Legal Issues of Offshore Outsourcing given to Software Outsourcing Companies in India - Part 2

3. The Implication of Local Laws: 

An offshore service provider needs to follow certain local laws in order to safeguard its business from civil penalties. Let us assume if you are an outsourcing service provider company i.e. a software outsourcing company in India, then the legal provisions applicable in India will decide your business fate. These statutory requirements may increase the client’s liabilities forcing the service provider’s proposition to be less competitive. A number of countries have adopted stringent laws regarding data protection and privacy in their constitution. Clients and service providers of respective countries are legally bound for sharing legal responsibility which has increased the liability on the client side and thus they are expected to raise a legal issue while providing contract to a service provider. Ensuring themselves compliant to local laws force the clients to move away and focus on countries with less legal hindrance. Software outsourcing companies need to study carefully the local laws applicable to their business and operations. Including relevant clauses and defining work approach that is in compliant to local laws and legal system should be mentioned in the contract.

4. Taxation:

International and other various local issues play a role in influencing offshore outsourcing such as taxation policy of a nation which plays a major effect in the offshore outsourcing decision. So those who outsource must look at what tax implication they will have to face. Different countries are bound to have different tax laws acting as a deterrent in effective relationship. It is advisable that both the concerned parties mention, which tax provision, shall be applicable in the contract.

So summarizing this, a company needs to decide on the type of outsourcing that matches with its business strategy considering different aspects. This article seeks to address the legal issues impetus to offshore outsourcing provided by a software outsourcing company in India.

To conclude, offshore outsourcing given to a company such as to a software outsourcing company in India comes with a lot of benefits on hand such as tapping of potentially skilled labor providing significant cost savings and time. But it also has forced the dozens of nation to rethink the system of governance and attempt to mitigate legal issues. The countries which have acclimatized to the new demands of offshore outsourcing and have taken steps to eliminate business legal issues, are getting returns. However, as discussed, there exist many legal considerations that an entity must consider before and during such an outsourcing process and need to be sort out for a smooth execution.

Courtesy - Bhavesh Bulchandani