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MEMOIRE DE RECHERCHE
                                           2011/2012


NOM et PRENOM de l’auteur 1: SATHE Vaibhav Vishwanath, E113001




    SUJET DU MEMOIRE


Intellectual Property Issues in Global Software Outsourcing
Development of framework analyzing critical factors that impact intellectual property
transfers in global software development outsourcing scenarios




- NOM DU DIRECTEUR DE RECHERCHE: Prof. Dr. LEMAIRE Jean-Paul




   La diffusion de ce recueil     CONFIDENTIEL                   Non 
   est strictement réservée à
   ESCP Europe.
Affidavit




I the undersigned, SATHE Vaibhav Vishwanath, E113001, certify on the honor that I have
not plagiarized the paper enclosed, which means that I am the only author of all the sentences
this text is composed of. Any sentence from a different author than me was written in
quotation marks, with explicit indication of its source. I am aware that by contravening to the
present rule, I break the recognised academic principles and I expose myself to the sanctions
the disciplinary committee will decide on.
I also confirm this work has never been submitted during studies prior to ESCP Europe. If
this work has been written during studies conducted in parallel, I must precise it.


The remarks written in those pages only commit me.




                                                                   Paris, May-03-2012




                                                          SATHE Vaibhav Vishwanath
École supérieure de commerce de Paris — Europe
        79, avenue de la République, 75543 Paris cedex 11, France




  Intellectual Property Issues in Global Software Outsourcing
  (Questions de propriété intellectuelle dans le contexte mondial du logiciel sous-traitance)




                                             Vaibhav Sathe

                                Master in Management 2012 student

                                    ESCP Europe, Paris Campus




                                             Submitted To:

                                     Prof. Dr. Jean-Paul Lemaire

                                       Professor, ESCP Europe




Langue de la thèse: Anglais

© 2012. ESCP Europe. Tous droits réservés.
Contents
Introduction ................................................................................................................................ 1
Distributed Delivery Models...................................................................................................... 3
   Business Implications ............................................................................................................ 3
   Outsourcing Levels ................................................................................................................ 4
   Software Development........................................................................................................... 5
   Outsourcing Contracts ........................................................................................................... 7
Intellectual Property ................................................................................................................... 9
   IP in Products ......................................................................................................................... 9
   IP in Services ....................................................................................................................... 11
   Trainings .............................................................................................................................. 11
   Management of IP ................................................................................................................ 12
Legal Framework ..................................................................................................................... 14
   IP Laws in the world ............................................................................................................ 14
   Contract Laws ...................................................................................................................... 16
   Employment Contracts......................................................................................................... 17
   Case Study: Pine Labs vs. Gemalto Terminals, High Court of Delhi [20] ............................ 19
Client-Vendor Relationship ..................................................................................................... 21
   Trust ..................................................................................................................................... 21
   Verification .......................................................................................................................... 22
   Other Aspects of Interaction ................................................................................................ 23
Corporate Strategy ................................................................................................................... 26
   IP due diligence.................................................................................................................... 26
   Business Intelligence ........................................................................................................... 27
Research Methodology ............................................................................................................ 31
   Problem Definition............................................................................................................... 31
   Variables Extracted .............................................................................................................. 33
   Survey Design ...................................................................................................................... 34
   Survey Responses ................................................................................................................ 35
   Factor Analysis Configuration ............................................................................................. 38
   Factor Analysis Results........................................................................................................ 39
Conclusion ............................................................................................................................... 44
   Managerial Implications ...................................................................................................... 44
   Limitations and Future Scope .............................................................................................. 45
References ................................................................................................................................ 47
Appendix-I: SPSS Outputs ...................................................................................................... 50
Executive Summary

        The objective of this study was to identify factors that affect Intellectual property

Transfer in global software outsourcing scenario. The study also aimed at establishing

relative importance of these factors based on variance in expert opinion.

        The report begins with overview of software outsourcing and offshoring models. It

explains managerial implications and benefits vs. risks involved. After discussing types of

contracts in outsourcing, the scenario with software is specifically discussed. The term

Intellectual property is then defined with its application with respect to both software product

and service sectors. Then the report establishes IP management approach. We then proceed

with brief discussion on legal background and framework and establish how it varies in

critical countries like USA, EU and India from software outsourcing point of view. A sample

case study elaborating importance of legal understanding and intricacies of contract is also

discussed.

        Report then proceeds with defining role of trust between partners and discussed

various aspects of interaction between employees of two organization. Report discussed

various factors that impact the communication and possible impact on smooth IP transfers

between the partners. Report then discusses aspects from corporate strategy and defines role

of corporate intelligence, IP due diligence in safeguarding company’s interests regards to

intellectual property.

        After compiling list of all important variables, a primary expert survey was conducted

in order to derive underlying factors using statistical summarization techniques. A

summarization exercise reduced 39 variables into 13 factors among three aspects – Legal,

Human Resources and Corporate Strategy. The explained variability helps companies decide

the priority of the factors.
Intellectual Property Issues in Global Software Outsourcing                                          1




                                        Introduction

       Business landscape is changing at dramatically high speed today, thanks to modern

technological developments especially in communication and computation areas.

