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February 1, 2009

Wanted - New home for outsourced labor

The Satyam  disaster has uncovered some of the darker sides of off shoring repetitive functions to low cost labor markets.

You would think the warning signs were there earlier with a rash of warnings about identity theft. (2005 ) (2006 ) (2008 )

Unfortunately, as seems to have been common during the "free market rules" days of the economy, none of this mattered so long as it didn't unnecessarily dent the profits of the companies doing the off shoring.

The problem has always been the triple threats of rampant corruption, a lack of corporate governance, and a desperate need for ready cash. The result - Satyam and a crisis of confidence.

We seem to be finally coming around to understand that cheap labor is okay - as long as it comes with the controls and governance that we should expect with the sensitive data that they are managing.

Will there be a public outcry? Not yet.

Will the corporate start to look for higher levels of governance and corporate ethics? Not if it threatens profits.

But this is nearing the tipping point of a evaporation of trust. And as we saw recently with the failure of gigantic financial institutions like Lehman Brothers, an evaporation of trust can be fatal to any industry, any company, and any nation - no matter how big and powerful they are now.