Software Outsourcing: Legal Issues

Software outsourcing is noticed widely essentially taking place in all size of business segments. The outsourcing companies coming in relation to the developing call canters and Information Technology firms, of course, play major roles in India. The relation grown with such firms has effectively reduced the costs and there is an easy access to skilled workforce that may not be available onshore. Software Outsourcing processes often involves some greater risks to customers, which could be compiled in four categories:

·         Poor infrastructure

·         Data insecurity.

·         Inefficient economy

·         Political instability

 There are some greater risks involved in business which we have tried to cover in this article briefly from the legal perspective with some attempted identified solutions.

Taxation

For offshore software outsourcing, it is necessary to consider, if there will be any additional or extra tax considerations, in particular to offshore outsourcing VAT implications and taxation liability are present. Countries, like India, also have favorable tax laws which could benefit outsourcing companies; therefore the local tax laws should be investigated properly by the tax specialists.

Change control

It is always advisable to justify the level of investment by both the clients and the vendors, because both the parties normally look forward for a long term relationship and contract. Though, in most software businesses, the technologies and the client's needs are constantly changing and developing over the contracted terms. So it is necessary that any contract has to be flexible and dynamic enough to cope with these issues. To avoid such problems it’s always necessary to have a robust change control mechanism, and should include procedures for proposing and accepting changes and their impacts on the levels of servicing, pricing and so on.

Relationship and Performance Management:

Outsourcing companies’ important issue is to ensure that the vendor is taking care of cost, effectively and efficiently for the duration which usually converts into long term relationship. In software outsourcing, if vendor remains competitive, then it’s Benchmark in Offshore outsourcing.

Local law

The international aspect specifies an expression in provision within the contract, as every country is having different law applying (governing law) and also where the disputes can be heard. It is probably advisable to give jurisdiction to both the English courts and the courts in the offshore territory as there may be circumstances where proceedings would be best brought locally.

Quit scenario:

 Offshore outsourcing ends when the clients may have to deliver the services from the onshore to the offshore vendor again. Exit or quit from any outsourcing arrangement is fraught with challenges, which can be magnified in the offshore scenario and a detailed contractual provisions are also developed to ease this process. The employment law of the onshore outsourcing company will also be considered with all the practicalities.

13:18 - 24/2/2009 - post comment