The impact of India's pandemic lockdown on IT outsourcing
In part one of a two-part series, we're identifying the major factors affecting enterprises with India IT outsourcing providers during the COVID-19 pandemic.
Enterprises with IT outsourcing provider relationships in India are grappling with the realities of the current national lockdown, technology access, procurement restrictions and other limitations. Given the financial challenges many companies are experiencing today, outsourcing certain functions and processes may make more sense than ever, but the recent events dealing with the COVID-19 pandemic offer a wakeup call regarding certain operational dependencies on offshore, India-provided services and corresponding operational, contractual and financial key considerations. We'll explore the major impacts in a two-part article, beginning with setting appropriate expectations, evaluating force majeure in contracts, adjusting business continuity (BC) and disaster recovery (DR) plans and arming providers with the necessary tools to perform IT outsourcing duties.
Maintain realistic expectations
It's important to remember that no IT service delivery model is immune from this unprecedented circumstance, whether outsourced offshore or onshore, supported internally or via global in-house captive centers. While there are some significant challenges on a case-by-case basis, overall steady-state operational disruptions have not yet been profound. That being said, service level degradation may occur during this period. It is realistic to expect more operational disruptions as the constraints and challenges persist -- whether due to service locations, resource contentions with other supplier customers or personnel issues regarding wellness and availability.
Partnership and well-functioning governance with IT outsourcing are critical during this period. While the provision of service and corresponding service levels and service level credits should not be contractually limited or compromised, from a practical, operational perspective, both suppliers and enterprise customers must "lean in" to work out the best outcome. Exercising contractual rights of termination, imposing SLA credits and other contractual remedies are either not practical given the timeframes and operational dependence or will come off as tone-deaf and will be counterproductive, given the mutually difficult event that must be addressed together.
Force majeure considerations with IT outsourcing
Some enterprise customers may be dealing with the pandemic as a force majeure event in their deals. To the extent that is the case, suppliers and providers may have rights to exit agreements, provide lesser service or renegotiate certain service provisions. While this may sound appealing to enterprises at first glance, this is not something that most customers want or can withstand -- they need the current services and want to maintain reliability and quality of service with security and service continuity.
Well-crafted agreements will not have a pandemic as a force majeure event, thereby obligating the supplier to continue the full scope of services at the requisite service levels. While these practical, operational realities must be considered, enterprise customers can use this to their advantage when pressing for continuity and quality of service over other supplier customers who do not have this favorable provision in their agreements. And even if it were a force majeure event, there should still be contractual obligations to reinstate the services in accordance within specific timeframes -- typically in three days' time. If they are unable to do so, then the client should be able to terminate the agreement without incurring costs or penalties.
BC and DR plans
BC and DR plans are typically focused on facilities, thereby not addressing service disruptions caused by an individual's inability to perform work. This can create immediate problems and must be directly addressed with suppliers, including the need to modify their respective plans to focus on the service and service levels themselves -- not the location from where they are provided. Moving forward, plans should include cases where facility and logical assets are still in place, but location and workforce availability are otherwise compromised.
Ensure providers have necessary tools and access
Enterprises that are currently engaged in IT outsourcing may be in a better position than those with global in-house centers, as there is typically more service elasticity to bring incremental support to bear and many suppliers have been aggressively addressing issues. While it can be challenging -- especially for service providers in offshore locations like India -- those providers with the most effective operations have already made preparations and are implementing plans such as making significant equipment and software purchases, training employees to work effectively from home, ensuring appropriate Wi-Fi connectivity is in place and enabling VDI, VPNs, Citrix and multi-factor authentication to address security.
Physical security is more difficult to address, with some providers installing alarm systems and other measures for employees working from home. Another consideration is physical workspace. Many Indian outsourcing employees may be living in spaces with multiple family members -- finding a quiet space to perform highly complex work has been a challenge in certain circumstances. Suppliers can only do so much to enable this unprecedented work-from-home situation.
Unfortunately, there are also circumstances where certain supplier resources lack the necessary bandwidth or tools to perform their jobs and must be monitored closely. If handled well, being able to tap into hundreds of thousands of resources at larger IT outsourcing providers can be a major mitigating factor for enterprises, but only if they have the tools to do their jobs. Some suppliers got in front of the situation by preordering thousands of more laptops, Wi-Fi dongles and other key gear. Others are having to play catch-up.