IT Outsourcing Agreement

 In this world of digital transformation and continuous development of new technologies, when any business organization decides to hire an IT outsourcing company then it becomes compulsory to sign an NDA(nondisclosure agreement) to protect and secure your confidential data such as trade secrets and business strategies. NDA is a contract that creates a confidential relationship between the two parties that gets access to the business and project sensitive information. This means that there will be an exchange of sensitive data from both ways or confidential information can also go both ways. To know more about NDA in the IT outsourcing world, let’s go through this blog and understand how it works.

1. What is a Non-Disclosure Agreement?

A non-disclosure agreement is the most common legal contract agreement that is normally signed between two parties before comprehensive negotiations begin. This is a formal agreement that establishes a legal trust between a person who keeps a trade secret (such as the idea) and the person to whom the secret will be revealed (i.e., the outsourcing company you want to outsource your development to). Because of the benefits of IT Outsourcing services, many companies are looking to outsource their IT projects and this is the moment when NDA comes into the picture.

An NDA is such an agreement that allows a corporation to protect its intellectual property, confidential data and trade secrets. It’s a non-disclosure arrangement that may be exclusive and the information flow is only in one direction. In that situation, only the receiving party is obligated to keep the confidential information about the contracted company secret.

A trade secret, a copyrighted method, future project or product specifics, financials, marketing plans, technological feats, or some other confidential knowledge may all be considered proprietary material. An app development outsourcing company is mostly the recipient of information.

2. Purpose of NDA

Non-disclosure agreements don’t have to be prolonged or impossible to grasp. In reality, the best ones are usually just a few pages long. The purpose of the NDA is very thoughtful. It is just meant to provide a clear picture to all businesses why they should use NDA for their business. So the purpose of NDA is to eliminate all future disputes and bring both the parties to mutual agreement.  

The extent of involvement of the partner company in the partnership can be decided by signing the NDA. Hence the software development services are exposed to the risks of classified information or data breach as the partnership will expose the software developers to access information.

As a result, all aspects of it must be included in non-disclosure agreement clauses. Often, both organizations will get a feel of the degree to which they will be able to assist each other and the collaboration’s limits.

For the time being, any paper and piece of information transacted or stated in advance in the agreement would be secured under the agreement.

3. Types of Confidentiality Agreement in IT Outsourcing

NDA is an integral part of the business to collaborate seamlessly without any interruptions. For companies to do business, it is important to establish trust among both the parties and NDA is responsible to take this on board. NDAs are not just one type. There are numerous ways you can associate with any business using different types of NDA. Basically, there are three types of NDA.

3.1 Unilateral Agreement

One side discloses sensitive details and other intellectual property to a second party under this unilateral deal. The second (receiving) group promises to keep the information private to prevent it from being shared with others. A one-way NDA is another name for this.

3.2 Bilateral Agreement

All sides exchange classified information under a bilateral arrangement, with each side promising to keep the information exchanged confidentially. In joint ventures, mergers, and acquisitions, this is also known as a two-way or shared NDA.

3.3 Multilateral Arrangement

It is one in which three or more sides agree not to share sensitive information with anybody other than the parties to the agreement. When working for three or more members, this form of NDA is advantageous, but it necessitates mutual consent during the agreement’s negotiation.

4. Parts of a Non-Disclosure Agreement

4.1 Parties Involved

Including the name of the parties involved in the project is the obvious part of the NDA but still, the contract must precisely include the details of who is receiving the essential data and is obliged to protect and keep it remain confidential. This means that when any business hires a software development company, it is essential to mention all the team members in it.

4.2 Definition of Confidential Information

Generally, not every data shared with a contractor or a partner is confidential. But when it comes to NDA, it specifies all the different types of information that is considered sensitive. Besides, it also describes what form of communication is there between both parties.

4.3 Return of Information

When the business relationship between the parties ends, there might be a requirement for an NDA recipient to confirm that all the important and confidential data has been destroyed or returned.

4.4 Exclusions

Exclusions mean the types of information that aren’t required to be kept confidential. This includes previously disclosed data or financial relationships with another firm. Basically, this section of the NDA includes information that isn’t supposed to be kept secret from the world.

5. Is NDA a Savior For all Your Complex Software and App Development Challenges?

Undoubtedly, yes signing a non-disclosure agreement (NDA) is very important for businesses. You can easily handle your business data, confidential information, and all other sensitive information which are vital for businesses. You must ensure that a strong binding arrangement is drawn out with your service provider while outsourcing business processes. Your trade secrets and other classified information will be safeguarded by this NDA. Hence, signing an NDA is a smart choice that companies make with outsourcing companies by guaranteeing the confidentiality of all personal business information and concurrently boosting business.

Itesh Sharma

Itesh Sharma is core member of Sales Department at TatvaSoft. He has got more than 6 years of experience in handling the task related to Customer Management and Project Management. Apart from his profession he also has keen interest in sharing the insight on different methodologies of software development.


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    1. Jaun Faraz

      Businesses know that outsourcing their IT operations can be very beneficial but they are afraid of losing control of their project and loss of valuable information. But by reading this article business can overcome this issue. This article completely explains how by signing NDA businesses can take advantage of outsourcing. By signing an NDA your trade secrets and other classified information will be safeguarded.

    2. Sayema

      Article explains in very detail about the importance of NDA during outsourcing of IT services. It explains purpose, definition and important clauses which need to be considered. But it can also need to include what to do when vendors break the outsourcing agreement.

    3. Nancy

      Thank you for sharing such an important topic. This article is very well written and informative. It clears all my doubts about security in IT outsourcing.

    4. Aadil Mustafa

      It's essential to carefully consider all of the terms of an outsourcing agreement in order to protect your business and ensure a successful partnership. One key point that the article touched on is the importance of clearly defining the scope of work and the responsibilities of each party. This can help to avoid misunderstandings and ensure that both parties are working towards a common goal.