Getting results from outsourcing

The Rights Lawyers' Ziad Choueiri discusses how contracts should deal with IT outsourcing

Tags: The Rights LawyersUnited Arab Emirates
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By  Ziad Choueiri Published  April 25, 2009 Arabian Computer News Logo

Outsourcing is the reassignment of the management and/or daily implementation of an entire business function, which may otherwise be conducted internally, to an external service provider. The outsourcer - generally a client company - and the supplier of the outsourced service and/or product enter into an agreement that clearly sets out the services and/or products that are to be outsourced.

Outsourcing agreements are often compared to service level agreements (SLAs) and share a number of similarities. However the main variation that exists is the level of continued support of the service and/or product and the extent of the management control. Consequently, an outsourcing agreement will often contain provisions found in SLAs.

Any well-prepared outsourcing agreement that protects all aspects adequately should consider:

Commencement/Transition Phase

This initial phase includes issues related to the transfer of personnel and ownership concerns of the software and hardware, if any, that are to be an aspect of the services and/or products.

The primary considered aspect is that of the employees. The UAE governs employees through Federal Law No. (8) of 1980 concerning the Labour Law, which states that the primary employer, that is to say the company named on the employee's visa, remains liable for their actions and their remuneration.

Furthermore, UAE Federal Law No. (5) of 1985 concerning the Civil Transactions Law provides under Article 907 that, "The worker may not engage himself in any other activity during working time no shall he work during the period of the contract for another employer."

When outsourcing, there are two available options for employees. The first includes the cancellation/transfer of the service provider's employee's current visa and its re-issuance to the ‘sponsorship' of the client company, thereby maintaining conformity with the Labour Law by ensuring that employees working at a particular company's premises are sponsored by the client company.

The second option would stipulate which party is liable for the obligations and responsibilities pertaining to the employee's actions and remunerations. Although seemingly convenient, these terms must clearly mention that employees remain the service provider's responsibility and any actions taken against them may only be done through the employee's sponsor.

Management/Operation Phase

Both parties should make certain that the services/products are being managed effectively. This will refer to issues related to the obligations of the parties, financing, insurance coverage and third party licences with reference to intellectual property. Topics such as third-party software can create problems for the client company. It should be noted that licences issued to customers often exclude assignment rights -and this can become a crucial issue.

The choice of implementing software or third party instruments should be made early. If introduced by the outsourcing supplier, then the issue of continuing with the use of such software can be a problem. If left entirely in the hands of the supplier, then upon termination of the agreement it is perfectly possible for them to withdraw the ability to use the third party rights from the company, effectively leaving the outsourced service and/or product virtually helpless.

With these two phases covering the main outsourcing issues, the next part of this article will deal with additions in greater detail.

Ziad Choueiri is a solicitor with the Rights Lawyers.

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