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Companies are becoming increasingly concerned with protecting their intellectual property and
ensuring that they do not infringe upon others‟ intellectual property. When outsourcing IT
development, companies need to be vigilant about any third-party software that is included within the
software being developed. Even open source code requires licensing of one sort or another. The
mistake of infringing upon another company‟s intellectual property can be very expensive to litigate
and can ultimately result in having to pay millions of dollars in licensing fees. Also, how do
companies ensure that whatever trade secrets or other IP a third party is exposed to is not stolen?
Intellectual property laws in many countries are lax. Can you imagine how to stop an employee of a
company in Asia from selling your trade secrets?
In this day of the Internet, where companies‟ Web sites and networks are being attacked daily by
various viruses and other hacking attempts from both within the United States and offshore, it is
important for companies to be ever vigilant. Especially when software is being developed offshore,
companies must ensure that backdoors are not left open to enable uninvited hacking. When software is
developed, quality assurance generally tests to ensure that it conforms to the design specification.
Exhibit 18.2 Verifying application software: Testing doesn’t versus shouldn’t.
Refer to Exhibit 18.2. The nonoverlap area to the left represents gaps between the design
specification and the actual program. However, equally important is the nonoverlap area to the right,
which represents features in the programs that were not in the original specification. While testing
reveals the area to the left, very few companies test for the area to the right. The area to the right
represents the potential backdoor for security weakness and hacking. Outsourcing providers usually
are known for their high level of quality; however, companies that outsource software development
have to be aware of the potential for security backdoors to be left open.
Organizational morale is an issue that needs to be addressed when contemplating outsourcing a
function or project. When an entire function (e.g., human resources management) is being outsourced,
frequently as part of the negotiations the outsourcing provider will hire the employees from the
company. However, while this may sound like a win-win situation for both companies, it also presents
its own challenges. Issues include potentially relocating transferred employees or reconciling the
benefits offered by the two companies. Even those employees who remain in the old company might
resent the treatment of any employees let go. In situations where projects require no layoffs but where
functions are outsourced, employees might resent that the contracted employees are earning more than
they are or are being given an opportunity to work on a new project that they would have preferred.