Competition has naturally exploded in its dynamic environment as traditional barriers have

weakened and new opportunities have risen. This has created need of absolute efficiency in

business environment. Companies have started focusing on their core competencies

entrusting other activities to vendors specializing in those. That’s why we can see that in

today’s businesses activities like recruitment, IT infrastructure & maintenance, internal

payroll & accounting, supply of raw material are increasingly done by contractors. This

allows the firm to focus on core business areas where it takes on head on with its competitors.
                                                       [3]
Simple and largest examples of it can be of Apple            . It designs and markets devices like

iPhone and iPad employing around 60,000 employees worldwide. But it has outsourced the

task of manufacturing to Taiwan based Foxconn Group which employees over 800,000 in its

factories which manufacture several hundred millions of these devices every year. Then

Apple has contracted large oceanic freight services which ship these devices to retail shops

owned by Apple or partners across the globe. Naturally, a computer company Apple has no

expertise in running hardware manufacturing plants, worker management, operational

management and transport. By negotiating best prices in advance, Apple can delegate these

tasks to vendors which have expertise and ability to deliver as per mobile manufactures

design requirements. This frees up large amount of Apple resources which are dedicated to

activities like designing new devices, develop software and applications, run marketing

campaigns and manage relationships with carriers, retailers and partners. From competition

standpoint, these activities matter to the company and not way in which it is manufactured or

transported. Apple registers hundreds of patents while designing these devices. But, when
Intellectual Property Issues in Global Software Outsourcing                                         2


Foxconn or any other supplier manufactures these devices based on these technologies, can

we believe that they learn nothing about it? Isn’t it possible that outsourcing vendors and

employees get massive knowledge of specifications, techniques and know-how of making

these devices? While company focusses on core expertise for competitive reasons, the ways

employed pose risk that the same technology, same intellectual capital can fall into hands of

competitor. It is known that Foxconn not only manufactures Apple handsets but also has

large manufacturing contracts from Apple contractors namely, Samsung, Motorola, Microsoft

and Nokia. So, how does Apple trust Foxconn with its ultimate intellectual secret? What are

benefits companies get by outsourcing? How do companies protect knowledge leaks from

their employees? Do inter-company contracts play any role? Do governments ensure such

intellectual property is protected by laws in respective countries? Do benefits of outsourcing

outweigh all the risks?

       In this thesis, we will try to look at global outsourcing of software projects and

identify how companies create, identify, protect and transfer their intellectual capital. We will

identify benefits and risks in outsourcing. We will also look at various forms of project

delivery including outsourcing and offshoring. From literature survey we will identify various

variables that affect intellectual property protection in global outsourcing scenario. The

literature will include books, published journal papers, case studies and articles published in

relevant area. We will conduct expert survey in order to gather opinions of people with

regards to importance of the variables. We will then run exploratory factor analysis to

summarize these variables and identify factors that affect IP protection. We will look from

both sides of clients and vendors. This study will be useful to companies worldwide which

are considering outsourcing of software products to take precautions while structuring the

outsourcing contracts.
Intellectual Property Issues in Global Software Outsourcing                                            3


                                      Distributed Delivery Models

Introduction

        Let’s look at some basic definitions related to outsourcing terms that have evolved
           [2]
recently         . Outsourcing means contracting out certain pre-defined tasks to third party. It is

not necessarily outside country of origin of the firm. Offshoring means getting done certain

tasks outside country of origin. Offshoring need not involve outsourcing as company itself

may open subsidiary in a foreign country. Business strategy generally includes combination

of both outsourcing and offshoring. Nearshoring means offshoring business activities to a

country which is closer to country of origin on parameters like geographical distance, culture,

language etc. This reduces significant number of management challenges encountered

otherwise in offshore team management. Multisourcing means a business strategy which is a

blend of internal and multiple external sources in order to optimize available resources.

                           Onshore                           Offshore

Insource                   Same firm/same country            Same firm/different country

Outsource                  Different firm/same country       Different firm/different country

Figure 1 Delivery Models

Business Implications
                                                                                      [2]
        A variety of reasons may exist for outsourcing based on case to case            . The most

critical benefit is cost savings due to economies of scale or geographical location. Next

incentive of outsourcing is translation of fixed costs to variable costs. It reduces initial

investment and instead firm makes payments on contract basis at regular intervals. Another

benefit is also the ability to concentrate on core competencies of organization by out-

contracting support functions. Many a times outsourcing is also used to address issues in

variability of resources to address immediate or short time requirements of number of

resources or particular expertise. Outsourcing or offshoring can also result in improving
Intellectual Property Issues in Global Software Outsourcing                                           4


efficiency of organization due to better relocation of resources. Offshoring provides

opportunities to tap into global talent pool, many times at cheaper cost. The flexibility gained

by organization is critical in today’s delicate condition in terms of competition or economic

outlook.

       However, Outsourcing is like a double edged sword. While there are many benefits as

explained above, it also has several risks involved. In the past, profit making enterprises have

operated with a certain amount of secrecy to guard their trade secrets from rest of the world.

They also used to control a larger portion, sometimes entirely the value chain of the business.

But, with increasing number of players participating in value chains, the businesses had to

become more transparent. They have several trusted partnerships where partners have greater

visibility into internal details of organization. Among other issues is the high rate of failure of

marriage of two organizations due to variety of differences like organizational and national

cultures, business priorities and operational methods. In each business scenario, company has

to identify a win-win situation among all partners which include suppliers, clients and

contractors. This definitely complicates the managers’ job of achieving hard business goals.


Outsourcing Levels

       In any business outsourcing is done at multiple tiers of operations [4] [5]. At basic level

is low-wage human capital involving unskilled or manual labor. A second level of

outsourcing involves outsourcing of standardized production tasks, a typical semi-skilled

factory labor, which adds limited value but at lower cost. A third level involves knowledge

based outsourcing which includes educated workforce in science & technology working in

state-of-art R&D facilities. The knowledge based outsourcing involves multiple stages. On

one end it is manual knowledge delivery of tasks which cannot be automated, like data entry

& processing. While on other end, it is research and development resulting into defining next
Intellectual Property Issues in Global Software Outsourcing                                        5


generation products. The intellectual capital at stake increases exponentially as you move

from lower stage to upper.




