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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 modification."
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 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 core competencies.
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.
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.
signing an Outsourcing Agreement
the following must be properly addressed:
obligations of Outsourcer
obligations of service provider
Security and confidentiality
Fees and payment terms
Applicable law to
Term of the
Events of Defaults
Be aware of local
terms after the termination
of the outsourcing agreement.
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 abroad.
Examples of Business Process Outsourcing Agreements
Real Estate Services. An
international real estate services outsourcing agreement.
Mortgage Bank. A US large
mortgage bank outsourced various customer facing and back
office business processes to an Indian service provider.
Internal Accounting. Outsourcing
accounting, tax, and financial functions for a variety of
Financial Institution. A US
financial institute outsourcing agreement with an Indian
Multinational Insurance. A group
of major insurance and financial services companies formed a
global outsourcing arrangement with a supplier.
Claims Processing. Outsourcing
agreement for the submission and processing of provider claims
and the ongoing operation and support of such system.
Back Office Operations. Outsourcing
agreement for all the data processing systems and back-office
Benefits Processing. Outsourcing
employee benefits, such as pension plans and ERISA compliance.
Call Center Services. Outsourcing call
center operations including answering consumer inquiries, and
assisting buyers in the use of products.
Human Resources Management. Outsourcing
human resources management functions, including hiring,
benefits processing, payroll processing, and employee
Ticketing Fulfillment Operations.
Representation of a web-based start-up providing travel and
travel-related services in outsourcing its ticketing
fulfillment and customer support operations.
Electric Power Utility.
Procurement and logistics outsourcing arrangements.
Outsourcing agreement between a US company's data processing
systems, including financial, customer usage and billing
Internet Banking Operation. Outsourcing
of core bank operations, including the receipt and processing
of customer applications and transactions.
Legal Drafting & 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.