Legal Issues in Outsourcing
Legal issues in outsourcing
INTRODUCTION
The last two decades have witnessed a significant trend towards ever-increasing outsourcing by firms in most developed economies. This trend reverses an earlier pattern in the evolution and growth of large industrial firms towards greater level of vertical integration that prevailed during most of the previous 100 years.
What does Outsourcing mean? * It involves “takeover” and “transfer” of non-core function or entire business unit of an organisation * It involves long term contracts for agreed services at agreed service levels for agreed remuneration * It may involve automatic transfer of business/undertaking to the supplier
Common concerns against outsourcing to India * The security of customer and product information * The protection of intellectual property * The financial viability of service providers in an increasingly competitive market * The ability to provide consistent quality of service * The potential for changing of local laws
Despite these concerns, the number of companies choosing to outsource to India continues to grow each year thanks to a combination of large, educated, English-speaking workforce, low salaries, government support for outsourcing, and improving infrastructure.
One of the most important legal issue in outsourcing is contract formation. A good contract, where time has been spent on developing a strategy and effort has been devoted to negotiating it, will obviate many of the potential unforeseen costs and other risks otherwise inherent in the relationship. Through the contract a customer will assert responsibility for its non-delegable obligations, and avoid consequent loss of control of the function or process being outsourced. The parties’ respective roles will be clarified. The services and their service levels will be properly defined as will the charging rates and formulae. The duration of the relationship will be specified.
Framework for typical
INTRODUCTION
The last two decades have witnessed a significant trend towards ever-increasing outsourcing by firms in most developed economies. This trend reverses an earlier pattern in the evolution and growth of large industrial firms towards greater level of vertical integration that prevailed during most of the previous 100 years.
What does Outsourcing mean? * It involves “takeover” and “transfer” of non-core function or entire business unit of an organisation * It involves long term contracts for agreed services at agreed service levels for agreed remuneration * It may involve automatic transfer of business/undertaking to the supplier
Common concerns against outsourcing to India * The security of customer and product information * The protection of intellectual property * The financial viability of service providers in an increasingly competitive market * The ability to provide consistent quality of service * The potential for changing of local laws
Despite these concerns, the number of companies choosing to outsource to India continues to grow each year thanks to a combination of large, educated, English-speaking workforce, low salaries, government support for outsourcing, and improving infrastructure.
One of the most important legal issue in outsourcing is contract formation. A good contract, where time has been spent on developing a strategy and effort has been devoted to negotiating it, will obviate many of the potential unforeseen costs and other risks otherwise inherent in the relationship. Through the contract a customer will assert responsibility for its non-delegable obligations, and avoid consequent loss of control of the function or process being outsourced. The parties’ respective roles will be clarified. The services and their service levels will be properly defined as will the charging rates and formulae. The duration of the relationship will be specified.
Framework for typical