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Karnika Seth, Managing Partner SETH ASSOCIATES ADVOCATES AND LEGAL CONSULTANTS © Seth Associates, 2007 All Rights Reserved LEGAL PROCESS OUTSOURCING IN.

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Presentation on theme: "Karnika Seth, Managing Partner SETH ASSOCIATES ADVOCATES AND LEGAL CONSULTANTS © Seth Associates, 2007 All Rights Reserved LEGAL PROCESS OUTSOURCING IN."— Presentation transcript:

1 Karnika Seth, Managing Partner SETH ASSOCIATES ADVOCATES AND LEGAL CONSULTANTS © Seth Associates, 2007 All Rights Reserved LEGAL PROCESS OUTSOURCING IN INDIA-AN INSIGHT INTO THE GROWING INDUSTRY ICFAI National Seminar on Prospects and opportunities in Knowledge Services 9 th July,2007,Sirifort Auditorium, New Delhi

2 Presentation Plan Introduction to the LPO business Scope of Services rendered Preference for destination-India Different Models of Outsourcing Potential of growth in the LPO Industry Important Indian Government Initiatives Identifying major Issues in dealing with foreign clients in an LPO business Ensuring data protection-Case study-Mphasis BPO Fraud Practical experience & suggestions

3 Outsourcing is the contracting out of a company's non- core, non-revenue producing activities to specialists. It differs from contracting in that outsourcing is a strategic management tool that involves the restructuring of an organization around what it does best – its core competencies. Three common types of outsourcing are Information Technology (IT) outsourcing,legal process outsourcing (LPO) and Business Process Outsourcing (BPO). BPO includes outsourcing related to accounting, human resources, benefits, payroll, and finance functions and activities. All these activities fall under broad category of Knowledge process outsourcing (KPO) What is Outsourcing ?

4 What LPO means? is a kind of high value added BPO service involving legal work that industry vendors or in-house departments of organizations outsource from off-shore areas where it is costly to perform LPO or Legal Process Outsourcing is a kind of high value added BPO service involving legal work that industry vendors or in-house departments of organizations outsource from off-shore areas where it is costly to perform Services rendered may involve or Services rendered may involve low skilled quantitative tasks or high end qualitative tasks

5 Nature of Services High end High end The Qualitative tasks include: Intellectual Property Rights Intellectual Property Rights Patent Search Patent Search Patent Application Drafting Patent Application Drafting IPR Portfolio Management IPR Portfolio Management TM and Copyright Registration TM and Copyright Registration Legal Research/Opinion work Legal Research/Opinion work Document Review and Analysis Document Review and Analysis Intelligence Services Intelligence Services Contracting and Administration Contracting and Administration Low end Low end The Quantitative tasks include: Paralegal Services Paralegal Services Legal Transcription Legal Transcription Legal Memo Development Legal Memo Development Medical Transcription Medical Transcription Document Management Document Management Corporate Secretarial Services Corporate Secretarial Services Litigation Support. Litigation Support. Legal Coding Legal Coding Data entry Data entry

6 Paralegal services Image and Document coding Indexing and Tagging Legal transcription Archiving Deposition and Testimony summarization Document/Evidence Review

7 Spheres of law Litigation Litigation Arbitration Arbitration ADR ADR Banking Banking Securities Securities IPR IPR Mergers and acq Mergers and acq Real estate Real estate Taxation Taxation General business laws General business laws Insurance Insurance Corporate consultancy Corporate consultancy

8 Major International clients –source of work The in-house legal departments of MNCs Legal research firms International law firms Legal publishing companies Independent attorneys Work inflow is observed to be more from USA, Australia, U.K, France,Japan, China

9 Preference for destination -India? Experienced Legal professionals Experienced Legal professionals Communication and education advantage-English language Communication and education advantage-English language professionals skilled in use of IT professionals skilled in use of IT Presence of IT Infrastructure and Government facilitated schemes for ITES sector, better telecommunication initiatives, power and transport facilities Presence of IT Infrastructure and Government facilitated schemes for ITES sector, better telecommunication initiatives, power and transport facilities Exposure to foreign laws Exposure to foreign laws Foreign qualifications in legal stream Foreign qualifications in legal stream Cost reduction Cost reduction Advantage of time zone Advantage of time zone Efficacy at work Efficacy at work Staffing 24x7 Staffing 24x7 Supports regional assignments Supports regional assignments

10 Preference for destination-India Laws Governing International Contracts "Proper Law of the Contract" When the parties in the Contract make an express choice of law,Indian Courts have always recognized such choice of proper law Under Indian Law, parties are free to stipulate their terms of contract and lay down the law by which the Contract is to be governed. Courts in India have held that the intention of parties would decide the law of which country would govern the Contract and which Court would have jurisdiction. Sections 13, 15 and 44A of the Indian Civil Procedure Code and Section 41 of the Indian Evidence Act, govern the conclusiveness and enforcement of foreign judgments in India The parties may also choose a foreign venue for arbitration. A Foreign arbitral award would be recognized in India if the country of venue has signed either the New York or Geneva conventions and has been notified as having reciprocal relations with India in the matter of enforcement of foreign awards. A foreign arbitral award would generally be more easily enforced in India than a foreign court judgment.

