How To Identify And Mitigate Security And Intellectual Property Risks When Outsourcing Offshore

Abstract: Independent Software Vendors and Application Service
Providers have become increasingly pressured by external market
conditions when developing an offshore sourcing strategy, yet few
properly understand and mitigate the associated security and intellec-
tual property risks.

Independent Software Vendors (ISVs) and Application Service Providers (ASPs) are challenged to innovate faster
than their competition, to deliver their products to market first, to supplement their development teams, and to re-
balance their development priorities in order to accelerate revenue generation. Management and investors want to
lower total cost of ownership and increase shareholder value. Due to the standardization of software engineering
processes, pricing pressure, margin compression, and increased enterprise customer expectations (total cost of
ownership and return on IT investment), software companies are faced with the task of accomplishing more complex
product development with limited and decreasing time frames.

Today, Independent Software Vendors and Application Service Providers are valued most for their intellectual prop-
erty; for many of those, IP is much more valuable than any physical asset. Software companies derive more than 80
percent of their market value from intangible, digital assets and intellectual property. Yet, despite the advanced
measures currently used by security-conscious software companies, often they have no way of knowing if—and
when—intellectual property is leaving their own corporate networks. The Internet has destroyed forever the concept
of controlling information flow, and the security perimeter is on its way to extinction. This lack of insight is of great
concern because insiders are responsible for more than 80 percent of all corporate security breaches today. Former
Attorney General John Ashcroft estimated in October 2004 that intellectual property theft costs U.S. companies
about $250 billion a year.

While outsourcing software development, maintenance, and quality assurance, software companies should mitigate
many risks before they arise—during and after the outsourcing relationship. The majority of intellectual property
thefts occur through electronic media. Most vendors work for more than one client and therefore, an offshore devel-
opment company may carry risks. In addition, the physical security of the development center where the distributed
team is located is of utmost importance when it comes to protecting intellectual property.

So what does the security group at a typical software company need to do in order to keep intellectual property safe
and reduce risks of exposure?

This white paper discusses the existence of security and intellectual property risks and vulnerabilities in the distribut-
ed software development environments. It also addresses critical business issues to mitigate those risks with quali-
fied risk management techniques, team collaboration tools, and, critically, a verification and audit process resulting in
greater visibility of the software development process, improved security, and reduced risk of IP exposure.

According to McKinsey research, in 2005 only four to eight percent of large offshore software engineering markets
worldwide were related to packaged software R&D, and most of that growth has occurred in the last four to five
years. Global outsourcing is an option vendors are exploring to remain cost-competitive as operational difficulties
associated with global outsourcing are gradually removed. Regardless of size and maturity, offshore outsourcing is
on the agenda of early staged, mid-sized, and large software companies for many different reasons. More and more
software companies turn to product outsourcing, i.e. hiring external vendors to develop a product for the company.

The increasing reliance on IT outsourcing raises serious concerns about the theft of intellectual property as well as
the very integrity of the source code being produced. It is ironic that the countries with a history of intellectual proper-
ty theft and those that companies trust the least with binary code are the places where software code development is
being sent. Of greater concern is that many of these countries have known terrorist networks and there is no way to
ascertain the security risk of the workers used to produce software components for mission critical applications.

Currently companies have inadequate safeguards in place to deter “insider” programmers, who abuse the trust and
privileges granted to them, from intentionally harming source code with almost total impunity. The threat to the
source code has never been greater; the current level of awareness by organizations is not commensurate to that
threat. It is the critical priority for companies today to expand security measures from simply addressing system op-
erational weaknesses to include unprotected software developmental vulnerabilities.

Security is a major concern when it comes to outsourcing. Below there are some practical steps that ISVs and ASPs
can follow to protect their Intellectual Property and reduce risks while outsourcing software development offshore.

Computer security means to protect information against unauthorized access, modification, or destruction. It deals
with the prevention and detection of illicit acts by users. This definition implies an understanding of the value of the
information in order to develop protective measures.

