Access and Control


In the previous section, intellectual property rights were characterized and discussed as intangible legal elements that are crucial to the success of an offshore outsourcing venture and thus have to be managed very carefully when outsourcing to foreign countries (Ramanujan / Sandhya 2006, p. 53).

Building on intellectual property rights, the purpose of this short section is to highlight the importance of access to and control over physical materials embodying the intellectual property. While intellectual property rights themselves may be intangible, the intellectual property is embodied or stored in tangible materials, such as servers, hard discs, DVD´s etc. In Outsourcing transactions, the tangible aspect is critical (Phillips 2002, p. 17).

From a legal standpoint, the physical control of produced work is a key concern in offshore outsourcing, especially in the ITC industry:

Suppose, for example, that a company in the USA hires an outsourcing vendor in India to do substantial programming work. In this scenario, the US customer decides to change vendors before the code is finished and does not want to pay the total amount agreed. The vendor does not want to lose the business and wants to collect the full amount agreed before handing over the source code produced so far. In this case, the customer´s ability to gain physical possession of the source code, and to do so quickly, is absolutely crucial (Phillips 2002, p. 17).

Under US copyright law, a work is not protected unless it is fixed in a tangible medium of expression (17 U.S.C. §102a). This emphasizes the relevance of the intellectual property ownership issue discussed in the previous section and it also shows that it is imperative to manage and control the tangible aspects. “Rather, before embarking on outsourcing that may place physical materials that embody valuable intellectual property in the hands of offshore vendors, the customer needs to ascertain whether and how it will ensure that it has physical possession of these materials if the foreign vendor refuses to deliver them.” (Phillips 2002, p. 17).

Offshoring may offer attractive economic benefits but there is also a price attached to additional risks, which in some cases can exceed the benefits. Loss of control over  tangible aspects of the work product is one of these risks.

Another important risk is the loss of control over security regarding system and facilities, when work is done at offshore sites. A company might have very high security standards at the home location but it is almost impossible to guarantee that the offshore site will comply with the same security standards. Hence, there is a risk that data and systems are compromised (Desouza et al. 2004, p. 34). 

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