Data Protection Laws and Outsourcing

Posted on April 28, 2010

Data protection is a vital aspect of business, especially in the outsourcing industry. Throughout the process of outsourcing, a lot of data – both common and sensitive – is exchanged between a service provider and its client. In a bid to get more finance and legal outsourcing projects, service providers in many countries are requesting their authorities to come up with a law that can assure the safety of data that is transferred by the client to the service provider to work on a project. The absence of a data protection law makes companies more reluctant to outsource their finance operations to offshore companies.

While some countries have existing laws related to data protection, some countries don’t. India, one of the most sought after outsourcing destinations in the world, also has a data protection legislation in place. In countries like Kenya, data protection laws are on the verge of being developed. “A law on data protection has been held back because it was tied to the Freedom of Information Act. We expect both laws to be approved by the Cabinet in their next few meetings,” said Bitange Ndemo, permanent secretary in the Ministry of Information, Kenya.

According to analysts, banks and similar companies fear litigation that could come with disclosure of customer information, when outsourcing. They believe that even with the presence of a robust data protection law it is risky to outsource banking operations which include sensitive data. According to an international Information and Communication Technologies (ICT) consultant, companies in countries like the U.S.A. refrain from outsourcing projects that contain business-critical data as they fear data leakage.

Why Need A Data Protection Law?

  • A data protection law not only safeguards data but also helps build a reliable framework for gathering, exchanging and using of sensitive data in business and legal context.
  • It is essential to build confidence among foreign partners that the data sent to a service provider is safe and there are adequate suitable legal mechanisms in place in the event of a data violation.

Know more about the security and confidentiality measures at Flatworld Solutions.

2 thoughts on “Data Protection Laws and Outsourcing

  1. Reuben Molina

    Data Protection Laws are becoming more and more important to a country that has a lot of service providers since outsourcing is currently rampant. It is always wise to take consideration of the clients’ concerns regarding privacy and security.

  2. Ella

    This is so true. It is very important to have a knowledge on the rules regulated by the law. Nowadays, you need to be careful about the placements of the data.


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