Since the mid-1990s, outsourcing has become a staple of American corporate life. Outsourcing exists for almost every aspect of a company’s operations. It has rapidly shifted the way American companies conduct business. Outsourcing isn’t just the use of an outside consultant or contract provider on a semi-regular or even regular basis to perform some business function when needed. It is the almost complete transfer, pursuant to contract, of some recurring internal company function to an outside vendor who has all of the necessary resources to perform that function. It’s also a transfer of most of the decision-making ability associated with that function. Outsourcing agreements typically last several years at a time.
Whether it’s Information Technology Outsourcing (“ITO”) such as computer programming, web development, or data continuity/recovery, or Business Process Outsourcing (“BPO”) such as human resources, accounting, or customer relationship management, outsourcing can allow a company to allocate its resources more efficiently and to focus on improving its strength. It can allow a business to stay more flexible, responding to changing marketplace conditions.
Outsourcing can reduce a company’s costs while increasing its productivity. It may allow the company, whose strength is not the outsourced function, to focus on improving the service it offers to its customers. For example, a national retailer headquartered in Boston can outsource its customer service call center outside of Massachusetts to a vendor which specializes in retail call centers. This way, the Boston retailer can focus its efforts on selling its products. In short, there are numerous benefits associated with outsourcing for all of the parties.
What are the Risks to My Company if We Outsource?
Outsourcing can be fraught with pitfalls for both parties. These must be addressed at the beginning of the relationship. Regardless of whether you are a company looking for outsourced services or a vendor which provides them, you should retain qualified legal counsel to recognize and mitigate these pitfalls very early in the negotiation process. This is particularly true because outsourcing contracts tend to be much longer term than other types of agreements. Entering into an unfavorable agreement with another party is bad enough, but it’s even worse if it lasts for many years.
If your company is entering into a business relationship with a foreign company, such as one located in China or India, the need for competent legal counsel becomes even more important. Failing to address certain issues can result in dissatisfied customers, poor productivity, and compromised intellectual property—all of which can work to the advantage of your competitors. At the Law Offices of Daniel A. Batterman, we are familiar with the many issues that confront both companies and vendors in structuring outsourcing agreements. We are aware of the many different facets which must be addressed in these contracts and can help you recognize and determine the impact on your company’s legal interests and rights.
