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Pitfalls in INTERNATIONAL OUTSOURCING AGREEMENT
How to Draft OUTSOURCING AGREEMENTS
Drafting International Outsourcing Agreements &
According to a recent study:
"Many organizations that are looking to establish global
outsourcing contracts and agreements with foreign providers
mistakenly believe that the terms and conditions are about the
same as onshore contracts with in-country service providers.
Outsourcing contracts structured with in-country providers will
not work as templates for global outsourcing without significant
most important areas to protect through an international outsourcing
agreement are security and confidentiality, legal compliance, fees and
payment terms, proprietary rights, auditing rights and dispute resolution
The greatest risks for global
outsourcing come from some emerging countries that are early
entrants into outsourcing, or those that have limited
governmental support, ineffective legal enforcement, immature
infrastructure, limited or nonexistent intellectual property
protection or lack an understanding of foreign laws.
The most important areas to
protect through an international outsourcing agreement are
security and confidentiality, legal compliance, fees and payment
terms, proprietary rights, auditing rights and dispute
resolution process. The legal systems in some countries might
claim jurisdiction over any agreement regardless of which system
the agreement specifies, and that other legal systems might have
little respect for intellectual property rights.
How to Draft an Outsourcing
Agreement, BPO Agreement, KPO Agreement?
Outsourcing is the
contracting out of a company's non-core, non-revenue producing
activities to specialists. It differs from contracting in that
outsourcing is a strategic management tool that involves the
restructuring of an organization around what it does best - its
Two common types of outsourcing are Information Technology (IT)
outsourcing and Business Process Outsourcing (BPO). BPO includes
outsourcing related to accounting, human resources, benefits,
payroll, and finance functions and activities. Knowledge Process
outsourcing (KPO) includes outsourcing related to legal,
paralegal, and other highly skilled activities.
A good outsourcing
agreement is one which provides a comprehensive road map of the
duties and obligations of both the parties - outsourcer and
service provider. It minimizes complications when a dispute
arise. However, many a times people neglect to pay attention
while drafting an outsourcing agreement.
properly drafted Outsourcing Agreement saves a lot of problems later on.
Lawyers who understanding the work culture and legal environment of both the
jurisdictions should be involved in drafting Outsourcing Agreements.
Before finalizing an
outsourcing agreement, the terms should be thoroughly discussed
and negotiated to avoid any misunderstanding at a later stage.
Lawyers from all applicable jurisdictions must be consulted
before finalizing any outsourcing agreement.
Before signing an
the following must be properly addressed:
Duties and obligations of Outsourcer
Duties and obligations of service provider
Security and confidentiality
Fees and payment terms
Applicable law to outsourcing agreement
Term of the Agreement
Events of Defaults and Addressing
Dispute Resolution Mechanism
Location of Arbitration
Number of Arbitrators
Interim measures/Provisional Remedies
Appeal & Enforcement
Be aware of local peculiarities
Survival terms after the termination of the outsourcing
Every outsourcing agreement
should be modified as applicable under different circumstances.
One brush should not paint all the painting. Offshore
outsourcing is a legal minefield and many companies are not
aware of the problems it causes. Of the 18 areas in a standard
contract 15 need to be changed if the outsourcing provider is
Examples of Business Process Outsourcing Agreements
Services. An international real estate services
A US large mortgage bank outsourced various customer facing
and back office business processes to an Indian service
Accounting. Outsourcing accounting, tax, and financial
functions for a variety of companies.
Institution. A US financial institute outsourcing
agreement with an Indian party.
Insurance. A group of major insurance and financial
services companies formed a global outsourcing arrangement
with a supplier.
Processing. Outsourcing agreement for the submission and
processing of provider claims and the ongoing operation and
support of such system.
Operations. Outsourcing agreement for all the data
processing systems and back-office operations.
Processing. Outsourcing employee benefits, such as pension
plans and ERISA compliance.
Services. Outsourcing call center operations including
answering consumer inquiries, and assisting buyers in the use
Management. Outsourcing human resources management
functions, including hiring, benefits processing, payroll
processing, and employee counseling.
Representation of a web-based start-up providing travel and
travel-related services in outsourcing its ticketing
fulfillment and customer support operations.
Utility. Procurement and logistics outsourcing
Outsourcing agreement between a US company's data processing
systems, including financial, customer usage and billing
Banking Operation. Outsourcing of core bank operations,
including the receipt and processing of customer applications
& Legal Research.
Outsourcing agreement between a US Company and an Indian
Contact us for Outsourcing
Services Offered by Us
Madaan & Co. has helped
many companies in drafting their international agreements,
including joint venture agreements, outsourcing agreements,
distribution agreements, sales agreements, agency agreements,
franchising agreements and various other agreements.
Our lawyers include those admitted to bar in the
United States of America and India. They have
undertaken legal maters in the USA, India
and Europe. They understand the multi-cultural
multi-jurisdictional aspects of international business
in this age of globalization. They include those educated
at Harvard Law School, Harvard University in the
USA and premier universities in India.