Navigating Intellectual Property Concerns in BPO Relationships

Imagine you have just struck a business process outsourcing (BPO) deal. Assigning your non-core functions to a provider gives you access to cost-effective expertise and technology. That is good for the company, right? 

Well, not so fast! Note that outsourcing requires you to share some of your confidential information and critical assets. As you strive to innovate with your BPO partner, intellectual property (IP) issues arise.

But fret not! Below, we list concepts and strategies to help you better understand and address IP concerns in BPO relationships. Continue reading this article to learn more. 

Why Preserving IP Rights Is Critical When Outsourcing

IP represents your unique products and services; letting a provider exploit this critical aspect of your business weakens your competitive edge. Failing to preserve IP rights leads to costly litigation that delays operations, decreases profitability, and damages your reputation. 

You must secure IP rights to assure your customers that your business offerings are safe, reliable, and effective. Your brand’s authenticity also means you deliver high-quality products that consumers recognize and value.

According to 64% of the consumers surveyed by Salesforce for its most recent report, buyers now take online privacy more seriously. Another 61% said they are comfortable with companies that transparently use their personal data.

Hence, you must ensure your potential BPO partner adheres to your IP rules, especially since most transactions occur online. This remote setting leaves sensitive information exposed to various cyber threats.

Highlighting the importance of intellectual property in your outsourcing arrangement helps strengthen your customers’ trust in your brand. So, if you hire a well-founded customer service provider, expect increased cost efficiency and credibility.

Common IP Concerns in BPO Relationships

Resource optimization and staff augmentation often come to mind when asked, “What is BPO used for?” 

Despite those advantages, IP challenges remain when working with any outsourcing partner. These issues are not immediately apparent, but failing to address them before signing a long-term contract results in serious drawbacks. 

Avoid the downsides by understanding companies’ common IP concerns when engaging in BPO relationships:

• Identifying the ownership of work outcomes. The inability to clarify who owns the IP rights over the provider’s expected output leads to disputes over its use and control. 
• Sharing confidential data with the vendor. As mentioned, BPO involves the exchange of top-secret enterprise information. Unauthorized parties accessing such critical data may result in identity theft and product duplication.
• Conducting technology transfer. If your outsourcing agreement involves proprietary software, copyright law infringement and source code theft may happen. These issues typically occur when you do not set modification and sharing restrictions.
• Safeguarding trade secrets. Many organizations depend on trade secrets for their competitive advantage. Despite picking a reliable provider, outsourcing still poses several risks to trade secrets. Unexpected disclosure and misuse are some examples.

Note that you hired a provider to boost cost savings. Although rare, you might lose profits when your vendor or another third party, such as hackers, violates your IP rights. For instance, your video streaming business might lose approximately $113 billion in revenue due to piracy. 

Such an incident occurs when you do not set appropriate limits when outsourcing your content management. The lack of robust cybersecurity measures also allows cybercriminals to breach your systems. 

Strategies to Mitigate IP Challenges When Outsourcing

Understanding the IP concerns in BPO relationships is crucial to developing a structured plan for hiring a potential service provider. The resulting insights help you decide what terms and conditions to include when preparing a service contract and non-disclosure agreement (NDA).

Thus, you must familiarize yourself with the best practices to address IP issues before closing an official BPO deal. This way, the benefits you gain from outsourcing outweigh the negative impact of the challenges. When working with a provider, execute the following strategies to protect your intellectual property:

Perform Due Diligence 

Conduct due diligence before entering a service-level agreement (SLA) with a BPO company. This proactive approach lets you assess and manage IP risks when entrusting specific functions to a third party.

The systematic process also gives you a comprehensive overview of your potential partner’s practices. It helps you decide what BPO measures to take to secure your IP assets. Perform these steps to achieve such advantages:

• Identify and catalog your organization’s IP assets, including patents, trademarks, copyrights, and trade secrets.
• Clarify the BPO contract’s scope of work to understand which IP assets will be involved, created, or accessed.
• To avoid unexpected conflicts, verify whether your potential BPO partner has a history of IP violations or legal disputes.
• Examine the vendor’s confidentiality policies and practices. 
• Confirm if the provider has robust confidentiality measures to protect sensitive IP information.
• Validate the credibility of the support vendor’s cybersecurity measures to ensure they match yours and industry-specific standards.
• Examine the provider’s systems to ensure they are secure, up-to-date, and fully functional.
• Investigate how the vendor performs background screening for its in-house staff to help minimize the potential risk of IP breaches.

