Top 6 provisions you should know to prevent outsourcing pitfalls

Top 6 provisions you should know to prevent Outsourcing Pitfalls Copyright@2010 Mani Soft International www.manisoftinternational.com

Introduction
How does a company protect itself from pitfalls when it outsources one or more of its business functions offshore?
The careful conscientious investigation and discussion at the management level is a must before making the following decisions:
- What should be outsourced?
- Where?
- When?
In the following slides we discuss about the critical provision You should be aware when You make an out sourcing agreement.
Copyright@2010 Mani Soft International www.manisoftinternational.com

1.Protect Intellectual property
Before entering into an outsourcing arrangement, first determine the extent to which local law protects your IP. Make sure your outsourcing agreement has a well-drafted, bullet-proof intellectual property provision that
clearly establishes ownership of IP in existence at the time the outsourcing agreement is entered into
clearly establishes ownership of IP that is developed or improved during the course of the outsourcing relationship
restricts the supplier, in the strongest terms, from disclosing any of your proprietary software or other information.

Checklist that helps you draft an IP provision meets all three requirements:
Clearly define the intellectual property to be protected.
After determining what legal protections the laws of the host country provide, include an affirmative representation and warranty of the supplier to adhere to those laws. (However, don't limit yourself to only the protections afforded under local law; be as broad as applicable law will allow.)
Clearly define the parties that will be subject to a non-disclosure agreement.
Clearly define what activities are prohibited under the non-disclosure agreement. Include strong penalties for breach of the IP provisions.

Copyright@2010 Mani Soft International www.manisoftinternational.com 2. Ensure Data Privacy
Even the most routine cross-border transfers can cause problems for an enterprise. Therefore, make sure your outsourcing agreement requires the supplier to adhere to the data privacy laws of the host country. If the host country does not have sophisticated data protection laws, consider requiring the supplier to adhere to the laws of another, more developed jurisdiction, such as the European Union. Finally, the most widely accepted basis for permitting the transfer of information, regardless of jurisdiction, is obtaining the data subject's consent. Therefore, obtain written consent from the data subject prior to transferring information to a third-party supplier.

3.Require Consent for Subcontracting
Make sure the supplier can only subcontract with your written consent.
Retain the right to review the terms of a subcontracting arrangement before it is entered into.
Require the supplier to remain contractually liable for the functions that are subcontracted.
Require that, at the very least, the subcontractor's level of service, systems, and control must be on par with that of the supplier.
Retain the right to establish specific parameters or prerequisites for any subcontractor, such as those you might create if you were to hire the subcontractor yourself.
Require the subcontractor to be subject to the terms and conditions of the IP provisions of the outsourcing agreement.
Require that the subcontractor hold you harmless and indemnify you for any acts or omissions of the subcontractor.

4.Exit Strategy inclusion
The major motivating factor for outsourcing is the flexibility that offers as well as the profitability.
However, a change in the geopolitical climate or change in the company's focus or profitability could necessitate the need to terminate an outsourcing relationship.
Give yourself the right to terminate the right to terminate the agreement, if it anything goes wrong

5. Dispute Resolution
Ensure that your outsourcing agreement properly addresses how you will resolve disputes.
Consider which laws should govern the contract and where disputes will be adjudicated.
Also consider requiring all disputes to be arbitrated by a local or international arbitration firm, thereby avoiding courts.

6. Mutually agreed process to ensure industrial security standard
There must be a mutually agreed-upon process to
Articulate and certify the security of the delivered project. Armed with that information, organizations can manage application risk and balance remediation priorities.
The major issues the agreement addresses would be
Appropriate use of security mechanisms
Secure coding best practices
Programmer experience and skill set
Presence of malicious code

Outsourcing has rapidly become an effective management tool to reduce costs, control outcomes, and focus on core business practices.
However, because your success is often dependent on foreign cultures, laws, and business customs, it can be replete with pitfalls. A well-drafted outsourcing agreement can help minimize those pitfalls and soften the blow when unavoidable ones arise.

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Top 6 provisions you should know to prevent outsourcing pitfalls

by Mani Soft International on Jun 08, 2010

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Top 6 provisions you should know to prevent outsourcing pitfalls — Presentation Transcript