11 Preference for destination-India India has ratified the World Trade Organization (WTO) Agreement, which came into force on January 1st 1995 and has also become a party to the Agreement on Trade Related Intellectual Property Rights. It has made several amendments to its laws concerning Intellectual Property to suit the international standards India has ratified the World Trade Organization (WTO) Agreement, which came into force on January 1st 1995 and has also become a party to the Agreement on Trade Related Intellectual Property Rights. It has made several amendments to its laws concerning Intellectual Property to suit the international standards

12 Models of International IT-Enabled Outsourcing Out-tasking model: export a task and, upon completion, import it for use in home country 7/24 model: maintain a continuous work schedule by having teams in various time zones Foreign local subsidiary model: outsource tasks in support of operations in that country Global model: establish data and service center overseas to support global operations

13 Different Categories of LPO Players e.g Office tiger,Pangea3 BPO/ITES Players Providing LPO Services e.g Office tiger,Pangea3 e.g Seth Associates, J sagar Associates,, Kocchar & Co Law Firms Providing LPO Services e.g Seth Associates, J sagar Associates,, Kocchar & Co (Single-Focus LPO Excluding Patents Services) e.g Lexadigm,Mindcrest Third Party Units (Single-Focus LPO Excluding Patents Services) e.g Lexadigm,Mindcrest (Single-Focus Patents Services)- e.g Evalueserve Third Party Units (Single-Focus Patents Services)- e.g Evalueserve e.g Evalueserve, Integreon KPO Players Providing LPO Services e.g Evalueserve, Integreon lex sphere, Atlas legal research Captives of Law Firms lex sphere, Atlas legal research e.g GE, Dupont Captives of Corporate Legal Departments e.g GE, Dupont

14 Survey Reports: predicting future of LPO business in India According to a study by the United States-based Forester Research, the current annual value ( ) of legal outsourcing which is worth $80 million can rise up to $4 billion and can fetch 79,000 jobs in India by The National Association of Software and Service Companies -- Nasscom -- also projected that legal processing outsourcing (LPO) providers in India will soon rise to $3-4 billion industry.

15 Potential of growth ValueNotes, a Pune based research firm released a survey report Offshoring Legal Services to India claiming Legal Process Outsourcing is expected to be a $640 million by end of 2010 as against $146 now Number of people employed in this sector will go up to 32, 000 from 7, 500 now, in next three years The frontrunners are leading due to their strong capabilities, onshore offshore presence, growth strategies, and the strength of their brand in the global LPO market Rising demand, vendor maturity and capability to offer higher value services has led to the 50% growth in this sector in

16 Important Indian Government Initiatives Foreign Direct Investment (FDI) for 100 percent of the equity in BPO companies -options to foreign companies to engage independent service provider, branch office, set up JV or wholly owned subsidiary, acquire exiting company Foreign Direct Investment (FDI) for 100 percent of the equity in BPO companies -options to foreign companies to engage independent service provider, branch office, set up JV or wholly owned subsidiary, acquire exiting company Foreign Investment Regulations Software development and BPO services is now under the automatic route and no foreign investment approvals are required to set up a wholly owned subsidiary; only certain filings need to be made after receipt and issue of share capital. However, acquisition of shares in an existing Indian company may still require a prior foreign investment approval. Foreign Investment Regulations Software development and BPO services is now under the automatic route and no foreign investment approvals are required to set up a wholly owned subsidiary; only certain filings need to be made after receipt and issue of share capital. However, acquisition of shares in an existing Indian company may still require a prior foreign investment approval. Most foreign corporations set up their subsidiaries as private limited companies with liability limited by share capital. Most foreign corporations set up their subsidiaries as private limited companies with liability limited by share capital. Duty-free imports of capital goods (under the Export Promotion of Capital Goods scheme) Duty-free imports of capital goods (under the Export Promotion of Capital Goods scheme)