A rough classification of protective measures in computer security is as follows:

1. Prevention: Measures to prevent illicit damage, change or theft of information
2. Detection: Measures to detect the who, when, and how of an information attack
3. Reaction: Measures to allow recovery of original information
Strong measures can only be created from an understanding of how they can be compromised:

1. Confidentiality: Preventing unauthorized disclosure
2. Integrity: Preventing erroneous or malicious modifications
3. Availability: Preventing unauthorized withholding of information and resources
4. Authentification: Verification of user identity
5. Authorization: Validation of authorized access to sensitive systems
The object of computer security is to protect valuable and sensitive organizational information from attacks while
making it readily available to authorized users. While the information revolution opened new avenues for IT, it also
opened new possibilities for crime.

The diagram is a schematic of the types of security threats that exist.

Security
Threats

Natural
Human
Disasters

 Floods
 Fires
Non
Malicious  Earthquakes
Malicious
 Hurricanes

 Human Error
 Ignorant Personel
Insiders Outsiders  Trainees

 Disgruntled Employees  Hackers
 Malicious Employees  Crackers
 Contract Programmers
 System Administrators
 Computer Operators
 Security Personnel
 Digital Terrorists

While planning, designing, executing, and evaluating offshore outsourcing initiatives, software companies should
consider the following attributes and business categories of security that cover both the internal and external envi-
ronment:

1. Intellectual Property Rights
2. Network Security
3. Physical Security
4. Information Protection
5. Personnel Security
6. Customer Privacy
7. Disaster Recovery
8. Business Continuity

This is one of the most critical concerns in an offshoring scenario. Security of IP encompasses facilities, assets, ser-
vices, and personnel. The four legally-defined categories of intellectual property are:

1. Patents When software organizations register their inventions with the government--a process that
can take more than a year until applicants gain the legal right to exclude anyone else from manufac-
turing or marketing it. Patents cover tangible things. They can also be registered in foreign countries,
to help keep international competitors from finding out what your company is doing. Once you hold a
patent, others can apply to license your product. Patents last for 20 years.
2. Trademarks A trademark is a name, phrase, sound, or symbol used in association with services or
products. It often connects a brand with a level of quality on which companies build a reputation.
Trademark protection lasts for ten years after registration and, like patents, can be renewed. But
trademarks don't have to be registered. If a company creates a symbol or name it wishes to use ex-
clusively, it can simply attach the TM symbol. This effectively marks the territory and gives the com-
pany room to prosecute if other companies attempt to use the same symbol for their own purposes.
3. Copyrights Copyright laws protect written or artistic expressions fixed in a tangible medium - nov-
els, poems, songs, or movies. A copyright protects the expression of an idea, but not the idea itself.
The owner of a copyrighted work has the right to reproduce it, to make derivative works from it (such
as a movie based on a book), or to sell, perform, or display the work to the public. Businesses don't
need to register their material to hold a copyright, but registration is a prerequisite if they decide to
sue for copyright infringement. A copyright lasts for the life of the author plus another 50 years.
4. Trade secrets Formula, pattern, device, or compilation of data that grants the user an advantage
over competitors is a trade secret. It is covered by state, rather than federal, law. To protect the se-
cret, a business should prove that it adds value to the company - that it is, in fact, a secret - and that
appropriate measures have been taken within the company to safeguard the secret, such as restrict-

ing knowledge to a select handful of executives. Coca-Cola, for example, has managed to keep its
formula under wraps for more than 117 years.
IP protection can be achieved by using the following security controls, but companies also need to work with a local
legal representative to ensure total protection.

