Below is an interesting article on the risks involved in outsourcing...
Worth thinking about!

Janet Krueger

January 6, 2003

Experts See Vulnerability as Outsiders Code Software


As American companies increasingly move their software development
tasks out of their own offices to computer programming companies here
and abroad, new concerns are being raised about the security risks

Some of these concerns over the practice, known as outsourcing, are
being raised by people with an obvious self-interest for example,
programmers who have seen their livelihoods shift to less expensive
operations overseas. And the companies providing outsourcing services
argue that they take all necessary precautions to limit risk. But the
question of whether the booming business in exporting high-tech jobs
is heightening the risk of theft, sabotage or cyberterrorism from
rogue programmers has been raised in discussions at the White House,
before Congress and in boardrooms.

"I can't cite any examples of this happening but what that means is we
haven't found any," said James Lewis, director of the technology
program at the Center for Strategic and International Studies in
Washington. "It's clearly a temptation for people, and it's a
concern," he said.

While operations in some countries, like the United States, Britain
and India, are considered generally safe for such software
outsourcing, nervousness is beginning to grow at companies and in the
government about the possibility of abuse by hackers, organized crime
agents and cyberterrorists in nations like Pakistan, the Philippines
and Russia.

To Mr. Lewis, the potential for problems in the software design
process goes beyond the earlier trend of running back-office
operations and call centers in other countries.

"The banks have done a fairly good job of insulating themselves," he
said, keeping their call centers overseas from being able to engage in
unwanted activity. But letting outsiders work on the software that
runs businesses and financial institutions could be opening up a world
of trouble, he said. "You're going to have code that will be written
in countries like India and China," he explained, "and no one's going
to know what's in it."

David McCurdy, a former congressman and executive director of the
Internet Security Alliance, an industry group, said that although he
considered himself a "free trader" with a strong belief in the
benefits of global commerce, he believed that the risk from offshore
outsourcing was "the most serious of the industry-based issues that
this country faces."

The issue has been discussed quietly at the highest levels of
government, said Howard Schmidt, vice chairman of the president's
critical infrastructure protection board. At the White House, he said,
"this has come up as part of a broader discussion of how do we get
trust and reliability" in computer systems.

He said, however, that the issue was outsourcing itself, not simply
the overseas kind, and cited spies like Aldrich H. Ames and Robert
Hanssen as examples of how Americans could do just as much damage to
the nation from within as outsiders could. "Irrespective of where it's
done, we need to make sure that our code is clean and protected across
the board," he said.

It is easy to see why companies find the economics of outsourcing
compelling; cost savings can be 25 to 40 percent. Forrester Research
of Cambridge, Mass., predicted in a recent report that the
acceleration in outsourcing would result in 3.3 million American jobs'
moving offshore by 2015, an exodus reminiscent of the tide of American
blue-collar jobs that moved to East Asia in the 1980's. Forrester
estimates that 70 percent of these jobs will move to India, 20 percent
to the Philippines and 10 percent to China.

Patrick P. Gelsinger, the chief technology officer of Intel, said the
cost of one engineer in the United States would pay for the services
of three Indians, four Chinese or five Russians. But he said he was
not concerned about the potential for mischief within his own
company's overseas software development. The software is reviewed, he
said, to avoid surprises.

"Is it possible?" he said. "Sure, it's possible. Is it a unique risk
there? No, it isn't."

Offshore outsourcing got its trial run in preparations for the Year
2000 changeover, when government and industry had to check every line
of software for glitches that could make computer networks and even
building security systems shut down at 12 a.m. on Jan. 1, 2000.

Much of that work was done overseas, and although industry experts
warned that foreign programmers might commit crimes or lay the
groundwork for terrorism, no evidence of sabotage occurred, said Jay
Ehrenreich, senior manager for cybercrime prevention and response at
PricewaterhouseCoopers, the consulting firm. After that experience, he
said, many companies felt comfortable sending software work overseas,
and now such bespoke programming is done around the world.

