International Outsourcing

Globalization of business offers both opportunities and challenges for outsourcing. Significant cross-border differences in wage rates, real estate costs and regulatory climates compel enterprises to consider international outsourcing. To achieve the potential benefits of international outsourcing, enterprises and their service providers need to bridge the corresponding cross-border differences in business and social culture, language, political risk, legal systems, regulation of business transactions and data flows, taxation, financial systems, currencies, logistical infrastructures, time zones, distances and dispute resolution processes.

By undertaking international outsourcing, business partners embark on a journey of comparative analysis, in which unstated assumptions need to be made explicit to avoid miscommunications. Enterprises, service providers and their respective consultants and attorneys must actively explore the frameworks for cross-border collaboration.

Since this website was established in 1997, new legislation and international agreements have been adopted in many countries.   We review some important legal trends, legislation and agreements in the "additional resources."

Additional Resources

Business and Social Cultures
Political Risk
Legal Systems
Taxation
Financial Systems and Currencies
Logistical Infrastructures
Time Zones
Dispute Resolution Processes
Foreign Investment Regulation of Outsourcing and Offshoring


Articles
Outsourcing after Divestiture of Manufacturing Operations: IBM's Services Agreement with Lenovo for Personal Computers.   On December 7, 2004, IBM announced a definitive agreement to transfer its personal computer division ("PCD") to Lenovo Group Limited (formerly known as Legend), a Chinese state-owned enterprise.  The deal heralds a new era in post-sale support. Sensitive issues of foreign ownership (especially from China), marketing, finance, human resources management, brand management and customer support, management control need to be addressed on cases of divestiture.  The new model breaks ground in the degree of the "seller's" ongoing involvement in the operations of the divested operation.  Chief executives, business development officers, marketing officers and M&A advisors can benefit from the lessons of the transaction.

European Community: A Services Directive at Last- On December 27, 2006, the European Union’s Parliament and Council of the European Union adopted Directive 2006/123/EC on “Services in the Internal Market.”  This pivotal directive represents the culmination of additional year’s negotiations following the failure to adopt a prior services directive on the same subject.  It represents an important step in cross-border flow of services within the European Union.  More importantly, it distinguishes between rights of establishment and rights to provide and receive services across member states.  See www.outsourcing-law.com/1070-Euro_Services_Directive_2006.htm.