1. Agreements - should be structured through different levels of security confidentiality agreements
both at organization and individual level.
2. Country Laws - different government laws pertaining to IP, piracy, and copyright should be ad-
dressed. Companies should carefully evaluate the country's track record and compare the laws on
the books with the actual implementation and enforcement of those laws.
3. Physical Security - See the Physical Security section
4. Legal Compliance - companies should structure the contract so the offshore supplier is liable for
any breach of confidence.
5. Compliance with Security Standards - companies need to ensure the compliance of the supplier
organization with accepted International Security Standards like BS7799, ISO 17799, Safe Harbor,
CoBIT etc.
6. Employee Contract - companies should also specify in the contract that (supplier) employees can-
not work for a competitor for a fixed duration after leaving the present company. They cannot divulge
confidential data to competitors, press, or make other non-approved disclosures.
7. Security Management Training - the supplier should have a process in place for periodic Infor-
mation Protection training for all offshore employees.
Contractual Security

When going offshore, there are several concerns that arise with regard to the legal considerations that cannot be
avoided. Trade secrets are also a major concern to software companies, as competitors can easily embezzle them.
Hence, tight security measures should be employed in software development projects especially while going off-
shore. The following procedure explains in detail the measures to be taken to ensure that the offshore vendor pro-
vides enough contractual security.

Legal Bindings

The vendor should sign at least two agreements for the purpose of securing intellectual property.

1. Non-Disclosure Agreement
2. Consulting Agreement
Non-Disclosure Agreement

 NDA is an agreement stating the terms of confidentiality, which should be signed by the vendor at
the time of discussing the project feasibilities.
 The offshore vendor should sign a Non-Disclosure Agreement (NDA) to assure confidentiality of in-
formation even before signing the contract.

 Companies should ensure that the NDA provided by the vendor states what exactly the vendor
means by confidential.
 The NDA should clearly express how the vendor will ensure the confidentiality of your information.
For example, the NDA should state one or more of the following points in the agreement to ensure
confidentiality:
 Shall not remove any proprietary or other legends or restrictive notices contained or included in any
confidential information provided by Company
 Shall not copy any confidential information
 Shall not disclose any confidential information to a third party without the prior written consent of the
Company hereto
 Agrees to keep secure and maintain the confidential information of Company in a manner no less
protective than that used to maintain the confidentiality of Recipient's own confidential information,
but in any event not less than a reasonable degree of care; and agrees to use the confidential infor-
mation only for the purpose of this agreement
 All employees of an offshore vendor should also sign a similar NDA with their company when they
join. This also ensures that any customer data is confidential. Thus proprietary information stays with
the best possible IP protection methods.
Consulting Agreement

 The offshore vendor should sign a consulting agreement at the time of entering into a partnership.
This agreement should cover all IP-related issues:
 The contract should capture and secure all prices, costs, and other business benefits sought.
 The contract agreement should also state the definition of confidential information and what it in-
cludes. For example, confidential information can include any one or more of the following:
 Proprietary computer software, programs, applications, and processes, including documentation,
trademarks, or service marks
 In-house personnel, financial, marketing, and other business information, and manner and method of
conducting business
 Strategic, operational, and other business plans and forecasts
 Information provided by/regarding in-house employees, customers, vendors, and other contractors
 The ownership right for the software that is developed by the offshore vendor should remain your
property and the offshore vendor should not own any right for the intellectual property of the devel-
opment work.
 The vendor should agree that any and all work produced that becomes copyrighted, or that may be
the subject of an application for copyright protection, will be considered a work made for hire.
 Contractual relationships should include provisions for inflation, taxation, and changes in corporate
structure. Finally, the companies need to plan for the end of outsourcing/vendor relationships.

Enforceability of agreements: Although intellectual property and commercial law are practiced throughout the
world, software companies should seek relationships with U.S. entities that have real U.S. assets. Companies should
consider provisions for alternative dispute resolution such as arbitration and mediation as well.

Trade secrets

Trade secrets are kept as secrets through the law of confidentiality. Software companies should ensure that all those
who are given access to their confidential data at the offshore location understand the conditions of confidentiality
and are bound by them.

