Outsourcing; NDAs and NCCs: Protect Yourself at All Times

When it comes to choosing the right outsourcing partner, companies and business owners are governed by their own meticulous standards- a BPO provider failing which would necessarily not be considered in the selection process. Ideally, it is a BPO provider that could provide the most cost-efficient, and at the same time, high quality services which clients will hire. Some clients, however, demand a little bit more.

These clients, who are concerned with the security and privacy of the information relative to the outsourcing transaction, will ask for the drafting of contracts or agreements to safeguard the intellectual and property rights involved. Despite the trust which naturally must be created between a BPO provider and a client to have a healthy working relationship, most clients still desire to procure or incorporate Non-Disclosure Agreements/Clauses (NDAs/NDCs) and Non-Compete Clauses (NCCs) to the original service contract.

So what are Non-Disclosure Agreements/Clauses and Non-Compete Clauses? And why do these matter?

Non-Disclosure Agreements

By definition, to disclose means to reveal or make known. It only follows that “non-disclosure” means the contrary. Clients who intend to keep their outsourcing activities a secret usually stipulate confidentiality with regard to particular stages of the project. Not everyone is willing to make it of public knowledge that the services he provides to others are outsourced to another company. NDAs in a way, therefore, maintain not only the privacy of the outsourcing client but also his reputation. After all, if one finds out who actually performed the services delivered by the client, what’s stopping him from questioning the reputation of the client? Worse, this person might directly contract the services of the outsourcing provider- clients will then lose their clients, something the Business Process Outsourcing (BPO) industry does not contemplate of doing.

NDAs are most common in software and web development projects, where intellectual property rights are involved. Express stipulations forbidding the disclosure of the process of development and the ideas and information pertaining thereto are usually found in service contracts for development projects. For added protection, clients will forbid the disclosure of both the process of development as well as the actual product itself i.e., the mobile application developed.

Non-Competition Clauses

While an NDA seeks to prevent the disclosure of the outsourced business process or project to parties outside the contract, a Non-Competition Clause bars the BPO provider or the persons tasked with the subject process or project from “competing” with the client’s interests. This means that the person or team who worked for or on the business/business activities is forbidden from gaining any economic or financial advantage, or any interest whatsoever, that would prejudice the client during and/or after the completion of the project.

Again, this clause is usually found in software and development projects due to the intellectual property rights involved. Having an NDA yet failing to incorporate an NCC can lead to an ironic and frustrating situation where despite the non-disclosure of the outsourcing of the developed product, the client suddenly finds himself in competition with the development team which he hired to help him in the first place. Imagine having a similar app pitted against your app- and this app was actually your idea.

There are many free and sample templates of NDAs and NCCs online. To further protect your interests- whether you are the client or the BPO provider- you could always seek a legal counsel to draft functional and enforceable agreements in accordance with the tenor you intend to bind the other party and yourself.

Both these agreements usually come with penalties or fines to be charged against the party who breached the same. Non-inclusion of penalties or fines in the contract does not necessarily mean that the erring party incurs no liability. When it comes to the enforceability of these agreements, the laws of the country where these are sought to be enforced will always be considered.

Outsourcing is only as effective as the foundation upon which it is built. And in every outsourcing venture, the contract which governs the working relationship should be the strongest foundation both parties could rely on.

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