The Australian Newspaper is reporting that Australia’s National Australia Bank (NAB) could lose millions of dollars from the Satyam corporate fraud scandal.
It is reported that as part of its international off shoring program designed to save costs, NAB made significant investments into training, transition costs and redundancy.
The Satyam corporate fraud has rocked India and with admissions of exaggerating assets and profitability on the company’s balance sheets.
It may well turn out that NAB’s disastrous foray into off shoring, will actually cost it more than if they had of kept critical IT support and staff in Australia. Qantas is also reported to have been exposed to Satyam via its USD$135 million in contracts.
This case serves as a good example of what can go wrong with off shoring, and what off shoring legal agreements need to accommodate, in this rapidly developing area of IT Law.
Some things that can be included in off shoring agreements to assist customers are:
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Performance guarantees – such as security deposits, to assist the transition of services to another provider with reduced disruption; and
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Local placement of critical infrastructure in Australia, with some maintenance being provided off shore.
Legal agreements may not provide absolute protection from corporate fraud or failure, but they can go some way to minimising the distruption and loss to business.
