Everything You Need to Know About the Outsourcing Contract

Amy Pattinson
August 17, 2022
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6
 Mins Read

An outsourcing contract is a contract between a company and a service provider wherein the provider promises to deliver specified services. An example would be data processing from a service provider that utilizes its staff and equipment, typically working from its location.

Outsourcing is beneficial for businesses to save time and money by contracting out work to third parties. It can help your business meet its short and long-term goals. But you can also agree on all departments covering IT, accounting, payroll, etc. However, regardless of your aims and requirements, you will always need to construct an outsourcing contract to ensure the task is done. Invensis provides end-to-end customized back office BPO services across major business functions and industry verticals ensuring on-time fulfilment of tasks.

What Is an Outsourcing Contract?

An outsourcing contract is an agreement signed upon by the companies getting into outsourcing projects like -the vendor and the buyer. Not just the work assumption, it also contains information and details regarding the excellence parameters, timelines, pricing, rewards, etc., of the outsourcing adjustment that the two parties are getting into. In addition to that, the outsourcing contract also consists the legal issues around intellectual property, NDA agreement, and much more.

Some legal issues, such as intellectual property rights and the protection of confidential information that you may need to communicate with the third party so they can perform their duties, are also dealt with in the contract.

What Should Your Outsourcing Contract Include?

It's good to start with something that includes basic identifying information like the agreement and effective dates and the names of contract parties and their addresses. There is a variety of other sections a good outsourcing agreement should include:

  • A detailed description of services
  • Deliverables
  • Payment schedule, often a net-30 basis
  • Terms and conditions
  • Insurance requirements
  • Warranties
  • Inspection and acceptance
  • Governing Law
  • Independent contractor clause
  • Severability

Types of Outsourcing Contracts

Once you understand an outsourcing contract and why you need it for any outsourcing venture. You now understand the different kinds of contracts. When outsourcing product development that is common in the industry and which one would apply to you. So, without further ado, let's start reading about the different types of outsourcing contracts:

Managed Project Outsourcing Contracts

Another outstanding outsourcing contracts form the flat-rate outsourcing contract. Companies outsourcing IT services to India or any other country construct a Request For Proposal or RFP, and the outsourcing company places a proposal.

The managed project and your requirements are mentioned beforehand in the RFP and the estimated costs. However, as the name suggests, it has a set cost to be paid for a particular type of service taken.

Time & Materials Contract

This type of contract pays the supplier for the materials and work time used by the outsourcing service provider (at the predefined hourly rate for each member of the dedicated team) (e.g., using the software license or other assets). Therefore, before the collaboration begins, it is important to understand the total cost of ownership and any potential flexibility in this area.

The client who delivers the idea and requirements is entirely responsible for the project's total price and deadlines. So it must be carefully managed and kept under control. It is also possible to examine these challenges ahead in coordination with the IT partner.

Fixed Price Contract  

In this outsourcing contract, the customer and the service provider agree on a "fixed price" for the service (i.e., for delivering the solution). A supplier estimates the price by relying on a comprehensive description scope of work to be done. The constant price means that the project's scope and deadline remain unchanged. This type of contract can also function effectively in the case of hybrid contracts, like 'fixed price per iteration, in which the client pays separately for each milestone.

We recommend establishing the project's scope and estimating costs with business and technical specialists to crystallize your idea and collect all requirements.

Even if alterations are possible, there is less flexibility with this type. At the same time, the project is ongoing. Therefore, it significantly impacts delivery time and cost and may result in contract modification. In addition, as this model requires a specification, a significant amount of work is mandatory before beginning the project.

Flexible Scope

This outsourcing agreement structure is a stand-alone, full-lifecycle Agile project management and delivery strategy that seeks to offer customers rapid and effective solutions. Agile's core principles and values guide the collaboration between teams and individuals. The key to the project's success is its alignment with the company's business goals.

This methodology needs a radical cultural shift from the development team. In addition, an implementation may be costly because developer and user training is necessary.

Conclusion

When outsourcing contracts, you need to cover your legal bases seriously by explaining many things in detail. Work closely with your lawyer, who must help you make this process easy to pull off. Today, most of the companies in the outsourcing market offer a variety of pricing and outsourcing models that can be custom-made to specific projects, to help them meet all the requirements and grow their businesses.

Moreover, this is what every CIO, regardless of industry, wants. Invensis with its deep industry expertise helps organizations to tailor customized back office BPO services that match your business needs. We aim to enhance your service delivery excellence while ensuring compliance with industry-followed quality and security standards.

About Invensis

Invensis Technologies is a leading global provider of IT-BPO services with a reputation for excellence. Our carrier-grade infrastructure and commitment to empowering clients around the world to achieve business transformation and growth through our services set us apart from the competition. With over 5,000 staff and more than 22 years of experience, our company has been providing quality services since 2000.

Invensis delivers intelligent contact center and back-office functions for businesses. Invensis is an ISO 9001 and 27001 certified organization and has achieved HIPAA compliance to provide high-quality and secured end-to-end outsourcing services. We have a strong base in the USA, Canada, Australia, UK, Ireland, Germany, and other countries serving over 200 clients. Invensis is powered by innovative processes, and technology solutions and provides holistic automation from design to implementation and continuous development—along with data security. Our solutions tailors to help businesses achieve their strategic goals and help them become industry leaders.

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Amy Pattinson

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