Many US companies have successfully outsourced their work to Indian firms and have benefited from the cost savings and expertise that these firms offer.  However, there are outsourcing nightmares that have led to lawsuits, trust issues, and reputation.  It is important to note that while these examples highlight some of the challenges and risks associated with outsourcing to India, they do not represent the entire outsourcing industry in India.

Satyam Computer Services Scandal

In 2009, Satyam Computer Services, one of the largest IT companies in India, was involved in a financial scandal where the company’s founder and chairman admitted to inflating the company’s profits and revenues over several years. This led to a loss of trust among Satyam’s clients, including several US companies, who had outsourced their work to the company.

IBM India Layoffs

In 2017, IBM India laid off around 5,000 employees, which led to protests from the employees and criticism from labor unions. Many of these employees had been working for IBM for several years and were suddenly laid off without any prior notice or compensation.

Infosys Visa Fraud

Infosys, one of the largest IT companies in India, was fined $34 million by the US government for visa fraud. The company had allegedly used B-1 visas, which are meant for short-term business visits, to bring in employees who were working on long-term projects in the US. This led to a loss of trust among Infosys’ clients in the US, who had outsourced their work to the company.  Learn about other outsourcing nightmares here.

Call Center Fraud

In addition to the outsourcing nightmares, India is known for its call center industry, which provides customer support services to several US companies. However, there have been several instances of call center fraud in India, where employees of these call centers have scammed US customers by posing as IRS agents or tech support executives. These scams have led to a loss of trust among US customers and have tarnished India’s reputation as an outsourcing destination.

Data breaches

In recent years, there have been several cases of data breaches in India, including those of US companies operating in India. These cases have led to a loss of trust among customers and have tarnished the reputation of Indian IT companies. For example, in 2019, Wipro, one of the largest IT companies in India, reported a data breach that had affected some of its clients.

Intellectual property theft

Another problem is Intellectual property theft Indian IT companies, and can lead to a loss of revenue and reputation for US companies operating in India. In 2019, T-Mobile, a US telecommunications company, sued Huawei, a Chinese telecom equipment maker, for allegedly stealing its technology through its Indian subcontractor.

Communication barriers

Subsequently, communication barriers can arise due to differences in language, culture, and time zones, and can lead to misunderstandings and delays. For example, a survey conducted by the National Foundation for American Policy found that communication barriers were one of the main challenges faced by US companies outsourcing to India.

The survey conducted by the NFAP found the following results:

Language barriers

Additionally, the different accents, vocabulary, and grammar used in Indian English were cited as the main reasons for communication breakdowns.

Cultural differences

Different communication styles, business practices, and work ethics were cited as the main reasons for cultural misunderstandings.

Time zone differences

The time differences between the US and India can create difficulties in scheduling meetings, coordinating work, and communicating in real-time.

Technology issues

Poor internet connectivity, IT infrastructure, and software compatibility were cited as the main reasons for technology-related communication breakdowns.

These outsourcing nightmares highlight the need for US companies outsourcing to India to address communication barriers through effective communication strategies, cultural sensitivity training, and technology solutions. By addressing these challenges, US companies can improve their communication and collaboration with Indian outsourcing partners, and enhance the overall success of their outsourcing initiatives.

Quality issues

Besides these problems, quality issues in Indian IT companies can lead to delays, cost overruns, and a loss of trust among customers. In 2013, the US State of Minnesota terminated a $26 million contract with Indian IT company, Infosys, due to quality issues and missed deadlines.

Labor disputes

Additionally, labor disputes are common in India and can be difficult to resolve. In 2012, workers at a Coca-Cola bottling plant in India went on a hunger strike to protest against alleged labor violations, including low wages and unsafe working conditions. Similar labor disputes have occurred at other US companies operating in India.

Discrimination

Discrimination based on race, gender, caste, or religion is prevalent in Indian workplaces, including those of US companies operating in India. In 2016, a former employee of Cisco Systems filed a lawsuit against the company, alleging that he had faced discrimination based on his caste. Similar cases of discrimination have been reported at other US companies operating in India.

