No Minimum Commitments. Offshore agreements should not contain minimum or revenue commitments. Instead, business owners should negotiate for a tiered discount schedule that leverages volume discounts for improved utilization and speed. The offshore outsourcing firm should be responsible in earning its client’s business based on performance and not on pre-negotiated commitments.
Termination for Convenience (without material early termination fees). Ideal outsourcing deals should allow companies to terminate contracts even before the end of the term and should not require the business owner to pay a significant termination fee. This way, scuffles are avoided – regardless of the cause of the termination. There can be various reasons to terminate an outsourcing deal. Performance, cultural issues, distance, and other areas are only some of them. The outsourcing firm, of course, can almost always fire back and demand to be compensated for stranded costs like the cost of hiring dedicated outsource staffs to fill the positions, severance and others. But then again, entrepreneurs can be savvy enough to argue that stranded costs are generally not material. In this case, entrepreneurs who decide to terminate deals before the end of the term can only pay for actual stranded costs but not for expected profits and lost opportunities.
Length & Flexibility of Deal. A good BPO offshore outsourcing deal generally consists of an initial term of 2-3 years with two to four successive one year extension options. This way customers can actually choose whether to continue leveraging their expertise or not. The agreement should contain all terms of the deal, including the price.
Currency Options. Given the constantly changing value of dollars, business owners should decide on a currency payment structure that provides the best financial sense. More often than not, leveraging local currency is a beneficial option for offshore deals.
Key Personnel. Service providers should ensure that clients are provided with “key personnel” or reliable resources that an outsourcing company can turn to in case they need to conduct interviews for their projects. Key personnel offer companies more control over quality control of their dedicated outsource staff.
Intellectual Property Rights. Ideal offshore deals contain clear provisions on ownership of software or products being developed and should prevent the outsourcer from using the said software or whatever products for other purposes. These should not be provided to competitors. In all sense, appropriate disclaimers and provisions should be stipulated.
Meaningful SLAs. The agreement should contain service-level agreements (SLAs) that reflect expected performance levels from the hired offshore BPO staffs. It should be focused on areas that create positive business impact for the firm.