The hidden risk in outsourcing overseas

An equal, if not larger, amount of effort is directed towards the misappropriation of an even more valuable asset: intellectual property.

Hypercompetitive entrepreneurs, both inside and outside the United States, have discovered that a lot more money can be made by stealing state-of-the art product designs, new drug formulas or software and entertainment products than was ever possible with stolen credit cards.

While the loss of a credit card is momentarily irritating and inconvenient, the loss of breakthrough technology such as a next-generation aircraft wing has broader economic consequences. It also affects a far greater number of people than does consumer fraud. And due to our almost delirious desire to outsource everything we once held near and dear, the incidence and threat of valuable data loss is accelerating.

Unfortunately, it is rarely reported. As such, companies will continue to trade off the benefits of low-cost labor for the risks of intellectual property theft without fully understanding the implications.

Based on indisputable historical evidence of the illegal manufacture and sale of black-market products, from tennis shoes to watches to software, do we really believe that the schematics of our next-generation processor will remain safe and secure, given that they are being transmitted overseas in digital form?

Historically, data privacy and protection have been administered using manual means. Our companies trust us, as long-term valued employees, with their most sensitive and valued information. Often this data takes the form of next-generation product designs and differential advantages.

But today--for near-term cost savings, access to emerging markets and, in some cases, the availability of talent itself--Western European and American businesses are contracting people they have never met, living in countries with no concern about proprietary data or this nation's innovative edge. I commend India for taking steps to tighten laws around data protection for foreign work handled by Indian companies and for instilling harsher penalties for data breaches. However, there are far more countries that do not regard data protection a priority.

The loss of proprietary design data for next-generation technologies--whether they take the form of pharmaceuticals, electronics, manufactured goods, computer software or entertainment products--posses a real threat to the future well-being of our economy.

Perhaps our government should enact legislation that mandates the protection of these assets when they are transferred overseas as a part of on outsourcing effort. While it is one thing to offshore the cheap jobs, it is another thing to breed low-cost competitors for the future.