Written by  
Dion Wiggins   Rita Terdiman   Debashish Sinha   Sujay Chohan   Rebecca Scholl
and  Frances Karamouzis.

9 June 2002

The tension between India and Pakistan has affected the IT outsourcing market in India. Gartner offers guidelines for how enterprises and vendors should deal with this situation — business continuity plans are key.

The possibility of war between India and Pakistan has flooded the worldwide media. The concern stems from the unprecedented buildup of troops by both sides on the Kashmir/Pakistan border, talk about nuclear weapons and fear of terrorists who may want to destabilize the region. Apart from the human and political crisis, these tensions have already hurt the IT industry in India, a leading destination for enterprises that want to outsource software development.

The media frenzy has created a great deal of confusion and spread some inaccurate information. The most basic thing to recognize is that the outcome remains uncertain — no irreversible chain of events has been set in motion. Therefore, enterprises and vendors should resolve to deal with the crisis methodically. They should base decisions on knowledge, not fear or media reports. Furthermore, they should keep things in perspective. Tension between India and Pakistan has persisted for more than 50 years. Although the present crisis is serious, the situation is at least familiar. Gartner believes India's software industry will continue to grow, although it must change some of its practices.

Nevertheless, not acting out of fear does not mean enterprises and vendors should ignore risks. The Sept. 11 attacks showed that the worst does sometimes happen. Crises like this one between India and Pakistan have the salutary effect of pointing out weaknesses in business continuity plans (BCPs), so enterprises and vendors should seize this opportunity to improve operations.

Gartner also believes that the current situation in India and Pakistan does not warrant enterprises pulling their projects out of India. Moving projects out of India will create more problems than this solves. So to help enterprises and vendors understand the situation and how they should respond to it, Gartner offers the following advice.

  • Confirm media reports — Reconfirm news with reports from your vendors. Be aware that political commentators and government officials in India and other countries may have their own goals and perspective when reporting news on this issue.

  • Overcommunicate — Gartner always emphasizes communications to address normal issues (cross-cultural issues, virtual team dynamics, organizational resistance to change, capability maturity differences as well as time zone and physical location). The present crisis calls for communication beyond the usual, including talking with vendors, clients and prospects as well as with the enterprise's employees. Apply the three "R's" — rigor, re-enforcement and repeatability — to reach all key stakeholders.

  • Revisit the offshore provider's business continuity plan — Understand the scope, limitations and risks of the offshore provider's BCP. Conduct an in-depth review of the components of the plan and ensure the enterprise is comfortable with the key elements: data, platforms, connectivity and succession planning for workers. The vendor should have done "dress rehearsals" to show proof of concept for its BCP. Work with the vendor to create customizations to its BCPs to meet specific needs on a company and project basis.

  • Reinforce standard redundancy planning — Enforce all approved policies and procedures at all sites in India and, of course, at the sites of enterprise service providers (ESPs). The most important aspects include timely execution and safe storage of backups offsite, physical security of personnel, facilities and technology equipment as well as data, logical security of technology access, and connectivity access for voice and data, including multiple carriers, alternate channels (routing of lines) and mediums (fiber, satellite).

  • Don't rely on country resources — All the largest ESPs in India and many smaller providers today do not rely on the country's infrastructure such as power and telecom. Thus, if some type of conflict occurs, the enterprise shouldn't rely on Indian resources either.

  • Understand the risks and limitations — Even the largest ESPs in India don't have complete backup as well as redundancy capabilities outside of the country. Many of the largest vendors have significant facilities outside of India, but they don't use them for backup or as redundant locations. No matter how comprehensive a vendor's backup capabilities outside India are, none of the backup sites can absorb more than a portion of its total employees. Therefore, the entire workload cannot be processed for every customer. Each customer should determine what its position will be in a worst-case scenario.

  • Review contracts — Where necessary, negotiate adjustments with vendors to accommodate the changing environment. Key areas include frequency of delivery, backup plans, location of version-control servers and rates for onshore staff. Enterprises may need new agreements to determine the level of service provided in the event of a disaster in India and which projects should be prioritized.

  • Work with the ESP — Crises are also opportunities to build stronger bonds. Enterprises should demonstrate their commitment to working through these issues with their vendors. Doing so will create a closer relationship that will work better for both. Voice concerns early and work with staff and the vendor to mitigate the risk. It's too early to pull out of India, so work to resolve issues, not to create new ones by moving projects out of India.
Advise to Vendors
  • Overcommunicate — Talking with clients remains crucial, of course. Vendors should also increase the level of internal communication to alleviate fears and update staff of the issues and concerns of clients, actions being taken to address these concerns, and changes in priorities and procedures.

  • Develop a comprehensive BCP framework — Include scenarios for site, city and country outages. Have backup plans within India (in different cities) and outside of India. Re-examine BCPs often, look for possible flaws that may have been overlooked or need revision due to a changing environment or client needs.

  • Address BCPs now — Proactively communicate BCP plans and updates to clients. Work with each client to review its BCP and provide customized options, if requested, at both the client and project level. Perform "dress rehearsals" to ensure the BCP can be executed and to identify flaws.

  • Be understanding — Show commitment to clients by working with them to resolve their problems. Understand the new perception that clients have and work with them to educate them on the realities. Explain to clients the view "from the ground" in India and reassure them of measures to mitigate risk. Ensure that they know the proximity of facilities to likely areas of conflict and all other relevant information so that they can make informed decisions. If clients are uncomfortable traveling to India, suggest they defer their visit and try to get the work done in other ways (for example, videoconferencing or meeting in other locations, such as Singapore, Thailand or Australia).

  • Deliver more often — Deliver intellectual property, including code, applications, data, passwords and documentation, more regularly to the client.

  • Prepare for project relocation — Maintain a limited development environment in a location outside of India for each major project, with all passwords and other access keys available to an executive sponsor outside of the region. Ensure that all intellectual property of the project is constantly updated and can be transferred smoothly to another project team if necessary. U.S. ESPs with offshore investments and enterprises collaborating across borders should use their U.S. business to mitigate risk.

  • Work with NASSCOM (National Association of Software and Service Companies) — The industry should display a common front to clients. A clear, concise message explaining the situation and how the industry as a whole is addressing problems will avoid conflicting statements emanating from different ESPs.

  • Obtain temporary work visas — Wherever possible, obtain visas, even if they are not needed at this time, for staff involved in critical projects (especially for the project leads). Having the ability to travel to the United States, Europe or other Asian countries to perform work on-site and ensure service continuity is a critical part of an ESP's BCP.

  • Understand all risks — Several other risks in addition to geopolitical concerns affect enterprises' offshore service decisions. Long term, success depends on ESPs alleviating this broader set of risks.

For more details and Gartner's analysis of the business issues, market implications and what has happened so far in the India/Pakistan crisis, read the complete report.


Also see China and India Can Both Win at Software Development, for trends, market comparisons, and advice about the Chinese and Indian software markets.

IT Trends in India, 2002
The most comprehensive evaluation of the India market ever published. Businesses in India, companies seeking to invest in India, and government agencies will benefit from the depth and breadth of this 200-page report.