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Best-case, worst-case pandemic scenarios for India service providers

India's IT and business support services will be tested during that country's pandemic lockdown. Many workers are now operating out of their homes, but the government is still allowing some to work in offices.

The coronavirus pandemic has created possible best-case and worst-case scenarios for India IT services providers. 

India's best outcome is no interruption in critical IT, business and call center services. But some services, such as new product development, would likely be delayed.

The worst-case scenario will depend on how significant the COVID-19 outbreak in India is, according to industry analysts. On March 25, India instituted a 21-day nationwide lockdown.

Tech firms have been deemed essential businesses by the government, which allows some limited office staffing. But the government wants tech employees "as far as possible" to work from home. The lockdown ends April 14, and India wants to have the novel coronavirus controlled by that date.

The hope is "business as usual will continue," said Abhishek Singh, vice president of Dallas-based Everest Group, an outsourcing consultancy and research firm.

"But in the case of a major breakout, there is no limit as to what can happen," Singh said. "People might just stop turning up in offices." If that happens, "then there is a chance that service disruption might be huge," he said.

India IT service firms provide critical services to U.S. businesses. This includes business applications that run finance, HR and other corporate, back-end functions.

Security, privacy rules are challenges

Indian service providers follow U.S. security rules, such as HIPAA. Regulations like these can be restrictive.  

In the case of a major breakout, there is no limit as to what can happen.
Abhishek SinghVice president, Everest Group

"That's the reason why a lot of clients, when they do offshore work, don't allow smartphones onto the floor where the work is being performed," said Rahul Singh, a managing director at outsourcing consultancy Pace Harmon in Washington D.C. They don't want employees taking photos of desktop screens. The shift to work from home (WFH) will mean relaxing some restrictions, he said.

Prior to the pandemic, India's IT services market was expected to reach $14.2 billion in 2020, a nearly 7% rise, according to IDC. Much of the revenue comes from U.S.-based firms. Infosys Limited, which has about 250,000 employees, gets about 60% of its revenue from North America. Tata Consultancy Services Limited, with more than 420,000 employees, gets about 50% of its revenue from North America. 

Although India service providers are still conducting some work at the office, most employees are working from home. The IT service providers have had to equip employees with computers as well as deploy VDI and other remote desktops tools. In some cases, enabling employees to work from home required agreements with customers to shift the work location.

The WFH shift creates challenges for IT service providers, Rahul Singh said. Home networks can be spotty. "There's a lack of real true broadband capability in a lot of these places," he said.

This affects India service providers as well as captive centers, which are client-owned services facilities. Efforts are being made to also shift some work back to the U.S., Rahul Singh said.

Service issues no matter what

If the virus isn't controlled, the worst outcome involves rescinding the government's essential business exception, Rahul Singh said. Absenteeism rates could rise.

The analysts widely expect some degradation in the services, no matter what. But if offices are shut down, "supporting everyone from a home environment will get bad," Rahul Singh said.

Analysts are split on the ability of the so-called captive centers to handle the virus impact. One argument is that captive centers are in a good position, in part, because they are directly backed by a U.S. office. But others see vulnerabilities.

Thousands of captive centers set up by U.S. firms in India "are going to turn out to be really bad decisions," said Steve Hall, president of ISG EMEA and a partner of its digital advisory services. Many were created to take advantage of low-cost labor, Hall said. They don't have the business resilience they need to make it through this problem, he said.

Hall's advice for someone like an HR manager, who is getting application support and maintenance from India, is straightforward.

"One, are they safe?" said Hall, of the overseas providers. Do they have all the equipment, resources and data security, including a VPN, that they need? "Are those secured in the same way that my data would have been secured, as if it was sitting in your campus?" Hall said.

"I would have a quick little checklist that I would go through with my teams," Hall said.

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