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IT services outsourcing

Outsourcing is a response to the need of acquiring a specific service with the maximum cost reduction, as well as reduction of difficulties connected to managing a team and the necessity of maintaining the team despite the changing needs of the entrepreneur. To begin with, it is crucial to emphasize that the subject of this post is outsourcing of services – as distinguished from outsourcing of personnel, which is discussed in a separate post. More often than not, outsourcing of services takes the form of a managed service – a collaboration, in which the IT service provider manages its realization and is responsible for its accuracy and punctuality. Therefore, it is a situation different in comparison to outsourcing of personnel, where the supplier is responsible for making the qualified personnel available to the client on time, but should not be liable for the timeliness and quality of the projects underway.

The legal responsibility of the principal (the client)

Outsourcing of services is widely used and does not involve meeting any specific requirements (an exception is, for example, the outsourcing of banking services by a bank). The client concludes a contract with a service provider, the breach of which by either party has the consequences specified in the contract or in the law. According to one of the most basic Civil Code provisions – Article 471, the debtor is obliged to compensate for damage resulting from non-performance or improper performance of an obligation, unless the improper performance is a result of circumstances for which the debtor is not accountable.

It often happens that a contract implements an extra rigor of responsibility – in particular, the liability for breach of a ban of employing the personnel of the service provider or breaches of information confidentiality. Their implementation and form depends largely on the negotiating power of the service provider.

As a rule, a client does not hold responsibility towards the personnel performing services on the part of the contractor – unless, for example, the personnel gets injured while performing work on the client’s premises, the client violates the personal rights (including the right to privacy) of such a person. However, we are discussing tort liability resulting from the force of law, not a contractual liability – after all, no contract binds the principal with the contractor’s personnel.

The client is generally not liable towards the service provider's subcontractors.

The legal responsibility of the contractor (the service provider)

The situation of an IT service provider is significantly different from the situation of an IT personnel provider. In this case, a contractor is responsible for the accuracy and punctuality of the services performed – as they are committed to perform a specific work within a specific time, not only provide the client with the personnel necessary to meet the client's internal needs.

An extra complication emerges in a situation where the service provider is a subcontractor performing services for an end customer on behalf of an outsourcing principal. Such contracts, most often imposed by principals, not so rarely contain provisions that condition payment of the contractor's fee on payment by the end client of the fee that is due to the principal. In addition, such contracts frequently transfer to the contractor responsibility for penalties and other sanctions imposed by the end customer.

Personal data

Outsourcing of IT services often includes entrusting the service provider with the processing of personal data held in the client's resources. This enforces the conclusion of a Data Processing Agreement (DPA), which foresees additional rules for the service provider's liability toward the customer. It is important to keep in mind that when entrusting the service provider with the processing of personal data, the customer takes full responsibility for ensuring that the processing is legally carried out.

To sum up:

The principal's responsibility is similar regardless of what is the subject of the outsourcing - be it performing precisely specified services or merely ensuring the availability of specific personnel. However, the contractor's legal situation is already drastically different depending on what kind of service the supplier has agreed to provide. This is an extremely important remark, as this problem is often overlooked by IT service providers. An entrepreneur is very often convinced that it has made an agreement to provide personnel but in reality, the contract imposes full responsibility on them for the quality and timeliness of the projects carried out. The liability of the parties to a contract is defined by the subject matter of the contract and what is the subject of the contract is determined by its provisions, not by title or non-binding email arrangements.

Outsourcing comes with risks for both parties of the contract. These risks vary depending on who is a party to the contract and what the contract covers, but it is always wise to seek legal consultation to learn about the consequences that come with signing a contract.