                  Figure 2 Interactions among stakeholders in typical outsourcing scenario

Software Development

       On global scale, software development is both outsourced and offshored, primarily for

cost competitiveness. The inefficiencies in labor markets in matured economies like high

costs of living and legal requirements on benefits, working hours and holidays result in much

higher human resource costs. This forms fundamental costing for software development. But

then how do distributed teams coordinate on delivering software globally? The global fiber

optic network which powers the Internet is the fundamental enabler for this phenomenon. In

addition to improvised communication network, other factors which contribute are higher

availability of skilled, educated and English speaking workforce in developing countries like

India, China, Mexico and South East Asia. Overall, software development factors in third

stage of skilled knowledge based layer of outsourcing levels. Based on requirements of

businesses it spreads across all stages in the third layer from basic level data entry operators

to cutting edge research in areas related to computer science and information technology.
Intellectual Property Issues in Global Software Outsourcing                                       6


Typical term used for this sector is IT/ITES which comprises of Information Technology and

Information Technology Enabled Services. Information Technology Association of America
[7]
      defines Information Technology as the study, design, development, implementation,

support or management of computer-based information systems, particularly software

applications and computer hardware. While ITES is defined as a form of outsourced service

which includes industries like banking, insurance, telecommunications which includes use of

modern IT evolution. Estimated size of total IT service industry was over 1.1 trillion USD [6].

IBM is the largest company in terms of market share, followed by HP and Accenture. This

industry is typically considered highly fragmented as top 4 companies control only around

12% of market. The outsourced services comprise around 48% of total IT industry which is

roughly a 500 billion dollar industry globally. The IT industry divisions as defined by

Datamonitor are as below.


                          Global IT Industry




          Data Processing and           IT Consulting & other
          Outsourcing Market                  services




                            Electronic Data             IT & System Integration
                           Processing (EDP)                     services




                        Information Technology
                                                                IT Consulting
                           Outsourcing (ITO)




                            Business Process          Information Management
                           Outsourcing (BPO)                  Services




                     Figure 3 Organization of IT Industry

         A typical outsourcing of software development may involve making of software

products or use of software products to make applications. When software products are made,

the intention of company is to sell them further in the market to monetize the investment.
Intellectual Property Issues in Global Software Outsourcing                                            7


Examples are again products like Microsoft Windows or Office in which a lot of contractors

are involved in development or testing activities. On other hand, when applications or

services are deployed using existing product, these are for sole use of client. Examples are

integration and customization of ERP like SAP for use of organization like AT&T by vendor

like IBM. Depending upon business model, a variety of ownership patterns may exist in such

business models. The bulk of outsourcing projects consist of second type i.e. development of

applications and services for purpose of running business operations of client.


Outsourcing Contracts

         Typically firms participating in an outsourcing relationship sign contracts that define

terms of engagement, quality parameters of expected output and penalties in violation of the
        [22]
terms          . Since the contracts are typically international, they are subject to differences in

legal structures of individual home countries of the participating companies. Hence, it is

important that certain factors like following are agreed upon.

   1. The contract is signed in only one language. This copy is considered as master for all

         disputes. Other translated versions can be made available. This ensures that

         interpretations don’t change due to translation issues.

   2. The jurisdiction under which any dispute will be subject to is agreed in advance.

   3. Ownership of intellectual property including geographies, rights and period is

         mentioned.

   4. Appropriate License of intellectual property owned by vendor but used in making the

         product which is generally owned by the client.

   Typically Outsourcing Contracts can be categorized into 4 types [23].

   1. Time and Material Contracts:

         Customer pays accepted hourly rate per resource. Typically used when vendor

         company does not own the full delivery and is only providing manpower to client,
Intellectual Property Issues in Global Software Outsourcing                                      8


      which is executing the project. Also, it is used in full vendor-owned models when it is

      difficult to pre-estimate the cost of deliverables. The resources are billed/invoiced to

      client on month or quarter basis.

   2. Fixed Price Contracts:

      When cost of deliverables can be accurately estimated, clients pay a fixed amount for

      pre-defined requirements to be delivered in given time with given quality. Either side

      needs to compensate the other for any variations in original conditions on their part.

      The number of resources used by vendor is not concern of the client.

   3. Revenue Share Contracts:

      These are partnership contracts, where clients won’t pay vendor for making the

      product. But, instead it will promise a certain share in sales. While a vendor has

      significant risks in this model, if the potential product succeeds, then it would get

      higher returns than it would have got in case of Fixed Price contracts.

   4. Hybrid Contracts:

      Hybrid contracts are those in which combinations of above models are used to hedge

      the risk on either party.
Intellectual Property Issues in Global Software Outsourcing                                                       9


                                          Intellectual Property

        World IP Organization [8] defines Intellectual Property (IP) as legal rights which result

from intellectual activity in the industrial, scientific, literary and artistic fields. IP rights

provide moral and economic right to the creator over his creation. It helps in establishing

trade of IP with fair pricing where IP can be put to use in social and commercial development

where original creators are justly compensated. Some of the common ways in which state

governs IP are trademarks, copyright and patents. Although there is great amount of

heterogeneity in legislations and enforcement levels across countries. It is considered that in

matured markets of North America and Western Europe, the Intellectual Property laws are

more matured compared to emerging economies like India and China where these are in

nascent stage. However, enforcements of these laws have remained a continuous challenge

for companies across the globe.