The majority of the violations in Intellectual property rights occur through electronic media. Most vendors work for
more than one client and thus the offshore development center cannot be expected to be a dedicated facility for a
particular client alone.

Also, the offshore development center (ODC) is usually connected to the client’s systems through International pri-
vate leased line circuit (IPLC) or a virtual private network (VPN) through the Internet. It is very important that the
functioning of networks at the offshore location is closely examined to ensure that the network links are secure and
less vulnerable to access by unscrupulous personnel.

A good infrastructure is the basic requirement for successful execution of the project, and addresses the responsibili-
ties of suppliers for establishing, maintaining, implementing, administering, and interpreting organization-wide net-
work security policies, standards, guidelines, and procedures.

1. Dedicated Infrastructure - suppliers should use customer-dedicated racks for housing servers,
routers, switches, and firewall products.
2. Network Security - the supplier system administrator will be responsible for performing network se-
curity risk assessments, preparing network security action plans, evaluating network security prod-
ucts, and performing other activities necessary to assure a secure network environment.
3. Network Device Security - a high-level of security for network devices is necessary to prevent un-
authorized access.
The following steps can be undertaken to ensure network security at the vendor’s premises.

Security for Network links

 The vendor’s network should be protected by a firewall and only authorized IPs should be allowed to
access the systems at the ODC after proper verification and authentication.
 The user name and password used to access the systems at the ODC should be changed periodi-
cally to avoid hacking.
 The ODC’s servers should be monitored periodically for any form of unauthorized access.
Security and access to customer's proprietary data

 It is preferable that the vendor follows a formal procedure for requesting access to the network. The
request should be originated by the Project Manager stating the users who are allowed to access the
network.
 The system administrator should ensure that the security guidelines stipulated by the client are en-
sured at all times.
 The vendor should have secure methods for information transfer between the ODC and the cli-
ent/onsite team.
 When data transmission is done over the internet, it is a must to ensure that data is encrypted and
sent through a VPN tunnel.
Code Security

 Important information such as source code should be well-protected with passwords and access
codes and should be made available only to the members working on that project.
 Proper version control procedures should be deployed to keep track of the changes done in the
code.
 The code should be backed up using an appropriate media, and erased from development, test,
and deployment servers after completion of the project.
 Backed-up data should be kept in a secure access area in the ODC as well as in a well-defined
offsite storage area to protect from natural disasters.

Physical security of the development center is of the utmost importance when it comes to protecting intellectual
property. Determining the flow of information into, through, and out of a vendor’s company should be considered.
Protection against the physical threats that can jeopardize vendors’ infrastructure assets should also be considered.

These are some typical best practices to ensure physical security:

 Access Control - access control ensures only authorized personnel enter client-servicing areas.
Round-the-clock security presence with:
Photo ID cards
Access controlled by swipe-card system with different levels of access. Biometric access if
necessary. 24/7 operations require a higher degree of security measures. Any employee
who forgets to carry the ID card, has to sign in at the reception desk and wait for a supervi-
sor to identify and escort him/her inside. Entry/exit tracking system should monitor move-
ment on each floor and each individual room.
All visitors should register at the Security Office, sign and obtain a temporary ID badge.
Their movement within the facility should be restricted and an authorized company employ-
ee should escort them.
Critical facilities are secured with electronic lock devices.

All important/confidential information is kept secure in lockable file storage systems.

