Outsourcing: Key Legal Issues and Contractual Security

Outsourcing: Key Legal Issues and Contractual Security

Efficiency in current processes and cost arbitrage is the new mantra in corporate worlds. And the nearest shop I could relate on the said term is Outsourcing sectors. Companies ensure the best driven forces are in place to imbibe the newest culture and keen to keep their businesses running and for that they resort for the best Outsourcing industry in place.

Outsourcing industry has been one robust and booming industry in the recent times, with many varied and rapid developments seen in and around their relevant work cultures. Irrespective of any industry, and their business requirements, servicing clients with the best of services has been of paramount opinion around all and everywhere.

A part of your operations / process dealing / client management is passed over to this arena for a better functioning and satisfaction of the firm. Key points at this front would be the services provided at lesser and effective prices and time save on non-core processes.

Having said that, tactical planning is of prime importance in here to a better handling on risk areas with respect to data handling, unnecessary fees and charges caused and the avoidance of the same. Outsourcing Industry analyse their statistics and are ranked on the root of the Service Levels maintained throughout the contractual period.

Early in its growth outsourcing was often viewed as a way for a business to focus on its core competencies while allowing more specialized service providers do other jobs. An area additional of high-speed communication and technology has made the world increasingly smooth  and outsourcing has become one of the primary instruments used to cut application development and maintenance costs, deal effectively with the peaks and valleys of software demands, and to make the greatest productivity gains.

Companies considering Outsourcing must consider the various legal aspects involved and create a strategy to minimize the risks of moving work. Not only do the intellectual property laws differ from country to country, a company must also take into consideration the nature of the judicial system, the various local laws, and the rules that would be imposed if the main firm would become bankrupt. In addition, the company should ensure that an accepted dispute resolution procedure is expressly set out, including where the case would be filed should a conflict arise.

A critical part of any successful outsourcing arrangement is an all-inclusive contract. For example, IT managers have reported getting less out of technology and product outsourcing contracts then hoped for, because of a lack of willingness on the part of vendors to perform beyond the service levels identified in the contract. It is critical to identify performance metrics that are up-to-date and contain meaningful incentives for the supplier to conscientiously meet the terms of any agreement.

The contract should explicitly include:

  1. Detailed specification for the work to be performed
  2. Schedules and deadlines for projects and penalties for failing to meet these deadlines
  3. Quality guarantee to measure development performance that comprehensively defines the standards that needs to be met. Payment terms and cycles
  4. The method of conflict resolution when the company does not satisfy the required quality level or deadlines
  5. The contract’s term, such as when it expires and conditions of renewal

The requirements of any outsourcing contract must be devotedly crafted because the contract provides the basis for any deal and acts as a binding factor between the two parties involved. The business relationship is less likely to be undermined if the two companies, which will be inevitably from different backgrounds, intentionally construct a plan that will jointly carry out the business goals of both parties.

Employers should centre on how the security and confidentiality of information will be maintained during the term of the outsourcing relationship. To ensure the confidentiality of employee data, the agreement should:

  1. Identify confidential information and specify the types of security mechanisms the employer expects of the provider.
  2. List applicable privacy laws and regulations.
  3. Require the provider to limit access to authorized personnel; keep security patches current; install, maintain, and monitor computer systems that require passwords, use encryption technology, and contain firewalls and similar intrusion detection systems.
  4. Specify that the provider shall be liable for complying with applicable laws and regulations and the breach of its confidentiality or security obligations.
  5. Provide employer access to and control over the information; impose restrictions on how information may be used, transferred, or shared; and grant employer audit rights over the provider’s security procedures.