IP in Products

        In this section we will discuss typical intellectual property that gets exposed in

software outsourcing contracts. As defined by A. Story [9], the software is of two fundamental

types with respect to intellectual property protection. First is Proprietary Software, in which

software code is under private ownership of creator which can be individual developer or the

company employing the developer. We will see in next section how employers govern IP

created by their employees. Most common example of proprietary software is software

product like Microsoft Windows. Such software is never sold to end consumer, but licensed.

Read excerpt from Microsoft Windows EULA [10].

Microsoft Windows 7 Professional End User License Agreement (EULA) Excerpt

SCOPE OF LICENSE. The software is licensed, not sold. This agreement only gives you some rights to use the
features included in the software edition you licensed. Microsoft reserves all other rights. Unless applicable
law gives you more rights despite this limitation, you may use the software only as expressly permitted in this
agreement. In doing so, you must comply with any technical limitations in the software that only allow you to
use it in certain ways. You may not -
 Work around any technical limitations in the software;
Intellectual Property Issues in Global Software Outsourcing                                                   10

   Reverse engineer, decompile or disassemble the software, except and only to the extent that applicable
    law expressly permits, despite this limitation;
   Use components of the software to run applications not running on the software;
   Make more copies of the software than specified in this agreement or allowed by applicable law, despite
    this limitation;
   Publish the software for others to copy;
   Rent, lease or lend the software; or
   Use the software for commercial software hosting services.
    Second type of software is commonly known as FLOSS which stands for
                                              [9]
Free/Liberal/Open Source Software                   . Generally such software is governed by GNU

General Public License, which is structured exactly reverse as that of Microsoft’s EULA. The

software source code is open and users can modify, redistribute, copy or use it for personal or

commercial use. Modified GNUs allow users to sell additional features built on top of

FLOSS based software frameworks for commercial purposes. There are many companies like

IBM which are building large scale commercial software on platforms like Java or Linux

which are Open Source Software.

        As we discussed in previous section on software development delivery models, the IP

exposed in two models of product development vs. service development can be as follows. In

product development, the company which is proprietary owner of product invests a lot in

R&D efforts, typically in new features, algorithms. Typically a large number of patents are

registered across countries to protect this information. Vendors working on these products in

development, testing or deployment phases, depending upon their involvement, get exposed

to this intellectual information. Vendors involved belong to software companies typically not

competing with client itself. But same company can serve client’s competitors. The same

person may be working for competing company in the future. The humans can’t be ramped

down. So, although the actual source code is protected by patents and copyrights, the

knowledge gained by person in terms of ideas and processes stays with him permanently. The

same risk exists for permanent employees of client. But, considering attrition rate higher with

contractors than product firms themselves, the risk of leakage of such information is high

when it comes to involvement of vendors (outsourced contractors).
Intellectual Property Issues in Global Software Outsourcing                                        11


IP in Services

       In custom application or services developed, although there is less involvement of

research protected by patents, the code developed is intellectual property of vendors. But in

such contracts, it’s not the code that is critical IP. It is knowledge of business processes of

clients that vendors gain in order to develop software for them. A company typically

maintains a lot of information on business processes, suppliers, channels, margins, distributor

contracts and pricing secret as it gains competitive advantage out of it. As part of software

development, vendor gains deep insight into these processes. This is the real IP exposed to

outsiders. In fact, such knowledge is hard to quantify and hence difficult to protect even with

copyright or patent laws. Similar risks exist due to attrition of vendor resources to competing

organization.

       But, in software industry new business models are evolving, where vendor providing

service to traditional customers can retain the IP rights i.e. Contractors will not make

software on demand for the client which is owned by client but managed by vendor. Now,

evolving models of cloud computing and Software as a Service (SaaS) [11] are resulting in the

vendors renting these services to their clients rather than selling their software. Google rents

various enterprise services like Gmail, Google Docs where enterprises have to pay per usage

to the Google. But they don’t have to worry about hosting and storing these services large

data centers. In this model, various APIs are designed by the vendor, which need to be

consumed by client side software in order to consume the services. While, APIs are largely in

public domain thereby reducing IP risks of vendors, integrating vendors still are exposed to

client’s business processes and internal data.


Trainings

       Employees are provided various trainings which are related or unrelated to work they

do. This is futuristic investment that employers do in their employees. It includes a variety of
Intellectual Property Issues in Global Software Outsourcing                                          12


internal and external trainings, certifications and mentorship programs. The knowledge

gained by individual is part of organization’s intellectual capital. In order to gain contracts in

outsourcing world, employers require their workforce trained in appropriate areas. Even

sometimes client firms provide trainings to contractors in order to ramp them up on the

project work they are doing. The knowledge always stays with person and benefits his

throughout the career, but it comes at cost of one of the companies he worked with.


Management of IP

       What do we mean by management of IP? Global organizations are in continuous

exposure of IP due to larger partner involvement in their value chain. IP Management is

defined as Identification, Protection and Exploitation of the intellectual assets of the

organization.

       In software development, the code is open to those who work on it. And this code

forms major component of IP assets of the company. So, from corporate strategy point of

view, it is important that company identifies its short term and long term goals. Then it

should identify what is the key intellectual asset it has/need in order to achieve them. Then

the strategies to protect those assets are needed to be devised. In order to balance company’s

other goals, there will be need to exploit and expose these assets to various partners involved

in delivery chain. So, based on nature of engagement, the company should review

periodically its strategy with respect to protection and enhancement of those IP assets.

Accordingly, such changes should be made.