17 Important Indian Government Initiatives 100% Income tax exemption for export of services: according to CBDT, the exemption would embrace the following (few) services: Back-office Operations Content Development or Animation Engineering & Design services Human Resource Services Insurance Claim Processing Legal Databases 100% Income tax exemption for export of services: according to CBDT, the exemption would embrace the following (few) services: Back-office Operations Content Development or Animation Engineering & Design services Human Resource Services Insurance Claim Processing Legal Databases

18 Important Indian Government Initiatives Promotions of STPs which provide ready-to-plug IT and telecom infrastructure Promotions of STPs which provide ready-to-plug IT and telecom infrastructure Indian tax laws have recently included provisions relating to transfer pricing, requiring pricing of transactions between associated enterprises to be at arms length Indian tax laws have recently included provisions relating to transfer pricing, requiring pricing of transactions between associated enterprises to be at arms length allows repatriation of profits, calculated in accordance with approved accounting rules. National Venture Fund for the Software and IT Industry with a corpus of Rs. 100 crore National Venture Fund for the Software and IT Industry with a corpus of Rs. 100 crore

19 Government Incentives in infrastructure segment The government has been continuously improving infrastructure with better roads, setting up technology parks, opening up telecom for enhanced connectivity, providing uninterrupted power to augment growth. The government has been continuously improving infrastructure with better roads, setting up technology parks, opening up telecom for enhanced connectivity, providing uninterrupted power to augment growth.

20 Tax Incentives-Infrastructure sector The tax incentives offered to the investors by the Government of India are a boon for firms involved in IT outsourcing to India. The incentives that facilitate economic growth and development are: The tax incentives offered to the investors by the Government of India are a boon for firms involved in IT outsourcing to India. The incentives that facilitate economic growth and development are: 1. Infrastructure: 1. Infrastructure: A 10 years tax holiday to ventures engaged in developing and / or maintaining and operating an infrastructure facility. A 10 years tax holiday to ventures engaged in developing and / or maintaining and operating an infrastructure facility. 2. Power: 2. Power: 10 years tax holiday to undertakings, which generate and / or distribute power. 10 years tax holiday to undertakings, which generate and / or distribute power. 3. Telecom: 3. Telecom: 5 years tax holiday for companies providing telecom services including Internet services and broadband services. Also 30 % deduction from profits for the next 5 years in any 10 continuous years out of first 10 years is also offered. 5 years tax holiday for companies providing telecom services including Internet services and broadband services. Also 30 % deduction from profits for the next 5 years in any 10 continuous years out of first 10 years is also offered. 4. Industrial Parks and Special Economic Zones 4. Industrial Parks and Special Economic Zones 10 years tax holiday is applicable to ventures that develop and /or operate or maintain in notified IT parks and special economic zones. 10 years tax holiday is applicable to ventures that develop and /or operate or maintain in notified IT parks and special economic zones.

21 Tax Incentives 5. Other Industries: 5. Other Industries: 5-year tax holiday is available for new industrial units to be set up in backward states and districts. 5-year tax holiday is available for new industrial units to be set up in backward states and districts. 6. Incentives for Exports: 6. Incentives for Exports: No Tax is deducted on exporters profits for unit set up on EPZs, STPs, EHTPs, FTZ and SEZs. No Tax is deducted on exporters profits for unit set up on EPZs, STPs, EHTPs, FTZ and SEZs. 7. Other Incentives: 7. Other Incentives: Tax concessions are allowed for FTI and a weighted deduction of 150% for scientific research and development expenditure have been offered. 10 years tax holiday is available for R&D companies engaged in scientific and industrial research. Tax concessions are allowed for FTI and a weighted deduction of 150% for scientific research and development expenditure have been offered. 10 years tax holiday is available for R&D companies engaged in scientific and industrial research.

22 Government Incentives in SEZ In India units are allowed to be set up in SEZ for rendering of services as well. The units in the zone are required to be a net foreign exchange earner. The units in SEZ set up during the financial year 2005 will get the following exemptions: 100% exemption of profits and gains from business for the first 5 years 50% exemption of profits and gains from business for the next first 5 years 50% exemption to the extent that such amount is reinvested in the SEZ Special Reserve Account. Losses falling under the heads Profits and gains from Business or profession and Income from Capital Gains can be carried forward/ set off as long as such loss is related to the business of the SEZ unit Exemption from Central sales tax on inter-state sale or purchase of goods Facility to retain 100% exchange earnings in EEFC account. ( exchange earners foreign currency account) Exemption from Service tax Export proceeds to be realized within 12 months SEZ units may import or procure from the domestic sources, duty free, all their requirements of capital goods, raw materials, consumables, spares, packing materials, office equipment, DG sets etc. for implementation of their project in the Zone without any licence or specific approval.