 Limited Access - employee access is restricted to their areas of work.
 Access by other supplier personnel is denied to the client's floor - isolated from the supplier
LAN
 Dedicated Facility/Work Area - physical security of facilities is managed through dedicated floors. If
this is not required, then logical isolation is sufficient to prevent inappropriate and unauthenticated
access.
 Camera Surveillance - round-the-clock surveillance to monitor any breach of security
 Movement Restriction - no printouts, photocopies, computer media, or computing devices are al-
lowed to enter or leave the floor. All housekeeping staff will clean the floor under the direct supervi-
sion of a Supervisor for the shift.
 Separate Meeting Rooms - provision for separate meeting rooms to facilitate interaction with team
members, vendors, and other external personnel.
 Recreation Facilities - separate recreation area
 Fire Safety - fire alarms, electronic-grade fire-fighting equipment, emergency measures. Fire drills,
regular upkeep of fire equipment, and fire insurance policies should not be taken for granted in off-
shore supplier agreements.
The following steps can be undertaken to ensure physical security at vendor’s premises:

Work area security

 Round-the-clock security should be provided for the work premises.
 It is a must for a company to know and monitor the physical movements of its employees. It would
be nice if surveillance cameras were used for this purpose.
 Entry to the development premises should be restricted with the help of access cards. It would be
nice if methods such as fingerprint or facial recognition, in combination with access cards, are em-
ployed.
 Developers belonging to different projects should be grouped into different bays/cabins.
 It would be nice to have a separate, locked work area for customer’s team.
Procedures for storing and protecting printed project materials and files

 All the printed materials and files should be catalogued and stored in a location protected by lock-
and-key system.
 Every employee should be provided with a cabinet where all details/paperwork related to the project
can be stored. It should be ensured that the employees lock their cabinets for safekeeping before
they leave their workplace.
 The Project Manager should be responsible for storing and locking all the materials after their usage
and accessibility should be given only to the authorized personnel. He/She should also ensure that
the place is protected from fire, rodents, insects, etc.

Authorization levels or mechanisms to control access to customer’s development tools and proprietary in-
formation

 The Project Manager should authorize only a select few members of the project for accessing devel-
opment tools and other proprietary information.
 Other members should not be authorized to have access to complete information about the pro-
ject/engagement. In case of any information requirement, they should approach the authorized team
member who will provide the needed information.

Offshore supplier organizations generally use different information protection methods for different clients based on
the business needs of the engagement. An Information Protection Agreement is a “must have” and should cover the
basic areas mentioned below in detail.

 Vulnerability Assessment - is the analysis of information assets within an organization to deter-
mine their sensitivity to outages. This includes identifying technical and non-technical weaknesses
that may impact the secure environment.
 Technical Criticalities - use of scanner tools like SATAN, ISS etc. to identify and document the
technical weakness of the IT systems.
 Non-Technical Weaknesses - interview custodians of information assets for non-technical and pro-
cess weaknesses and document the same.
 Data Access - in order to protect important and confidential data, information should be exchanged
strictly on a need-to-know basis. Monitor and restrict access to source data. All workstations should
have disabled CD and floppy drives to disallow any wrongful data transfer. All Team managers and
associates should have secure workspaces including secure lockers. Note: In general, person-
nel/customer/sensitive data should not reside in the offshore location. However, for faster execution
of work, a working copy with specific information can be made available to offshore employees. In-
formation Protection can still be ensured through various means such as encrypting the data, creat-
ing "test" data with all the sensitive fields randomized or deleted, etc.
 Data Audits - perform data security audits and report test results. Several types of audits common
in offshoring exist, including: periodic audits, surveillance audits, penetration testing, etc. Clients can
hire an independent local third party to audit and certify compliance.
 Data Security - appropriate access control procedures should be established, which include logging
individual access/actions. Use of firewalls is critical for segmenting and protecting information and
limiting access.

Companies currently have inadequate safeguards in place to deter “insider” programmers who abuse the trust and
privileges granted to them, from intentionally harming source code with almost total impunity. The threat to the
source code has never been greater - the current level of awareness by organizations is not commensurate to that

threat. It is the critical priority for companies today to expand security measures from simply addressing system op-
erational weaknesses to include unprotected software developmental vulnerabilities.

Personnel security addresses the potential risk from current and past employees and factors to mitigate the risk. Dili-
gence in this area is as appropriate as in onshore engagements. Government rules and regulations in different geog-
raphies also play a major role.