       Important point to note here is that software is generally protected through

assemblies, which are binary versions of the working code. This means that code is not

visible to users. This is typical method used by proprietary software. But, there are ways to

reverse engineer those assemblies and generate equivalent code segments that perform the

binary tasks. If we apply principles of VRIO (Valuable, Rare, Not Imitable, Exploitable by
Intellectual Property Issues in Global Software Outsourcing                                               13


organization), then we can hardly classify code as Not Imitable. There are many alternative

ways to make it look different than original but performing same function. This is the easiest

way adopted to work around patents and copyrights. That’s why over period of time, the IP

assets of software firm deteriorate.




                           Figure 4 IP Management Workflow: Software Development

*Source: Based on figure from Govt. of Australia’s guide for IP [25], Modified for Software Development
Intellectual Property Issues in Global Software Outsourcing                                            14


                                        Legal Framework

           In this section, we will take overview of Intellectual Property laws in some leading

countries in software world. We will also look at contract laws between partner companies

and employer-employee contracts.


IP Laws in the world

           Due to large concentration of software companies, United States has been leading in

creating legal framework for protection of intellectual property. The laws exist at both federal

and individual state level. They deal with trademarks, copyright, patents, trade secrets and

other aspects of intellectual property [12]. A patent is traditional way of protecting inventions
[14]
       . But a patent restricts use by inventor to gain economic benefit. But it does not keep

information secret. By registering patent, the entire technical information is revealed. In

world of software, it is relatively easy for organizations to make certain replacements in

approach and bypass patents in order to copy features in competing products. Typical

example is Apple has hundreds of patens on capacitive touch screen. But, patents limit the

idea to design of screen. All competitors have come up with capacitive touch screens in their
                                                                              [13]
devices by twisting certain design methods. But Trade secret is defined as           the proprietary

information that generates economic advantage for particular business. The organization does

not disclose it anywhere and continues to receive benefits till it remains secret. Economic

Espionage Act of 1996, by Federal government passed under National Information

Infrastructure Protection Act of 1996 provides protection for trade secrets of organization

which covers prohibition of usage of trade secret and its usage or inclusion in any product for

economic benefit of any entity other than owner. This specially covers for use of trade secrets

of US based companies for benefit of foreign entities. Economic Espionage Act as equated

trade secret threat with threat to the national security of United States. From global

outsourcing scenario, this is important legal framework.
Intellectual Property Issues in Global Software Outsourcing                                         15


          European Union, largest economic entity in the world, controls patents in the territory

governed through European Patent Office. It was established through conventions and treaties

at European or International levels like Strasbourg Convention 1963, European Patent

Convention 1973, London Agreement 2008, Patent Law Treaty and WTO agreements. EU

member states may or may not govern patents in their respective treaties. But, EU patent

override patents issued by member states. European Union is however criticized for weaker
                                                                                             [15]
laws on trade secret protection as compared to United States. As described by DeMarco           ,

let’s look at case of Samarth Agrawal who worked for French bank Société Générale in New

York. He copied and printed source code of algorithm used by bank with intention to sell it to

competing hedge fund. On basis of evidence from video surveillance and print logs, FBI

agents arrested him the day it was detected. Accused was convicted and sentenced to penalty

applicable under law. However, in European Union, criminal law is not applied immediately

in such cases. Also the investigating agencies lack resources and experience to investigate

such cases of electronic trade secret theft. This means that Samarth if had done this crime

sitting in Paris HQ of Société Générale, might have walked free after being detected for such

a crime.

          Situation in developing world is far worse. India, which is largest country hosting IT

services outsourcing projects outside United States, there are no laws defining term trade
         [16]
secret          . India is signatory on WTO’s agreement on Trade Related Aspects of Intellectual

Property (TRIP) and has enacted certain IP laws through new acts or amendments to existing

laws. These include laws related to patents and copyrights. However, Indian legal framework

does not define the term “trade secret”. There are no text or reference cases available with the

courts. However, the Indian Contract Law Section 27 provides a sort of remedy to

organizations. We will see in detail in next section on contract laws.
Intellectual Property Issues in Global Software Outsourcing                                       16


        Typically, from software development point of view, the IP laws related to patent,

copyright and trade secrets are the most important ones. We need to take a note of copyright

law and how the copyright law and contract law work together. The copyright is typically
                                                                        [19]
owned by the author himself. In India, the Copyright Act, 1957                 (amended as per

international treaties like TRIPS, 1995) defines ownership of copyright as to the person who

is the author/creator/causer of it. Causer is the term used specifically for computer generated

work including literary, dramatic, musical or artistic work. Note that person who operates the

computer is not the copyright owner. E.g. If author of book is getting his work computerized,

the person typing the book, thereby creating computerized copy is not entitled to copyright. It

stays with the author, who caused the computerized work to be created. A computer

programming is defined by this law under literary work and hence, the programmer (the one

who conceptualizes and writes or develops code which composes into working software

program) is entitled to the copyright. This however is overridden by employment contract.

The Copyright Law specifies (Clause 17.a) that when a person develops literary work

(programming included) as part of employment contract, the employer is first owner of

copyright of such work, if it relates to function of the employer as defined unless contrary is

defined in employment contract. This means that company (employer) is default owner of

copyright and employment contracts can override it if necessary. This leaves out case of

outsourcing. The outsourcing relationship is not an employee-employer relationship and

hence is not covered by clauses above. We will look at interesting case regarding outsourcing

later in this section.


Contract Laws

        United States Contract Law varies depending on respective states. However, in

general, there are provisions made which allow two parties to sign confidentiality or non-

disclosure agreements. These agreements are typically used to protect information disclosed
Intellectual Property Issues in Global Software Outsourcing                                            17


as part of proposed negotiation or business deal, which may or may not work out. The

contract is expected to call out items marked as confidential, duration for which information

is to be undisclosed. Contract Law prevents certain information that cannot be included in

such contract. This includes information received by receiver (created or obtained from third

party rightfully) before seller disclosed it, information commonly known in industry or in

public domain and potential anti-national or information including activities deemed illegal.