23 The Key issues-dealing with International clients in LPO business Your Market presence How you introduce your organization IT & systems in place Understanding cultural differences Due diligence Establishing credibility, endorsement of values Exhibit experience Addressing IPR & data protection issues Clear terms of engagement Competence & Manpower Promptness & Quality Control Payment arrangements

24 Approac hing Introduce LPO Discussi ng work possibiliti es Understan ding Difference s in culture ScrutinyBackgrou nd Check Establish ing Credibilit y IPR & Data protectio n issues Steps in Dealing with an International Client Agreeme nt Compete nce Payment Services & Quality

25 The Six Fundamental Value Parameters Parentage Presence People Product Professional Promise Global leader more than 5 decades of customer loyalty & service Global leader more than 5 decades of customer loyalty & service Continuous onsite and global support to handhold and troubleshoot immediately Continuous onsite and global support to handhold and troubleshoot immediately Professionally qualified, hands-on industry experience, specific domain expertise & proven delivery capabilities Professionally qualified, hands-on industry experience, specific domain expertise & proven delivery capabilities Most user friendly, futuristic design, easy scalability, zero vendor dependence, technology backing Most user friendly, futuristic design, easy scalability, zero vendor dependence, technology backing Continuous commitment, on-time delivery, reliability, & flexibility Continuous commitment, on-time delivery, reliability, & flexibility Guaranteed success Guaranteed success

26 LPO Industry s prime challenges: High attrition rates High attrition rates Unpredictability in regular flow of work Unpredictability in regular flow of work High cost of training and infrastructure investment High cost of training and infrastructure investment Ensuring information security and confidentiality especially under varying privacy laws Ensuring information security and confidentiality especially under varying privacy laws Abdication of responsibility Abdication of responsibility Risk management Risk management Quality assurances Quality assurances

27 Quality related accreditations International Standards Organization (ISO) 9000 series Six Sigma CMMi Model (Capability Maturity Model) SEI-CMM Model People Capability Maturity Model (People- CMM) e Services Capability Model (eSCM)

28 LPO Literature Printed/Online directory Past Experience of The firm Experience of key personnel Advertisement Website Media /press conferences Publications References Giving/hosting Seminars Approaching a client

29 Agenda for discussion with a foreign client Exchange of GoalsCommitmentUnderstandingRelationshipAgreement Earliest contacts should include a detailed exchange aimed at achieving long term goals A thorough understanding of the clients business objectives in the context of political, economic and social systems in the local jurisdiction An understanding of how different business practices, customs and etiquette can affect the relationship between the firm and its foreign client An agreement recording terms of engagement, issues-IPR, Data protection, tax issues To avoid unverified assumptions and to address issues when they arise.

30 Working out detailed strategies & plans Appreciate Clients goals Appreciate Clients goals Tune your Business objectives and strategy Tune your Business objectives and strategy Risk Implications of the clients position in the home market Risk Implications of the clients position in the home market Domestic Market place –Safeguarding LPO Reputation in the local jurisdiction –confidentiality, security concerns Domestic Market place –Safeguarding LPO Reputation in the local jurisdiction –confidentiality, security concerns Agree on policies and standards for assignment management and client service Agree on policies and standards for assignment management and client service Collect feedback on client satisfaction Collect feedback on client satisfaction

31 Understanding common cross border differences Professional precedence and deference Professional precedence and deference Communications Communications Holidays Holidays Adjusting to inevitable time gaps Adjusting to inevitable time gaps

32 Ready for Scrutiny ? TEAM INFRASTRUCTURE CAPABILITY RELIABILITY SKILLS RELEVANT APPLICABLE LAW

33 What is indispensable to a Foreign Client? A trustworthy & value adding partner A trustworthy & value adding partner - that ensures Quality & service - that ensures Quality & service Reliability Reliability -that ensures success -that ensures success Values Values - that goes beyond words - that goes beyond words Experience Experience - that holds Client in good stead to make right decisions - that holds Client in good stead to make right decisions

34 What Clients look for? Expertise Expertise - that provide accuracy. Infrastructure Infrastructure - that can ably support & value add to Customer Quality Quality - that assures you error-free and timely project delivery Support Support - that ensures success - that ensures success

35 Establishing credibility Fully skilled Team Strong infrastructure Previous tasks Completed Task Appreciation from the client

