Look Before You Sign Your Outsourcing Contract

Many times, outsourcing is the only financially viable option left in front of an organisation. However, when it comes to choosing the right Outsourcing vendor and signing on the dotted line, not many know just what to look for. Analysing the vendor agreement or the contract is extremely important so that both parties are on the same page when it comes to expectations and delivery.

So, what are the factors that a firm needs to look for before signing the outsourcing contract? What should be the contractual considerations so that your outsourcing partner meets your business expectations?

The contract should typically cover the following:

1.Scope of work. This clause should explain just what exactly the outsourcing company will do for the client. For instance, if it is an IT outsourcing project like PHP development or some software application development, the contract needs to outline how this would be executed.

2.For highly technical work, the client can even insist on the type of software that needs to be installed in order that his project be successfully executed; specify data backup and archiving activities; implementation of any other functional specifications.

3.Deliverables. The contract should clearly list all that the vendor is supposed to deliver or install. If it is a remote staffing, then the contract would cover the expectations the client has from the virtual employee in this regard.

4.Terms and conditions agreed upon. Very definitely, one of the key components of the vendor contract, this should address the terms and conditions set out during outsourcing. This needs to be as detailed as possible and should cover factors such as client ownership of work, definition of procedures; checkpoints for monitoring progress; confidentiality; control of all documents etc.

5.The Service Level agreement. Both sides should agree on the service level that will be expected. This is particularly essential for long-running projects in which case the vendor needs to let the client know in clear terms just how long it will take to work on the operation; the response time of computer systems; and so on.

6.Problem resolution should be included in the contract, and cover the gamut of problems that could crop up during outsourcing such as monetary compensation, problem escalation, terminating the contract procedures, repatriation clause etc.

7.Some amount of flexibility in the contract could be welcome. For example, if you are reorganized or if you acquire or divest some companies, there should be no penalties for that.

8.In case of a remote employee, the contract should be clear on the Notice period prior to termination of services.

9.It could also include a NDA (Non-Disclosure Agreement) to be signed by both, the vendor as well as the virtual employee. This is crucial since a lot of sensitive and confidential data will be exchanged between you and the vendor's employee, located halfway across the globe.

The best thing would be to employ the services of a contract specialist because they would better understand the business and legal subtleties for both sides and help draw up a practical and understandable contract more efficiently.