Outsourcing Contracts

Outsourcing Contracts

Outsourcing Contracts

Outsourcing refers to hiring someone else to do the work which was done by you or your employees earlier. Outsourcing happens across various industries e.g. Information technology, KPO, BPO, etc. Offshore outsourcing is the one that is most significant as well as a popular form. Companies manufacture several products for which they do not have time and the required capability. Companies outsource their work to decrease operating costs and also to use the company’s internal resources for several reasons. Another reason is to lessen the amount of work and the mental strain of the main company and attain quality results by the specialists. There are two major types of outsourcing structures that generally exist which are the following as under:

  1. Onshore outsourcing: Onshore outsourcing is the kind of outsourcing where the work is outsourced to an outsourcing service provider which is generally located in the same country as the company’s registered office. It is also called as domestic outsourcing.
  2. Offshore outsourcing: Offshore outsourcing is the kind of outsourcing where the work is outsourced to an outsourcing service provider that is located outside the country of the company’s registered office.

The requirement to outsource the work emerges when the company wants to concentrate on its principal business. Highly skilled foreign employees can benefit the economy of any nation in the long run. Organizations also outsource their work to reduce their labor costs. Various multinational companies outsource their work to India because of many reasons which are the following as under:

  1. Highly secured data
  2. Excellent quality of products
  3. Excellent expertise
  4. Optimization of costs
  5. Competent staff
  6. Quick response to queries
  7. Rise in employment and subsequently good jobs with better salaries.
  8. Access to the best standard of services at a relatively lesser cost

An outsourcing agreement is a contract made between the service provider and the company where the provider has pledged to provide definite services. For example, sorting the data by the outsourcing service provider by employing its own manpower and resources by working from their very own venue. There are various sectors that use outsourcing are which are the following as under:

  1. Call Center Outsourcing
  2. Data Entry Outsourcing
  3. Knowledge Process Outsourcing
  4. IT service Outsourcing
  5. Financial Services Outsourcing
  6. Healthcare BPO Services Outsourcing
  7. Engineering Services Outsourcing

There are different laws in India that govern outsourcing which is the following as under:

  1. Indian Contract Act, 1872
  2. Foreign Exchange Regulations
  3. Specific Relief Act, 1963
  4. Foreign Trade (Development Regulation) Act, 1992
  5. Information Technology Act, 2000
  6. Department of Telecommunications (DoT) policies and guidelines.
  7. Companies Act, 2013
  8. Labour laws
  9. The Code of Civil Procedure 1908
  10. Intellectual Property Laws
  11. Transfer of Property Act, 1882
  12. Income Tax Act, 1961
  13. Competition Act, 2000
  14. Indian Evidence Act, 1872

There are jobs that are usually outsourced and they are the following as under:

  1. Bookkeeping
  2. Web design and development
  3. Administrative tasks
  4. Knowledge processes
  5. Customer billing
  6. Business processes
  7. Customer service
  8. Information Technology
Categories of business models in outsourcing agreements

The categories of the business models are as following as under:

  1. Services agreement: Service agreement is based on the basic model where the third party will execute a particular task for the customer. The company may dispatch its resources, for example, I.T. resources and its workers to another location where the outsourcing service provider is based on entering into a contract for the same. The workers will be working from that location until the agreement is in force but this normally takes place in a joint venture or captive outsourcing model.
  2. Joint venture: In the Joint venture model the outsourced service provider and the outsourcing company form a separate legal institution for executing the necessary functions. It could be of different types where in one instance the outsourcing company can form a joint venture with several dealers. This normally occurs when one service provider does not have the resources to perform several tasks of the customer. In such a case the outsourcing company may form various legal institutions where these institutions will then finish the necessary tasks in a well- synchronized system.
  3. Captive outsourcing entity: In the captive outsourcing model the outsourcing company entirely controls all the assets of the outsourcing service provider. The outsourcing service provider then executes functions of the customer itself and not of any other customer. In this sort of model, certain workers may be employed but the outsourced company is in total charge of the outsourcing service provider.
Case law

Sh. Sundararajan, Bangalore vs. United India Insurance Co.: In this case, it was held if the public authority has outsourced its work to some other private company then it should take care that to fulfill its key responsibilities of providing the answer scripts even if the work has been outsourced to some other private company.