As U.S. government officials meet with Infosys' attorneys to present what they've so far uncovered in their ongoing visa fraud investigation, the Indian outsourcing services provider faces stiff monetary and other penalties as a consequence of its actions. But what could be even more consequential is the opportunity cost it is likely to suffer over the near term, and possibly longer.
The opportunity cost - an economics term that refers to what is lost as a result of making the choice to take one course of action instead of another - will at some point be calculated in terms of the business Infosys will have lost due to its choice to vilify Infosys employee and whistleblower Jay Palmer rather than take immediate action to rectify the violations he reported internally to the company in October 2010.
One need only consider what Infosys stands to lose in the health care sector alone to see the enormity of the problem the company is facing. Lucas Mearian at Computerworld has done some excellent reporting on the massive IT costs the health care industry in the United States is facing in the course of transitioning from the ICD-9 medical coding system to ICD-10, as required by federal government regulations. To give you a sense of the magnitude of the expense, consider that the cost and complexity of the transition are being widely compared to what it took to fix the Y2K bug. Here's an excerpt from one of Mearian's reports:
ICD-10 will also require staff at hospitals and private physician practices to map and load codes, redo system interfaces, redevelop reports and retrain users. System changes will impact nurses, physicians, patient financial services, case management, utilization review and other staff, in addition to coders. "It is the kind of thing that people have compared to Y2K. It's probably more complex than Y2K. There's a lot more human interaction than Y2K," said Robert Alger, vice president of health plan IT strategy at Kaiser Permanente.
Deloitte Consulting is advising its clients to take the Y2K comparison seriously:
The size and scope of ICD-10 implementation is projected to be expansive, complex and costly: Industry analysts characterize ICD-10 as potentially exceeding Y2K with respect to cost and impact, so advance planning is essential.
To put a dollar figure on the cost of the transition, the U.S. Department of Health and Human Services estimates the cost to providers alone will be a whopping $3 billion through 2017. That means that just as outsourcing services providers saw dollar signs when the Y2K transformation began, they're positively giddy over the prospects of the ICD-10 transition. In fact, just yesterday India's Business Standard reported that the big outsourcing providers in that country are already salivating:
Healthcare regulatory reform in America might prove another Y2K opportunity for the Indian information technology industry Tata Consultancy Services (TCS), Infosys, Wipro and HCL Technologies are among those looking at healthcare with a new focus. Their largest revenue contributor till now, banking and financial services, is under pressure. According to a Technology Holdings survey, U.S. healthcare had seen around 100 deals in the past 25 months, an average of four deals per month, aggregating $20 billion. The U.S. healthcare payer business process outsourcing (BPO) market was $1.2 billion in 2011, and will continue to grow at a 15-20 per cent compounded annual rate (CAGR) over the next three years. A Technology Holdings survey says the payer outsourced services market will grow nine per cent CAGR to reach nearly $15 billion by 2016.
So you can see why all those salivary glands are flowing. But of Infosys, Wipro, TCS and HCL, only Infosys is in the precarious position of potentially losing its share of the booty. That's not to say that Wipro, TCS and HCL haven't engaged in the very same sorts of visa and tax fraud as that being investigated by the U.S. government in the case of Infosys. I wouldn't be a bit surprised if they, and any number of U.S. companies that also rely heavily on the H-1B visa program, all have dirty hands.
The difference is that Infosys is suffering the misfortune of being the lone company with an employee who summoned the courage to blow the whistle on the illegal activity. That put Infosys in the position of having to make a choice. It could either embrace Palmer, and rectify the violations at next to no cost; or it could treat him as a pariah and go about its business of shamelessly violating U.S. immigration and tax law. Tack on the opportunity cost of the choice it made to whatever damages the U.S. government's criminal case and Palmer's civil case will extract, and it's plain to see why it's always better to just do the right thing.