The domestic business process outsourcing industry will spend around Rs 900 crore (Rs 9 billion) on various data protection measures in the current fiscal as security seems to have become the most important issue for the industry.

"With the burgeoning of third-party vendors and the on going hue and cry over outsourcing, security has emerged as the actual issue. It is also now the single biggest investment area for most BPO vendors," said Sunil Mehta, vice-president, National Association of Software and Services Companies.

Expenses will come in different areas like physical and external security, employee security, network security and an industry level security.

Though currently companies spend only 3-5 per cent of their revenues on security, at a 35-40 per cent year-on-year increase it is the fastest growing expenditure area.

Network security is the largest spending area with companies splurging on the latest anti-virus and firewall software.  BPO firms are also equipped with back-up systems and contingency measures in case of an emergency.

Employee security is another important issue, companies now run background checks on their staff and conducting regular screening and constant quality checks. "Employees are not even allowed a scrap of paper in the work bay, the client networks they work on are completely separate from the office network thus creating an effective data-lock," Mehta said. Industry level measures include the setting up of cyber labs to educate the law enforcement agencies on the nature of cyber crimes.

Local BPO players are keen not to lose out on any part of the current outsourcing wave due to security concerns.

"We go to great lengths to ensure physically, technically and logically independent customer networks that are constantly monitored. We also hold an enterprise wide BS 7799 certification and have strong back-up and contingency measures that are regularly monitered," said Akshya Bhargava, chief executive officer and managing director of Infosys Progeon.

Even as the detractors of offshoring are still playing up the job loss issue, industry observers have pointed out that issues like data protection and security will emerge more important clinchers in future.