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Technology - Outsourcing Agreements

Outsourcing is the process by which a company retains a third-party to perform some process or function that was or would be performed by the company itself. Historically, outsourcing was primarily focused on the information technology sector. Companies that lacked in-house IT expertise would use third parties to provide information technology services or product development. Information technology outsourcing typically involves the outsourcing of computer hardware and/or software systems, support operations (such as IT staffing), and other related services, such as telecommunications. Such services can be provided either on-site or remotely (or both).

Although recent trends in outsourcing present their own set of distinct issues, the core issues that apply to all outsourcing agreements continue to require serious attention. Due to the complicated scope of most outsourcing transactions (e.g., the transfer of employees, equipment, software, etc.), most outsourcing agreements usually have multiple year terms. Because customers are virtually "locked-in" for such a long period of time, great care must be taken to ensure that the benefits of the bargain are enjoyed throughout the entire term of the agreement notwithstanding any fluctuations in technology, the economy, or the vendor's business. Unfortunately, many customers make the mistake of not addressing certain key issues necessary to achieve this goal.

A significant concern for customers entering into technology-related outsourcing relationships is effective protection of their intellectual property and ownership of any intellectual property produced by the outsourcing vendor. Although the Paris and Berne Conventions regarding the protection of intellectual property create minimum intellectual property protections in most countries, certain rules and local laws vary around the world. For example, India is considered to have one of the most modern copyright laws in the world; however, enforcement may be lax and software piracy and other violations of the law are common.