines to handle overflow from its India operations, making it an outsourcing firm that also outsources.

At BofA, the first workers will take their seats next month at the bank's new Hyderabad facility, operated by local subsidiary, Continuum Solutions. If all goes as planned, 500 Indian workers will be on the job by December and as many as 1,000 by next summer.

The Hyderabad facility will handle support and transactions for most of the bank's major divisions, including consumer and corporate accounts.

Scott Scredon, a BofA spokesman, said customers' privacy is assured because Continuum workers "will be required to sign an agreement to keep all data confidential."

He added that "when they join Continuum, the first training provided is information security and the code of ethics."

Kroll, the Berkeley economist, is right: Outsourcing will continue. This week's developments involving Infosys, IBM and BofA show that the trend is clearly picking up pace.

Your name, your address, your Social Security number, your bank account number -- safeguarded by little more than a confidentiality agreement and a code of ethics.

How safe do you feel?