Programmers say the confidence is not justified.

"Anyone tells you that `offshoring' computer systems does not put the
infrastructure at risk is lying," said Ken O'Neil, a programmer who
lives on Long Island. He and other programmers talk of "sleeper bugs"
that could be set to go off at a later date, or back doors that would
let intruders in to shuttle money around, steal fractions of a penny
from millions of transactions or shut down the system entirely. They
warn of risks from political instability, organized crime and terror
cells, and even from governments that might demand the ability to spy.

Such talk could be dismissed as the grumblings of disgruntled
white-collar workers who have seen their high-paying jobs move
elsewhere. "Nobody is going to cry for people who make $75,000 or
$100,000 a year," said Marc Alan Fink, who lost his programming job
more than a year ago.

In fact, some of the newly expressed concern is part of a long-running
and acrimonious fight by programmers to hold on to their jobs in the
face of relaxed immigration standards for technical workers and
increased outsourcing. They attack the rise in special visas for
immigrant engineers, known as H1-B visas, and the trend toward sending
jobs overseas.

The companies that provide software outsourcing services say that they
take rigorous precautions to ensure that their employees are
trustworthy and their code is secure.

Arup Gupta, president of Tata Consultancy Services, an Indian company
that is part of a conglomerate, said he had gotten worried calls from
clients after the recent F.B.I. raid on Ptech, a software company in
Quincy, Mass. The agents were looking for connections between the
company and Yasin al-Qadi, a Saudi Arabian financier suspected of
financing terrorism, but early speculation in news reports focused on
questions about whether the company, which provides software used by
many government agencies, including the F.B.I., was secure.

Mr. Gupta assured his clients that his company used exacting
background checks and multiple reviews of company-written software
based on industry standards. "With all these in place, we can
guarantee, basically, that the code we deliver will be bug-free and
will perform to specifications and will not have holes in it," he

He said he could speak for only his own company, but he added that
since the Sept. 11 attacks, security fears and economic troubles had
shrunk his industry and brought about the consolidation of the major
Indian software houses. "The top five or six companies, you can be
assured that they are conforming to these standards," he said. "The
others, you cannot be sure but maybe they are."

United States technology services companies are also expanding their
overseas outsourcing offerings. Electronic Data Systems provides
outsourcing services in 93 "solution centers" that it has opened
around the world since 1990. Paul D. Clark, the chief information
security and privacy executive for the company, said E.D.S. understood
that the threat of sabotage in outsourcing is real. He said, "To say
that it isn't is to deny the realities." That is why the company
adheres to security and testing standards wherever code is written, he
said, adding, "whether it's India or Indiana, it doesn't make any

The company is careful about what code it releases to which countries,
said Dan Zadorozny, president of application services for EDS
Solutions Consulting; some federal government work, he said, is done
only in the United States and Britain, and "we're not going to move
that anywhere." But E.D.S. insists that its standards are high enough
that its outsourcing sites offer "a more secure environment than you
can provide yourself."

Some programmers, however, argue that reviews are less thorough than
companies say. "If code runs, I assure you, nobody ever looks at it,"
said one, who said conducting a line-by-line review would be like
having an electrician tear into walls to check wiring even though the
lights were working. "It never gets done in practice."

Mr. Ehrenreich, the crime consultant, said that it was up to companies
to demand that kind of security, even if it cost more. He recalled a
case in which he was asked to investigate the possibility of illegal
activity on an Indian outsourcing contract and discovered that it was
nothing more than run-of-the-mill overbilling fraud.

What struck him, however, was that the company had no idea how big the
problem was. He said far-worse crimes could have been committed
without anyone's knowing. "The risk was there that more could have
been done," he said. "They clearly did not have the controls in place
to mitigate it, control it."

"You can outsource the work," he said, "but you can't outsource the

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