'Outsourcing jobs can pose security risk'

With as many as 3 million software industry jobs poised to move offshore by 2015, the US industry needs to protect itself against potential security risks, including economic espionage, the Chairman of the National Intelligence Council has warned.

"While outsourcing of business functions is a growing trend that helps firms cut costs, it also brings potential security risks -- particularly when outsourcing involves entities owned and operated abroad," Robert L Hitchings, Chairman of the Council, which is the US intelligence community's think tank said while addressing the International Security Management Association in Scottsdale.

He said besides outsourcing, writing computer codes abroad and importing hardware entails security risks.

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"As many as 3 million software industry jobs could move offshore by 2015, with 70 per cent of these jobs moving to India, 20 per cent to the Philippines and 10 per cent to China," he said warning that corporate leaders need to be on guard.

"Corporate leaders need to be on guard and know who their business partners are and what security measures they have in place to protect against loss, whether through unintended leakage of proprietary business information, deliberate thefts of intellectual property, or outright economic espionage," Hitchings said.

While technology now allows companies to have their most sensitive proprietary computer code written overseas, he said the inability of companies to sufficiently vet the personnel involved in these activities can create a "significant vulnerability."

American openness to foreign trade and investment and its commitment to global information-sharing through academic and scientific exchange, Hitchings said unfortunately leave US technologies highly exposed to foreign exploitation.

Pointing out that collectors last year employed a wide variety of techniques in their quest to circumvent US restrictions in the acquisition of sensitive manufacturing processes, he said foreigners often through middlemen acquired sensitive US technologies simply by requesting them via e-mail, faxes or telephones.

Globally networked information systems, he said, also present vulnerabilities, and even the simplest computer threats pose real risks for US companies' business interests and proprietary knowledge.

Information technology, said Hutchings, has become as important to the US economy as oil, and the growing dependency of the US on foreign IT "raises concerns for corporate as well as national security."

"For instance, half of the world's laptops, one quarter of desktop computers, and half of all PC motherboards are now assembled in China. Taiwan is now responsible for about 70 per cent of all semiconductor production for hire -- producing chips designed and marketed by others," he said.

This growing US dependence, said Hutchings, makes US IT firms vulnerable to interruptions of foreign-built critical components, whether intentional or accidental.

"Foreign supply disruptions could suspend US firms' deliveries of finished systems within only a few days, as most carry limited inventories."