If such information includes trade secret then it is also governed by specific laws like

Economic Espionage Law.
                                            [18]
       European Union Contract Law                 generally requires an explicit declaration of

confidentiality in the contract. In addition, it says that certain information remains

confidential even if explicit declaration is not made. Further, EU Contract law adds that

certain information like trade secrets or know-how if disclosed during negotiation phase of

contract, the other party can neither disclose nor use the information for its own use, should

the contract is not formed as result of negotiation.


Employment Contracts

       Typically, employers sign contracts with their employees upon joining. As we have

seen, the provisions in contract laws across countries allow enforcing confidentiality clauses

regards to information that employees get access to as part of their job. Such contracts are

used in order to prevent employees from competing with employer or work for competitor of

employer. This may also involve clauses like non-compete clause, where employees are

forbidden from competing or working for competitor for certain period even after their

employment ends with first employer.

       In India, the section 27 of the Indian Contract Act, 1872 states that agreements in the

restraint of trade are void [17]. Indian Act prohibits employers to restrict use of skills, aptitude

and general technical knowledge by employees in competition with employer during period
Intellectual Property Issues in Global Software Outsourcing                                         18


of employment. So, wider than necessary restrictions may invalidate the employment contract

itself. This means that the employer if finds that employee is likely to misuse the information

he has received as part of employment agreement, then employer is entitled to injunction to

prevent such use. It is very limited remedy to employers to protect their trade secrets

compared to Economic Espionage Act of the United States. Moreover, if the act is committed

in past then employer is only eligible for damages and no criminal action can be initiated

against employee. The act also does not provide explicit protection to employers in case of

revelation of such information by employees after their period of employment.

          Following are key aspects of employment contracts regards to intellectual property.
[21]



1. Pre-employment Intellectual Property of Employee:

       Employer does not get entitlement to any IP earned by employee prior to joining even in

       business areas related. The employment contract must call out the list in case employer

       seeks use of such IP through employment and should disclose how assignment of rights

       happen and who gets rights in case employee leaves the company in future. However, in

       absence of any specific clause, if any employee incorporates his own intellectual property

       into product owned by employer, then the employer receives non-exclusive, perpetual,

       royalty-free, worldwide, make-modify-copy-sell access to said IP.

2. IP generated during employment:

       Intellectual Property generated by employee can include patents, copyrights and other

       information not covered by either. Patents and copyrights are governed by their respective

       laws. However, by default, laws in some countries like India grant copyright to employee

       (author). In such scenarios, the employment contract must include that the employee

       agrees to transfer rights to all such IP to the employer. Items not covered by Patent and
Intellectual Property Issues in Global Software Outsourcing                                     19


    Copyright laws are solely governed by non-disclosure and confidentiality agreements

    under Contract Law.

3. Recording of IP generated by employee:

    There are no laws which specify recording of IP. Hence, the employment contract should

    include that employee is required to comply with company requirement of up-to-date

    recording of IP in forms like designs, KM systems, notes & documentation. The company

    remains sole owner of such recordings after employee quits the job.


Case Study: Pine Labs vs. Gemalto Terminals, High Court of Delhi [20]

        Pine Labs Pvt. Ltd. (hereafter referred as Pine Labs) is a software development

company. Gemalto Terminals Pvt. Ltd. (former Schlumberger company, hereafter referred as

Gemalto) provides computer hardware terminals for retail establishments. Gemalto does not

have any expertise in software development. So, it engaged Pine Labs multiple times to write

software applications and backend systems for multiple of clients. Gemalto received contract

from IOCL (Indian Oil Corporation Ltd.) card fleet program in 2004. It hired services of Pine

Labs to develop software for same. Later on in 2009 Gemalto received another contract for

cards from HPCL (Hindustan Petroleum Corporation Ltd.). Gemalto approached Pine Labs

for this sub-contract, however negotiations did not work out. As a result, Gemalto awarded

the contract to other sub-contractor named M/S QCI Technologies Pvt. Ltd. (hereafter

referred as QCI). As part of system design, the software for HPCL would require to interact

with existing IOCL system. Gemalto asked Pine Labs to hand over the source code to QCI in

order to facilitate that.

        Pine Labs and Gemalto had signed Master Agreement for Development and Services

(MSA). As part of agreement and subsequent correspondence it was agreed upon by both

companies that Pine Labs has been compensated fairly by Gemalto and thereby does not

claim any right over the software code developed for use of Gemalto. Therefore, Gemalto’s
Intellectual Property Issues in Global Software Outsourcing                                        20


understanding was that it owns the source code rights of all the software developed by Pine

Labs under contracts with Gemalto. However, the agreement did not mention the time period

and territorial limits of the copyright claim. As per section 19 of Indian Copyright Act,

default period was 5 years and default territorial limits as India. Section 17 of the Copyright

Act states that the copyrights of the given program code are vested with the employee as

default unless contrary statement is agreed upon in the contract of employment. Since Indian

Copyright Act does not specifically provide guidelines in case of outsourcing contracts, the

same employment contract provisions can be used. Section 18 of the Copyright Act specifies

that copyright can be assigned to other owner, wholly or partially in terms of duration and/or

territorial limits. So, honorable court determined that outsourcing contract comes under

Section 18 which determines Assignment of copyright and not first ownership. Therefore,

court determined that due to no mention of duration, Gemalto was entitled to assignment of

copyright only for 5 years. Moreover, assignment of copyright code may not permit further

redistribution of the code unless specifically mentioned by the contract of assignment. Hence,

since the HPCL program request was after 5 years, the rightful owner of the source code was

determined to be Pine Labs.