36 Background Check on a New Client Conduct due diligence incase of new client. Conduct due diligence incase of new client. Website check Website check Personality analysis over phone discussions Personality analysis over phone discussions Verify the identity of the company with the corresponding Countrys embassy/government/country records Verify the identity of the company with the corresponding Countrys embassy/government/country records Confirm that the signatory is authorized to sign on behalf of the company Confirm that the signatory is authorized to sign on behalf of the company Verify that the company is legal and doing real business Verify that the company is legal and doing real business

37 Collate detailed Information Firms must maintain procedures and obtain satisfactory evidence of identity for all new clients. Confirm the Clients Identity If the official name of the company exists in the corporate records of the state or region in which the contract needs to be enforceable. If the signatory signing on behalf of a legitimate company, is listed as an authorized signatory of that company.

38 Due diligence techniques Check The Client's Background Check The Client's Background find some history about the company in the public corporate records find some history about the company in the public corporate records consultants who specialize in checking out company backgrounds consultants who specialize in checking out company backgrounds credit reporting companies (like Equifax) credit reporting companies (like Equifax) corporate credit and information bureaus (like Dunn & Bradstreet) corporate credit and information bureaus (like Dunn & Bradstreet) consolidated information sources (like knowx.com) consolidated information sources (like knowx.com)knowx.com Identity procedures should not be an end in themselves.

39 CLIENT IDENTITY VERIFICATION IdentityAddress Individual Birth Certificate Record of home visit Photo driving license Council tax / rent demand Passport Utility bill Photo card (Corgi / CIS) Inland revenue document Government identity card Entry on electoral role Residence permit State benefit entitlement Firearms certificate Paper driving license

40 CLIENT IDENTITY VERIFICATION Persons Persons Identity evidence Business or entity Proprietor Utility bill Bank signatories registration certificate Inland revenue document Bank details Tax returns Business records Professional registrations Personal visit

41 Legal Issues Issues relating to the ownership of intellectual property Liability for failures, and limitation of liability The right of termination-exit route Prohibition on hiring the others employees Data Protection, confidentiality-contractually enforceable,Art 21 of constitution, common law, fiduciary duty, breach of trust-criminal offence – both IPC and IT Act

42 Types of security related risks Three types of security related risks: Three types of security related risks: Theft of Data and Information Theft of Data and Information Natural Disasters Natural Disasters External Acts like viruses External Acts like viruses The National Association of Software Services Companies or Nasscom is working with the government to ensure that India's data privacy legislation is more in line with the U.S. It also intends to have the security practices of all its 860 members audited by international accounting firms. A cyber crime unit, which NASSCOM initiated in Bombay's police department where officers were trained to investigate data theft, is planned in nine other cities. The National Association of Software Services Companies or Nasscom is working with the government to ensure that India's data privacy legislation is more in line with the U.S. It also intends to have the security practices of all its 860 members audited by international accounting firms. A cyber crime unit, which NASSCOM initiated in Bombay's police department where officers were trained to investigate data theft, is planned in nine other cities.

43 Create strong confidentiality protection regimes Dedicated teams to maintain strict security, info - access and staffing rules Dedicated teams to maintain strict security, info - access and staffing rules Secure transmission and storage of information Secure transmission and storage of information Processes to be streamlined –only if need to know principle be adopted Processes to be streamlined –only if need to know principle be adopted NDA, adopt foreign data protection principles NDA, adopt foreign data protection principles IP of projects belongs to client IP of projects belongs to client Client –attorney priviledge Client –attorney priviledge Quality assurance accrediation Quality assurance accrediation

44 Data Protection-UK The Data Protection Act 1998 came into force on 1 March 2000 The Data Protection Act 1998 came into force on 1 March 2000 Under the Data Protection Act, anyone processing personal information must comply with eight principles of good information handling. Under the Data Protection Act, anyone processing personal information must comply with eight principles of good information handling. fairly and lawfully processed; fairly and lawfully processed; processed for limited purposes; processed for limited purposes; adequate, relevant and not excessive; adequate, relevant and not excessive; accurate and up to date; accurate and up to date; not kept longer than necessary; not kept longer than necessary; processed in accordance with the individual's rights; processed in accordance with the individual's rights; secure; secure; not transferred to countries outside the European Economic area, unless there is adequate protection. not transferred to countries outside the European Economic area, unless there is adequate protection.

