Outsourcing Agreements

On this Page:
Pitfalls in INTERNATIONAL OUTSOURCING AGREEMENT
How to Draft OUTSOURCING AGREEMENTS
Drafting International Outsourcing Agreements & Contracts

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Pitfalls in an International Outsourcing Contracts

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."

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.

A 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.
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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 Outsourcing Agreement the following must be properly addressed:

Duties and obligations of Outsourcer
Duties and obligations of service provider
Security and confidentiality
Legal compliance
Fees and payment terms
Proprietary rights
Auditing rights
Applicable law to outsourcing agreement
Term of the Agreement
Events of Defaults and Addressing
Dispute Resolution Mechanism
Time limits
Location of Arbitration
Number of Arbitrators
Interim measures/Provisional Remedies
Privacy Agreement
Non-compete Agreement
Confidentiality Agreement
Rules Applicable
Appeal & Enforcement
Be aware of local peculiarities
Survival 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 companies.
Financial Institution. A US financial institute outsourcing agreement with an Indian party.
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 operations.
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 counseling.
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.
Telecommunications Provider. Outsourcing agreement between a US company's data processing systems, including financial, customer usage and billing functions.
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 provider.

Drafting Offshore Outsourcing Agreements

Contact us for Outsourcing Agreements

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 and the 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.