       This case highlights legal complexities in outsourcing of intellectual property like

software code. In case of outsourcing across countries, applicability of laws for such disputes

is another issue as the laws vary greatly across geographies. It is therefore important that the

contract calls out duration, territorial limits and redistribution rights for source code

copyrights. Also, the contract should specify the country laws which will be applicable in

case of any disputes.
Intellectual Property Issues in Global Software Outsourcing                                              21


                                     Client-Vendor Relationship

           Clients and Vendors are both independent companies operating in different PESTEL

environment. The relationship between these companies may well extend beyond particular

contract. In this section, we will look into various factors (non-contractual or legal) which

define this relationship and any impact they have on the IP exposure risk. Roy and Sivakumar
[24]
       in their paper empirically test impact of factors like trust and external controls/verification

on intellectual property management in client-vendor relationship. In this section we will

study impact of various aspects of this relationship on management of IP i.e. Identification,

Sharing, Protection, Enhancement, Transfer and Surrender.


Trust

           Authors add interesting dimension by distinguishing between Interactions and

Communication. Communication is said to be more formal, while former is regarded as

informal and unstructured which helps in building knowledge and trust in business

relationship. In section on distributed delivery models, we have already explained the

outsourcing model of interactions which are between employees of vendor and employees of

client. While inter-company communication is more formal in terms of MoUs and

agreements, we can easily imagine that when it drills down to individual employee level, the

interaction among them is more informal and the amount of friendliness in this interaction

increases over time as the trust increases. This is typical human psychological behavior. The

authors further classify the trust into two types – Competence Trust i.e. the trust that the

vendor is capable of delivering on its promises and Goodwill Trust i.e. the trust that vendor is

performing the tasks in ethical and professional intentions. While authors confine their

analysis as one way i.e. Client expectations from vendors, we would like to highlight that this

relationship should be viewed bidirectional. As we have already established that it’s not only

client’s IP which is at stake but vendor’s IP also matters significantly in outsourcing
Intellectual Property Issues in Global Software Outsourcing                                      22


relationships in software development industry. Moreover, with the fact that software vendors

are also large size companies, in many cases much bigger than their average client size (e.g.

IBM, Hewlett Packard, Accenture etc.), which naturally tilts bargaining power balance in

favor of vendor than the client.

       Authors conclude that trust has 3 important dimensions which should be taken into

account - they are Quantity, Scope and Mode of communication. Please refer to appendix for

list of survey questions related to these dimensions.


Verification

       As authors suggest, verification can be classified into two forms. First is External

Control, which is a more formal engagement. It involves reporting of elements for oversight

purpose. This reporting or audit can be related to inputs, processes and outcomes. In the case

of Software Development, the outcomes are very subjective or unstructured i.e. difficult to

measure. However, typical variances tracked are schedule and budget. Typically outsourcing

contract defines the reporting items, methodology and items. This step is useful in tracking

inventory of intellectual assets which may mean design documentation, reusable components,

interfaces, modules etc. from software design point of view. Client can get direct idea into

progress made by the vendor through these reporting.

       Second form of verification is Internal Control or self-verification. In outsourcing

contract, if the client sets expectations beforehand and vendor assures to deliver on certain

SLAs, tracking responsibility of client reduces. But, this accountability to perform on

vendor’s side results in processes of control for internal point of view. Typical

documentation, status reporting, checkpoint meetings are some of the popular ways.

       We need to note one important factor i.e. attrition. Since, employees of vendor are not

in any employment agreement with the client, they are subject to change their jobs at their

free will. Even in typical outsourcing engagements, vendor companies keep their workforce
Intellectual Property Issues in Global Software Outsourcing                                             23


highly mobile and rotate them through their entire portfolio. In country like India, where IT
                                                                                  [30]
industry is facing over 20% attrition each year, this problem is significant             . As already

established, not all the intellectual property can be recorded in form of documentation. So, in

such cases of employee attrition a large portion of their knowledge is lost each year and

companies need to spend extra resources to make up for those. Attrition impacts the vendor-

client relationship significantly. There is also chance that the employees of vendor may work

for competitors of client after they leave their position with vendor organization. Since,

employees of vendor sign no agreement with client, there is practically no way the client can

seek injunction against this hiring. This results in loss of IP (typically unsecured), valuable

know-how and skillset for the client.


Other Aspects of Interaction

       The language plays critical role in conveying thoughts therefore impact understanding
                                                                     [26]
and transfer of Intellectual Property to large extent. As Gasparro          says, even if offshore

executives learn the English language, they may not be versed in the quirky phrases and local

dialects which make English difficult to comprehend.

        The geographic proximity helps in certain ways. First, it facilitates easy hassle-free

travel and enables face-to-face communication more frequently than in case of remote

offshoring. It is opinion of experts in software industry that personal communication is more

effective than digitally enabled communication (video conferencing) in case of knowledge

transfers. Second, the geographic proximity ensures temporal closeness i.e. time zones are

closer. West Coast of U.S. and India have time zonal difference of nearly 12 hours. In order

to work together, the team located across continents need to work long hours to achieve

overlap. It also provides relatively shorter bandwidth for such meetings compared to

possibility of accessing full working hours of employees. Working in shifts or overtime has

its own costs in personal life of employee as well as to business.
Intellectual Property Issues in Global Software Outsourcing                                           24


       In today’s era of multinationals, the unique issue of conflict of cultures has arisen.

MNCs typically maintain consistent culture across countries of operations. Sometimes they

customize some policies to local culture in order to accommodate legal and social

requirements. It results in conflicts on two fronts. First is Inter-subsidiary cultural difference.