For example: The level of detail allowed under US law while conducting Background Checks is significantly different
from that of Indian, Philippine, or Russian laws. What could be considered a breach of personal privacy in one coun-
try could be viewed more tolerantly elsewhere.

1. Background Checks - companies should conduct detailed background checks for all employees
working with sensitive information based on client requests. Some best practices include:
2. Routine Checks: Verification of educational qualifications and reference checks of fresh candidates
by HR.
3. Reference Checks: For all the employees with prior experience, reference checks with previous
employers.
4. Integrity Checks: An external intelligence agency is employed to do a thorough background integrity
check for those employees who would be handling sensitive data. The parameters for these types of
checks could include family background, personal character, social status, and criminal records.
5. Special Checks: Specific checks like drug screening are carried out in accordance with the client's
criteria and business needs.
6. Non-Disclosure/Confidentiality Agreements should be mandatory for all employees to sign in a
standard format.
7. Hardware Limitations - suppliers do not have access to the CD drives or master application. Read,
write, use, and modify access can be granted according to the specific function of the employ-
ee/team.
8. Internet Usage - access to the Internet is locked to the specific applications the employee uses.
Some kind of Internet monitor tool/mechanism can also be used.
9. Usage of Mobile Commuting- restricted usage. Not allowed in the actual work area.
10. Housekeeping - all housekeeping staff are required to work only under the supervision of the Shift
Manager/Supervisor.

In the course of conducting business, companies collect and process personally identifiable information of their cli-
ents, suppliers, business partners, shareholders, employees, and other persons (Personal Data and Information).
Personal Data and Information is information that can be used directly or indirectly to identify a living individual. Per-
sonal Data and Information may include sensitive categories of information, such as information that reveals racial or
political opinions, ethnic origin, religious beliefs, trade union membership, health or sexual orientation (Sensitive Per-
sonal Data and Information).Maintaining the integrity and confidentiality of Personal Data and Information, and han-
dling it correctly is important.

The privacy policy/agreement should be in place between client and service provider, and should describe how the
outsourcer and its employees should handle Personal Data and Information.

1. Backups - tape backups should be taken at pre-specified schedules as specified in the company
security guidelines or per the need of the client. The backups could be full backups at specific peri-
ods or daily incremental backups. Routinely, it is a combination of the two.
2. The backup tapes have a unique number for easy identification.
3. The tapes are stored as archives in off-site locations as part of disaster recovery plans. Note: It is
important to have scheduled backups not only for data residing within the organization but also for
data that is being carried around. For example: Data residing within laptops of various key people in
the organization
4. Data Recovery - provision of adequate tools to recover data quickly.
5. Non-storage of production code/data in an offshore location - all sensitive data should reside on
a dedicated server at the client site. However, all project management records, quality tracking doc-
uments, project related documents, source code, dummy development/working environment, should
reside on the local server at the offshore facility and should have a backup and recovery policy. Pe-
riodic testing and verification of the test results ensures compliance.
6. Disposal of sensitive data - sensitive data should be disposed of using a shredder on a daily basis.

Before building a Disaster Recovery and Business Continuity Plan, companies should perform an objective risk as-
sessment to identify business-critical applications and/or processes. Once potential risks are defined assigning ac-
countability is crucial. Determine 'what is the expected degree of assurance' and 'what level of backup is required' as
these points will decide the required number of resources and associated costs. Ensure implementation of the policy
by a combination of preventive measures and technical controls.

The Disaster Recovery and Business Continuity Plan should cover these areas:

1. Risk assessment - identify the areas of offshore risk. Keep in mind that some risks are geography-
specific. The recent SARS epidemic in Singapore, Hong Kong, and China is an example of this type
of risk. Other examples include: civil disorders, outbreak of war, breakdown of public services (basic
amenities like water, electricity, and roads/access) are a few. A key component of the assessment is
to determine the maximum allowable downtime.
2. Restoration process - outline, in the event of a disaster, how quickly the services can be restored.
Identify the minimum and maximum time schedule for restoration of basic services versus full ser-
vices.
3. Testing of Back-up Systems - regular testing of back-up arrangements should be organized to en-
sure they meet the requirements of the Business Continuity Plans.
4. Audits - develop an audit calendar to verify the accuracy of data and process restoration.

