American companies perceive a significantly higher information-security risk in working with offshore providers over those in the U.S.A. due to a lack of trust in the legal and regulatory environment in developing countries, according to a recent Booz Allen Hamilton survey.

Seventy-six percent of the respondents surveyed said that they perceive a greater security risk when working with an outsourcing provider located offshore as compared to providers located onshore (See Chart 1).

Information security is one of the top three important factors in selecting an outsourcing partner. It is ahead of financial strength, business stability and reputation.

There is also a growing concern about cyber crime, customer-data theft and network-security issues in an outsourced environment. Theft, misuse or damage of company systems and data remained the chief concern.

In fact, an increased awareness of security risks has led many companies to review their sourcing strategies. Fifty-eight percent of the respondents reported that they were aware of specific examples of outsourcing security failures or breaches of privacy. As a result, 63% said that their company has reviewed their overall sourcing strategies in the last year.