Require NDA Signing

In addition to SLAs, signing NDAs is critical to resolving IP concerns in BPO relationships. The document establishes a legal foundation for the contract’s strict confidentiality. It deters the unauthorized use or disclosure of sensitive customer and business information.

Maximize the benefits of signing an NDA with a provider by executing these best practices:

• Specify an NDA requirement when requesting proposals from potential providers.
• Include NDA terms and conditions during initial discussions with your potential BPO vendors. 
• Create a standard NDA template that matches your company’s needs.
• Modify the NDA template to include project-specific details after the initial negotiation phase.
• Relay to the BPO company the NDA’s purpose: protect your organization’s IP and confidential data. 
• Encourage open communication regarding any concerns the provider may have about the NDA. 
• Seamlessly add NDA signing to the overall contracting process.
• Set a reasonable deadline for the BPO partner to review and sign the NDA. 
• Provide legal guidance or clarification regarding the NDA if necessary.
• Keep the original copies after signing the NDA.
• Actively monitor and enforce compliance with the NDA throughout the contract period. 
• Regularly review, update, or renew NDAs, especially for long-term BPO projects.

Match IP and Data Protection Strategies

Discuss and align your IP and data security techniques with the BPO partner. Recent statistics from IBM show that an average data breach costs $4.45 million. Imagine how many critical projects you can fund with that much money.

Hence, align your IP and data protection measures with those of your selected service provider. Use the following strategies to avoid wasting millions of dollars on breaches or lawsuits:

• Define your IP and information security requirements. Determine the types of confidential data, such as trade secrets and customer data. Ensure the provider does the same. Exchange insights about these requisites until both parties conclude.
• Identify the security techniques expected from the BPO partner. These strategies include encryption standards, access controls, and secure data transmissions. Align these approaches with your in-house protocols to safeguard your IP and data throughout the contract.
• Detail data ownership and usage rights in the contractual agreements. Discuss with your provider how both parties will use your data. This action clarifies whether your company will own the IP rights for any BPO-produced output.
• Specify employee training requirements for both parties. These prerequisites cover employee training and awareness regarding IP and data security. Work with your BPO partner to educate workers on confidentiality and compliance with IP rules.
• Set reporting and auditing mechanisms. These provisions let you monitor the BPO partner’s adherence to joint IP and data protection requirements. It ensures ongoing compliance with agreed-upon and industry-specific standards.
• Include IP protection in exit strategies. This step helps establish the process for retrieving your old and new IP assets after the contract with the provider expires.
• Seek legal advice from IP and data security experts. This consultation ensures your NDAs and SLAs with a BPO company are robust and compliant with relevant laws. It also provides adequate defense for your organization’s IP assets.
• Review and update contractual agreements regularly. Industry policies and trends change over time. Thus, you must adjust your organization’s IP portfolio and data protection requirements. This ensures that your deal with the provider remains relevant and effective in the long run.
• Stay current with changes in IP and data security rules and regulations. Ensure your NDAs and SLAs remain compliant with evolving legal standards and make necessary adjustments accordingly.

The Bottom Line

Intellectual property represents the fruit of your labor and the uniqueness of your business. It also reflects your credibility and commitment to protecting your customers’ data and privacy. Meanwhile, outsourcing is your key to cost-effective daily operations.

However, IP concerns in BPO relationships might outweigh the numerous advantages that a provider can offer. Brand identity theft and data breach incidents may happen when you ignore the recommended strategies above.

Let’s connect if you need more clarification on addressing IP concerns when forming BPO relationships. Unity Communications offers a comprehensive knowledge base to inform you about the do’s and don’ts of investing in BPO.