Dallas, Texas 6/10/2010 5:57:39 AM
Alsbridge Unveils its Six Legal Provisions to Review in Outsourcing Contracts
Alsbridge, Inc., an award-winning global advisory firm that redefines the way companies reduce costs and improve back office operations, today unveiled its Six Legal Provisions to Review in Outsourcing Contracts.
“Legal terms of many outsourcing contracts have not changed in several years even though the business environment, security threats and regulatory environment have shifted greatly since some of these companies entered into their first outsourcing contracts,” said Ben Trowbridge, Alsbridge CEO. “By examining these six legal provisions of an outsourcing contract, companies may find that their outsourcing contracts, as currently worded, leave them exposed to more potential liabilities than they are willing to accept, so renegotiation is prudent and warranted."
The legal provisions that companies should carefully review are:
1) Data Privacy
Federal, state and international privacy laws have changed greatly in the last few years, with new obligations for companies and their service providers.
2) Data Security/PCI-DSS
Governments have strengthened data privacy and security laws due to increasing concerns over identity theft. If the outsourcer has access to personally identifiable data, such as credit card information, the company must ensure that the outsourcer meets federal and state laws for protection of this information. The contract should also address liabilities, responsibilities and any other obligations in the event of a security breach.
3) Acts of Terrorism
Terrorism, wars and threats thereof, can have a material impact on companies and their outsourcing needs. So, additional provisions, such as no-cost termination rights, might be warranted.
4) Service Provider Financial Covenants
Saytam Computer Services, an Indian outsourcing company, went to court this month to defend itself in an accounting scandal, which highlights the need for an ongoing review of an outsourcer’s financial health to ensure that it can provide services for the duration of the contract. In the current economic climate, changes in credit ratings are another important factor when reviewing the contract of a service provider. The company should consider contract provisions to protect it from any adverse financial conditions the outsourcer experiences.
5) Audit Rights/Sarbanes-Oxley
Sarbanes-Oxley strengthened auditing requirements for publicly held companies. In order to meet those requirements, companies must have certain audit and financial control provisions included in any agreements with outsourcers.
6) Related Considerations
Any changes to the first five provisions could have cascading effects throughout the rest of the contract. So if there are changes to any one of them, the entire agreement should be reviewed for any related changes that should be made.
These six legal provisions to review in outsourcing contracts were posted on Outsourcing Leadership under the title, ‘Outsourcing 2.0: Why You Must Renegotiate Your Outsourcing Agreement’ visit http://www.outsourcingleadership.com/ for additional information on best practices in outsourcing, shared services, benchmarking, and assistance with your sourcing strategies.
About Alsbridge
Alsbridge, Inc. is an award-winning global advisory firm that has redefined the way companies reduce costs and improve back office operations. Our proprietary benchmarking tools and data resources enable clients to utilize the most cost effective and value added sources globally for information technology, business processes and telecommunications networks. Through a combination of internal optimization and outsourcing, our clients achieve cost savings that support their strategic business objectives.
Founded in 2003, Alsbridge is the proven, effective difference. The company’s web site is: http://www.alsbridge.com/.