45 Legal Provisions dealing with data protection under the IT Act,2000 IT Act, 2000 delineates both civil and criminal liabilities for - IT Act, 2000 delineates both civil and criminal liabilities for - cyber contraventions[S.43(a) to (h)] and cyber contraventions[S.43(a) to (h)] and cyber offences[Ss.65-74] cyber offences[Ss.65-74]

46 Legal Provisions dealing with data protection under the IT Act,2000 Sec 2(1)(o) of IT Act 2000 defines Data- Sec 2(1)(o) of IT Act 2000 defines Data- A representation of information, knowledge, facts, concepts or instructions which are being prepared or have been prepared in a formalized manner, and is intended to be processed, is being processed or has been processed in a computer system or computer network, and may be in any form or stored internally in the memory of the computer; A representation of information, knowledge, facts, concepts or instructions which are being prepared or have been prepared in a formalized manner, and is intended to be processed, is being processed or has been processed in a computer system or computer network, and may be in any form or stored internally in the memory of the computer;

47 Legal Provisions dealing with data protection under the IT Act,2000 Computer database[ S.43 Exp (ii)- Computer database[ S.43 Exp (ii)- A representation of information, knowledge, facts, concepts or instructions in text, image, audio, video that are being prepared or have been prepared in a formalized manner or have been produced by a computer, computer system or computer network and are intended for use in a computer, computer system or computer network. A representation of information, knowledge, facts, concepts or instructions in text, image, audio, video that are being prepared or have been prepared in a formalized manner or have been produced by a computer, computer system or computer network and are intended for use in a computer, computer system or computer network.

48 Cyber Contraventions Deals primarily in with unauthorized access to computer, computer system or computer network. Deals primarily in with unauthorized access to computer, computer system or computer network. May result in civil prosecution May result in civil prosecution Liable to pay for damages by way of compensation not exceeding one crore rupees to the person so affected. Liable to pay for damages by way of compensation not exceeding one crore rupees to the person so affected.

49 Cyber Offences Deals with computer, computer system, or computer network related serious offences such as hacking (Section 66). Deals with computer, computer system, or computer network related serious offences such as hacking (Section 66). May result in criminal prosecution May result in criminal prosecution IT Act, 2000 has identified offences which are punishable with imprisonment or with fine or both. IT Act, 2000 has identified offences which are punishable with imprisonment or with fine or both.

50 Arms ActOnline sale of Arms Sec. 383 IPCWeb-Jacking NDPS ActOnline sale of Drugs Sec 416, 417, 463 IPC spoofing Sec 420 IPCBogus websites, cyber frauds Sec 463, 470, 471 IPCForgery of electronic records Sec 499, 500 IPCSending defamatory messages by Sec 503 IPCSending threatening messages by Computer Related Crimes under IPC and Special Laws 50

51 Case Study- BPO Data Theft The recently reported case of a Bank Fraud in Pune in which some ex employees of BPO arm of MPhasis Ltd MsourcE, defrauded US Customers of Citi Bank to the tune of RS 1.5 crores has raised concerns of many kinds including the role of "Data Protection". The recently reported case of a Bank Fraud in Pune in which some ex employees of BPO arm of MPhasis Ltd MsourcE, defrauded US Customers of Citi Bank to the tune of RS 1.5 crores has raised concerns of many kinds including the role of "Data Protection".

52 Case Study (contd.) The crime was obviously committed using "Unauthorized Access" to the "Electronic Account Space" of the customers. It is therefore firmly within the domain of "Cyber Crimes". ITA-2000 is versatile enough to accommodate the aspects of crime not covered by ITA-2000 but covered by other statutes since any IPC offence committed with the use of "Electronic Documents" can be considered as a crime with the use of a "Written Documents". "Cheating", "Conspiracy", "Breach of Trust" etc are therefore applicable in the above case in addition to section in ITA Under ITA-2000 the offence is recognized both under Section 66 and Section 43. Accordingly, the persons involved are liable for imprisonment and fine as well as a liability to pay damage to the victims to the maximum extent of Rs 1 crore per victim for which the "Adjudication Process" can be invoked.