5. On-going monitoring - indicate a schedule for plan reviews (quarterly, bi-annual, annually). Plan to
also monitor compliance and preparedness through mock disaster recovery drills. Be sure to reform
the plan as needs change.
6. Managing the alternate site - identify levels of disaster and plan for backup sites. Include one al-
ternate site for low-level disaster and another secondary site for a higher level of contingency.
7. Key resources - planning for movement of key resources/personnel is crucial. One best practice is
to have two sets of equally prepared teams located in two different geographical areas to dilute the
risk.
8. Post Disaster Communication - outline a communication plan that includes who to contact and the
plan of action in the event of an emergency. This plan should also include details for any external
communication.

A strong information protection policy, network security architecture, and a good disaster recovery and business con-
tinuity plan are not enough. To ensure compliance it is necessary to have an offshore presence for periodic audits
and ongoing monitoring. It is often advantageous to have a third party with a local presence who can perform the role
of a Security Organization. The primary objective of a Security Organization is to ensure a secure work environment.
Whether the offshore presence is with a third-party or an expatriate from the client organization, responsibilities
should include:

1. Conduct 'Information Risk Assessments' on prospective supplier organizations
2. Develop, monitor, and review information protection and security policies
3. Ensure compliance
4. Monitor security risks and threats
5. Determine responsibilities of key individuals
6. Approve and support the implementation of Information Security Management System and infor-
mation security initiatives
7. Review security incidents through reports presented by the SO covering status of security implemen-
tation, update on threats, results of security reviews, audits etc.
8. Security coordination within company and with external regulatory authorities

Before signing the contract

 It is preferred that companies inspect in person the physical premises where the software is to be
developed. This is an opportunity to check the security firewalls of your vendor’s buildings and work
area, the organization culture, the functioning of their networks, etc.

 It is preferable that companies interview the team members who will work on your project. This will
help you to judge the level of reliability on the employees.
 Companies should also check the offshore development company’s employee retention rate and al-
so if the outsourcee is working with any competing organizations. If such is the case, companies
should ensure that the teams working on their competitors’ projects do not have access to their pro-
ject information.
 Any method of information transfer such as e-mails, fax, electronic file exchange, instant messenger,
on-line meetings, paper documentation etc, should have their parameters for usage defined.
 All activities that will have to accompany the end/termination of the contract should be defined while
negotiating the contract terms and conditions. This includes the retrieval of any methods and proce-
dures, documents, source and executable code, company proprietary security or development
standards, code libraries, and data stored offsite.
 Contracts should be framed, such that the offshore company takes responsibility for the actions of its
employees.
 Companies should ensure that any project-related work is not subcontracted without approval. This
will help in protecting a sensitive application or data within the application.
 Companies should ensure that the vendor agrees not to use any of the company’s confidential in-
formation for purposes like sales, marketing, or demo without prior approval.
After signing the contract

 Companies should ensure that only data related to the performance and reliability of the system is
transmitted over the Internet. Information from the database should not be disturbed during any part
of the project.
 Companies should make sure that the system experts make modifications to the system only after
obtaining prior permission.
 Exchange of passwords and other critical information should be made secure by encrypting them.
 Companies should ensure that the data used during testing does not expose the real information of
the customers.
 Unwanted data should be destroyed.
 Companies should ensure that the vendor reports on replacements of team members, if any.
 Companies should ensure that an original copy of the source code is maintained.

Renat Khasanshyn is CEO of Altoros Systems, LLC. www.altoros.com

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How To Identify And Mitigate Security And Intellectual Property Risks When Outsourcing Offshore

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