Employee fraud

Another nightmare, is employee fraud in Indian workplaces, including those of US companies operating in India. In 2017, an employee of Infosys was arrested for allegedly stealing confidential information from the company and sharing it with a rival firm. Similar cases of employee fraud have been reported at other US companies operating in India.

Sexual Harassment

In recent years, there have been several cases of sexual harassment in Indian workplaces, including those of US companies operating in India. These cases have led to lawsuits, protests, and a loss of trust among employees and customers.

Infosys Sexual Harassment Case

One example of a high-profile case of sexual harassment in an Indian workplace is the case of former CEO of Indian IT company, Infosys, Vishal Sikka. In 2018, an anonymous whistleblower accused Sikka of sexual harassment, alleging that he had harassed a female employee of the company. The allegations were investigated by Infosys’ internal complaints committee and an external law firm, but no evidence of wrongdoing was found.

However, the case led to a public outcry, with many employees and activists accusing the company of not taking sexual harassment seriously. The case also highlighted the need for stronger laws and policies to protect women from sexual harassment in Indian workplaces.

This case is just one example of the many cases of sexual harassment that occur in Indian workplaces, including those of US companies operating in India. Sexual harassment is a widespread problem in India, and can be difficult to report and address due to social stigma, legal loopholes, and cultural attitudes. US companies operating in India have a responsibility to ensure that their workplaces are safe and free from sexual harassment, and to take prompt action to address any complaints or allegations of harassment.

US human resources should be aware outsourcing nightmares which include several laws in India that relate to employment, labor rights, and workplace safety. Some of the key laws include:

The POSH (Prevention of Sexual Harassment)

This law in India is a legal framework that aims to prevent sexual harassment in the workplace and provide redressal for victims of harassment. The law applies to all workplaces in India, including those of US companies operating in India, and requires employers to establish an internal complaints committee (ICC) to receive and investigate complaints of sexual harassment.

Under the POSH law, sexual harassment is defined broadly and includes physical contact and advances, making sexually colored remarks, showing pornography, and other unwelcome conduct of a sexual nature. The law also prohibits retaliation against employees who file complaints of sexual harassment.

To avoid outsourcing nightmares, US human resources should be aware of the POSH law if they are operating in India, as they have a legal obligation to comply with the law and provide a safe and harassment-free workplace for their employees. US companies should establish an ICC as per the POSH law and ensure that all employees are aware of their rights and the complaints mechanism available to them. US companies should also ensure that they have adequate policies and procedures in place to prevent and address sexual harassment in the workplace. Failure to comply with the POSH law can lead to legal and reputational consequences for US companies operating in India.

The Industrial Disputes Act, 1947

This law governs the resolution of industrial disputes and lays down procedures for conducting strikes, lockouts, and layoffs. It also provides for the formation of works committees to promote communication between workers and management.

The Employees’ State Insurance Act, 1948

This law provides for the establishment of a self-financing social security system for workers in India, including those working in US companies operating in India. It provides benefits such as medical, disability, and maternity benefits to employees.

The Factories Act, 1948

This law regulates the safety, health, and welfare of workers in factories. It provides for provisions such as safety and health measures, working hours, leave, and other conditions of work.

The Payment of Wages Act, 1936

This law regulates the payment of wages to employees, including the calculation of overtime, deductions, and fines.

These are just a few of the key laws that US human resources should be aware of when operating in India. It is important for US companies operating in India to ensure that they are in compliance with all relevant laws and regulations to avoid legal and reputational risks.

Outsourcing Nightmares Minimized

It is important to note that while these examples highlight some of the outsourcing nightmares and risks associated with human resources in India, they do not represent the entire Indian workforce or the HR industry in India. Many US companies have successfully managed their human resources in India and have built strong relationships with their employees and customers.

To find out more about reducing the risk of outsourcing nightmares, contact us.