53 Case Study (contd.) The BPO is liable for lack of security that enabled the commission of the fraud as well as because of the vicarious responsibility for the ex-employee's involvement. The process of getting the PIN number was during the tenure of the persons as "Employees" and hence the organization is responsible for the crime. The BPO is liable for lack of security that enabled the commission of the fraud as well as because of the vicarious responsibility for the ex-employee's involvement. The process of getting the PIN number was during the tenure of the persons as "Employees" and hence the organization is responsible for the crime. Some of the persons who have assisted others in the commission of the crime even though they may not be directly involved as beneficiaries will also be liable under Section 43 of ITA Some of the persons who have assisted others in the commission of the crime even though they may not be directly involved as beneficiaries will also be liable under Section 43 of ITA Under Section 79 and Section 85 of ITA-2000, vicarious responsibilities are indicated both for the BPO and the Bank on the grounds of "Lack of Due Diligence". Under Section 79 and Section 85 of ITA-2000, vicarious responsibilities are indicated both for the BPO and the Bank on the grounds of "Lack of Due Diligence". At the same time, if the crime is investigated in India under ITA- 2000, then the fact that the Bank was not using digital signatures for authenticating the customer instructions is a matter which would amount to gross negligence on the part of the Bank. (However, in this particular case since the victims appear to be US Citizens and the Bank itself is US based, the crime may come under the jurisdiction of the US courts and not Indian Courts). At the same time, if the crime is investigated in India under ITA- 2000, then the fact that the Bank was not using digital signatures for authenticating the customer instructions is a matter which would amount to gross negligence on the part of the Bank. (However, in this particular case since the victims appear to be US Citizens and the Bank itself is US based, the crime may come under the jurisdiction of the US courts and not Indian Courts).

54 The Outsourcing cycle : Memorandum of Understanding (MOU) Agreement Negotiations Outsourcing Agreement & engagement letter Service Commencement Service Improvement Renewal or termination

55 Points to be addressed in the engagement letter Availability and access Availability and access Responsiveness. Responsiveness. Working language(s) Working language(s) Status reports. Status reports. Delegation of legal work Delegation of legal work Communications with the foreign clients home office and local subsidiaries. Communications with the foreign clients home office and local subsidiaries. Communications with third parties. Communications with third parties. Conflict and unfair competition issues Conflict and unfair competition issues Staff sustitution Staff sustitution Billing Billing Expenses and disbursements. Expenses and disbursements. Payment. Payment. Applicable law & settlement of disputes Applicable law & settlement of disputes

56 IMPORTANT CONSIDERATIONS- Service Level Agreement Quality Quality - The client should be able to get out of the contract if he finds the quality below par. - The client should be able to get out of the contract if he finds the quality below par. Quantity Quantity - volume of work to be done in an hour/day/week/month as per agreed. Confidentiality Confidentiality - assurance that all the information and data would be not be disclosed to any third party. Pay Cycle Pay Cycle - how to remit professional fees Price Increases Price Increases - dependence of the client-ensure that for large, long-term projects, once the vendors personnel have acquired experience on the client projects, the vendor does not result in unreasonable price increases or replacement of key employees

57 Billing How often will fees be billed? How often will fees be billed? How much detail does the client require on the invoice? How much detail does the client require on the invoice? Billing practices vary considerably. A foreign client who is used to itemized, detailed hourly billing might take exception to the summary form of invoice that is customary for the firms local clients. Billing practices vary considerably. A foreign client who is used to itemized, detailed hourly billing might take exception to the summary form of invoice that is customary for the firms local clients.

58 Billing rates Depending upon the type of services being delivered, the billing charges range from US$ 10 to 150. Mainly in the industry, three kinds of standards are prevalent in terms of charging the clients. Depending upon the type of services being delivered, the billing charges range from US$ 10 to 150. Mainly in the industry, three kinds of standards are prevalent in terms of charging the clients. One, the flat rate fee – the clients have to pay the fixed amount of charges for the entire months working. Second, the packaged fee – wherein the clients pay for buying the entire package of services like patents prior art search would cost them around US$ 900 for 12 hours. Third, on hourly basis. High-end jobs would cost more than even US$ 100. The value for money has to be given by keeping prices relatively reasonable. One, the flat rate fee – the clients have to pay the fixed amount of charges for the entire months working. Second, the packaged fee – wherein the clients pay for buying the entire package of services like patents prior art search would cost them around US$ 900 for 12 hours. Third, on hourly basis. High-end jobs would cost more than even US$ 100. The value for money has to be given by keeping prices relatively reasonable.

59 Billing rates The billing charges are as follows: Area Amount (USD per hour) Telemarketing 5-12 Transaction Processing Tech Support (inbound) Printing Support Services Basic Back Office F&A Document Management The billing charges are as follows: Area Amount (USD per hour) Telemarketing 5-12 Transaction Processing Tech Support (inbound) Printing Support Services Basic Back Office F&A Document Management Services Research & Analysis Patent Drafting & Legal Research 150

60 Per-transaction price A norm in the US and the concept is fast gaining popularity among top Indian firms PTP for the uninitiated is a form of pricing where a firm company is paid only on the basis of completed transactions. The client pays a portion of the value that he gains from outsourcing rather than a fixed cost based on the number of seats or hours of effort that a service provider uses to deliver the solution. This ensures that the client pays only for the benefits that he derives and not for inefficiencies of the service provider. Transaction-based pricing requires high degree of domain specialization especially for high end work – a firms credibility and proven track record that today is not widespread.

