No one wants to start a relationship thinking about how it will end, but considering the value of technology to your business, this is critical when contracting with offshore developers. There may be a number of reasons for ending the relationship with offshore developers. You may decide to expand your onshore IT team or maybe the projects have been completed. The worst possible scenario is dissatisfaction with the partnership. Here are a few things we recommend you consider at the beginning of your partnership to avoid a messy ending.
Establish roles, responsibilities and expectations:
We’ve said this before and will say it again. Be sure to outline roles, responsibilities and expectations early on and include those items in the agreement. Important items should be reviewed and discussed live via video conference to ensure both parties fully understand and agree with how the relationship will work. Without clarity on the front end, simple things can quickly become complicated, especially when language and cultural differences are in the mix.
Include a dispute resolution process in your agreement outlining the steps each party will follow to resolve conflicts. The process should include the escalation path so that issues can be raised to management and even the owner of the company if necessary. The language in which this process will take place should be defined and translators identified if needed.
One more important item to include, is an international arbitration requirement. If an offshore developer is not willing to agree to this, you might want to look for another partner. Your work to define the resolution process can end up useless if both parties have not agreed on who will mediate disputes on the front end. Be sure to clearly define legal jurisdiction and controlling law in any offshore agreement.
Outline the Payment Process:
When working with individual offshore developers, an escrow account works well. Larger offshore firms will be hesitant to do work prior to payment, so the retainer agreement works best. Regardless of how you set up terms of payments, you are dealing with payment to a foreign company, so be sure your formal agreement states the currency of payment, terms and penalties for late payment.
Protect your Assets:
Finally, be proactive in identifying and protecting your assets. This includes partially completed development projects to ideas and designs in the pre-development stage. Be sure to keep an accurate inventory of these items and include very clear verbiage in the agreement regarding confidentiality and the prohibition of using these ideas in any form after termination. Clear consequences and legal actions need to be outlined in detail. The offshore developers you work with today could be working for your competitors tomorrow. Guard your companies assets.
Contract agreements when dealing with two parties from the same country can be challenging. Executing an agreement with an offshore developer adds a number of additional challenges. Don’t be deterred from moving forward with the offshore option. The benefits are worth the extra effort and many companies have successful partnerships in place with offshore developers.
Here is a recap of the items Labs8 recommends including in an agreement with an offshore developer:
- Clearly define the roles, responsibilities and expectations
- Include a formal conflict resolution process with escalation path.
- Require an international arbitration clause with language and controlling law defined.
- Be sure payment terms are set and clearly understood by both sides.
- Protect your assets legally in the agreement, with consequences for breach of contract terms outlined.
If you’d like to talk more about working with Labs8 to secure offshore development support, let us know.