Offshore Development Contract Conclusion Process

1. What is Offshore Development?

Offshore development is a business model where software or system development is outsourced to a development team or company located in a foreign country. This approach is adopted by many companies to reduce costs, acquire specialized knowledge, and utilize resources efficiently. In Japan, in particular, offshore development is attracting attention due to labor shortages and high labor costs.

2. Offshore Development Contract Conclusion Process:

2.1 Requirements Gathering and Partner Selection:

First, clearly define the objectives and requirements of the development project. This involves:

• Clearly defined goals: Specifically determine the project's purpose and desired outcomes.
• Functional and performance specifications: Determine the necessary functions and performance levels and how they contribute to the project's success.
• Technical specifications: Detail the technologies and platforms to be used.
• Budget and schedule: Set acceptable costs and deadlines.

Based on these requirements, list potential companies considering their reliability, past performance, and technical capabilities, and request proposals.

2.2 Non-Disclosure Agreement (NDA) Conclusion:

Before sharing detailed information with an offshore partner, conclude an NDA (Non-Disclosure Agreement). The NDA should:

• Define confidential information: Clearly define what constitutes confidential information.
• Specify the purpose of use: State the purpose for which the confidential information will be used.
• Prohibit third-party disclosure: Stipulate the obligation not to disclose the information to third parties.
• Set a confidentiality period: Define the effective period of confidentiality obligations.

This allows both parties to share information with confidence and proceed with the project.

2.3 Receiving Proposals and Quotations:

Next, receive proposals and quotations from potential partners. At this stage:

• Evaluate technical solutions: Examine whether the proposed technical solutions meet the requirements.
• Review the budget: Confirm that the quotation is within budget.
• Assess the schedule: Evaluate whether the proposed schedule is realistic.
• Check risk mitigation measures: Ensure that countermeasures for risks are clearly defined.
• Judge overall validity: Determine the overall validity of the proposal.

2.4 Contract Negotiation and Conclusion:

Based on the proposals and quotations, negotiate detailed contract terms with the partner. After reaching an agreement, create a contract and have it reviewed by the legal department or a lawyer. During negotiations:

• Choose a contract type: Select from Quasi-mandate Contract, Contracting Agreement, or Lab Contract.
• Clarify payment terms: Define payment timing and methods.
• Set deadlines: Establish deadlines for deliverables.
• Define responsibilities: Clarify the responsibilities and obligations of each party.

Ensure the contract accurately reflects all conditions, meets legal requirements in relevant countries, and clearly states risk mitigation measures. The project officially starts when both parties sign and seal the final contract. Electronic signatures or digital signatures may be used for some parts of the contract, which are legally valid.

3. Summary:

The process leading to the conclusion of an offshore development contract is essential for project success. First, define clear project objectives and requirements, and select a reliable offshore partner. Next, conclude an NDA, receive proposals and quotations, negotiate contract terms, and finally, create, review, and conclude a contract incorporating the agreed-upon conditions. Carefully following this process ensures smooth project execution and success.