61 Expenses and disbursements. The range of expenses and disbursements that are accepted as reimbursable can vary considerably from country to country. What is customary in one jurisdiction might be viewed as bordering on dishonesty in another? Unless reimbursement of expenses and disbursements is discussed and agreed at the start, the firm should expect the foreign client to challenge some of these charges.

62 Payments provisions Amounts to be paid-(i) Lump sum contract; Amounts to be paid-(i) Lump sum contract; (ii) Time based contracts; (ii) Time based contracts; (iii) Success fee based contract; (iii) Success fee based contract; (iv) Percentage contract; (iv) Percentage contract; (v) Indefinite delivery contract. (v) Indefinite delivery contract. Schedule of payments- Schedule of payments- Payment procedures, shall be indicated in the draft contract and agreed upon during negotiations. Payment procedures, shall be indicated in the draft contract and agreed upon during negotiations. Payments may be made at regular intervals (as under time-based contracts) or for agreed outputs (as under lump sum contracts). Payments may be made at regular intervals (as under time-based contracts) or for agreed outputs (as under lump sum contracts). Payments for advances if any should normally be backed by Bank Guarantee. The limit for advance payment will be as prescribed by GFR. Normally, it should not exceed 10% of the cost of the contract. Payments for advances if any should normally be backed by Bank Guarantee. The limit for advance payment will be as prescribed by GFR. Normally, it should not exceed 10% of the cost of the contract. Payments shall be made promptly in accordance with the contract provisions. Payments shall be made promptly in accordance with the contract provisions.

63 Three words of Caution-Payment Three words of Caution-Payment It may be the custom in the foreign clients country to age professional services invoices for up to 90 to 120 days. A demand for payment within 30 days might be viewed as distrusting and insulting to the clients integrity. Law firms must also be very careful about attempting to charge interest on accounts that are more than 30 days old. In some countries, interest payments, especially to providers of trusted professional services, are considered highly improper or even immoral. Litigation to collect a fee is considered to be a breach of professional ethics in some countries. Even though these professional rules might not apply to a law firm outside the clients home jurisdiction, even the suggestion of possible legal action to collect a fee could be viewed as highly offensive by the client, especially if the client feels that there are unresolved service issues. Customs Litigation Interest

64 Key Performance Indicators (KPIs) Average Data Value (Sales and Reservations Only) Average Data Value (Sales and Reservations Only) Customer Satisfaction Customer Satisfaction Service Level Service Level Abandoned Percent of Data Abandoned Percent of Data Cost Per Data Cost Per Data Errors and Rework Errors and Rework Forecast Work-load to Actual Forecast Work-load to Actual Scheduled Staff to Actual Scheduled Staff to Actual Adherence to Schedule Adherence to Schedule Average Handling Time Average Handling Time Reviewing strategies for increasing performance levels Reviewing strategies for increasing performance levels

65 Dealing with a complaint If the complaint is in writing, acknowledge it immediately If the complaint is in writing, acknowledge it immediately Tell your client who will be dealing with the complaint, and what the likely timescale is for dealing with it Tell your client who will be dealing with the complaint, and what the likely timescale is for dealing with it Keep your client informed of the complaints progress if it is unlikely to be resolved quickly Keep your client informed of the complaints progress if it is unlikely to be resolved quickly Note what the client expects from the complaints process, and whether those expectations are reasonable Note what the client expects from the complaints process, and whether those expectations are reasonable If your client asks for a meeting, try to arrange one as soon as possible If your client asks for a meeting, try to arrange one as soon as possible Open a complaint file, and keep a record of what steps you take towards resolving the complaint Open a complaint file, and keep a record of what steps you take towards resolving the complaint Finally, remember that speedy resolution of complaints helps to maintain client goodwill, and is frequently the most cost-effective solution for you. Finally, remember that speedy resolution of complaints helps to maintain client goodwill, and is frequently the most cost-effective solution for you.

66 Thank You! © Seth Associates, 2007 All Rights Reserved SETH ASSOCIATES ADVOCATES AND LEGAL CONSULTANTS New Delhi Law Office: C-1/16, Daryaganj, New Delhi , India Tel:+91 (11) , Corporate Law Office: B-10, Sector 40, NOIDA , N.C.R,India Tel: +91 (120) , Fax: +91 (120)


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