Second is organization-national culture difference. Hofstede proposed framework to evaluate

organizational cultures and national cultures, called as cultural dimension theory. He

proposed this theory as result of study done in IBM Corp. As result of Hofstede’s work

followed up by renowned psychologist, we can define following cultural dimensions that

impact organizational cultures.

       1. Power Distance Index,

       2. Individualism vs. Collectivism,

       3. Uncertainty Avoidance Index,

       4. Masculinity vs. Femininity,

       5. Long term orientation, and

       6. Indulgence vs. Restraint

These dimensions are largely responsible for different legal frameworks and differences in

interpretations of individual’s rights. E.g. People in U.S. consider software piracy as criminal

offence at par with physical thefts and are punishable by law there. But in countries like

China and India, the recognition of intangibles (software) vs. tangibles differs greatly. Similar

is the case with idea of patents, copyrights and any other protection given globally to

intangibles. Though under international treaties, the law makes piracy punishable offense, the

enforcement has largely remained non-existent as authorities are not exception to these

cultural dimensions. The culture, therefore, appears critical obstacle in stringent

implementation of Intellectual Property laws. Cultural differences also result in affecting
Intellectual Property Issues in Global Software Outsourcing                                         25


team dynamics and therefore may affect knowledge transfers. It also requires companies to

provide additional trainings to their global employees, which means additional costs.

       Some researchers have coined the term “Nearshoring” which means outsourcing to

the country sharing borders or having proximity on one or more dimensions like linguistic,
                                                                                [27]
geographic, cultural, political, temporal (time zone), economic or historical          . However,

such nearshoring may not satisfy skill or cost benefits typically associated with software

outsourcing decisions. Hence, it may not prove strategic.
Intellectual Property Issues in Global Software Outsourcing                                             26


                                           Corporate Strategy

       There are risks involved in outsourcing. Companies pursue outsourcing only when

they conclude that benefits outweigh the risks involved. Hence, from strategic point of view

the outsourcing is crucial decision and requires companies to perform more due diligence

before pursuing this route. In this section, we will restrict the discussion to those aspects

which deal with intellectual property issues. Strategic decision holds more significant from

outsourcer’s point of view than vendors’. For vendors, it is their normal business process to

seek out new clients and new businesses. So, the risks involved are well understood by

management of vendor and they are well prepared on both managerial and legal front to

handle these challenges. Opposite is true for small and medium companies which seek

outsourcing of part of their business from cost saving point of view.


IP due diligence

       There are multiple companies which run their own IT organizations and partly

outsource the IT services. From strategic point of view it is important what to outsource and

what not to. The key principle of management control is “If you can’t measure it, you can’t
                [29]
manage it.”            In order to effectively manage the IP assets, it is therefore important to

perform IP Audit or Due Diligence check before making IP transfers or sharing with the

outsourcee.

       An IP Audit is defined as systematic review of IP assets created, owned, used or

acquired by the business. The key purpose is to identify under-utilized IP assets, identify

threats to company’s future cash flows and enable business planners to devise informed
             [29]
strategies          . Typically the IP audit tracks various internal IP assets, their life over which

company can rip benefits, extent of use, importance and estimated present value of monetary

benefits. Such audit will enable company to classify the Intellectual Assets involved in

various buckets on different parameters and help formulize policies on what to outsource and
Intellectual Property Issues in Global Software Outsourcing                                                27


what not to. Generally IP audits are performed by internal experts or independent consultants.

These are non-statutory audits and require no disclosure.

              IP due diligence can be performed during various business transactions like mergers

and acquisitions, negotiating license or franchise agreement, sell of trademark or copyright,

or outsourcing. From outsourcer’s point of view, following due diligence items are important
[28]
       .

           1. Discuss fully with your IP professional what it is that you think you are getting out of

              the transaction.

           2. Enlist the protections along with their scope – operations, geographies and time

           3. Understand your obligations to the outsourcee.

           4. Understand in which geographies and timeline the outsourcee will transfer, use or

              modify the IP assets.

From outsourcee’s point of view following due diligence checklist is important.

           1. Obtain full detailed information on exposed IPs from outsourcer along with possible

              protections.

           2. List the operations that may be possibly performed on those IPs – transfer, share,

              modify, use. Discuss the possible impact of those changes on protections already in

              place. Clarify the licensing rights you receive.

           3. Ensure that for all the shared IPs, the outsourcer has full ownership rights to distribute

              those across geographies of operations or the areas in which such IP will be subjected

              to use or change, as applicable.

           4. Identify if any of those IPs are subject to litigation or infringement suits.


Business Intelligence

              The possible misuse of IP transfers requires motive. Risks involved in IP transfer vary

largely based on ability of the receiver to exploit it. It is therefore critical that company has
Intellectual Property Issues in Global Software Outsourcing                                          28


sufficient intelligence on the contracting partner it is going to tie up with. This is applicable

for both outsourcee as well as outsourcer.

   1. Outsourcer’s competitors

       First, it is important to gather information on business relationships between the

partner company you are seeking and your business competitors. If exists, then the company

must make certain disclosures on nature of business transactions and measures taken to

protect the IP of customers so that party can decide if it can proceed with relationship. Many

large IT organizations like IBM, HP serve large number of clients, many of them fierce

competitors of each other. It is also possible that same facility of outsourcee at single location

is serving multiple competitors. However, these companies are known to implement stringent

measures to protect mutual exclusiveness of such business practices through protected bays,

physical security, access control and providing awareness trainings to employees to prevent

them disclosing details to other employees working on different client projects.

   2. Outsourcee’s other businesses

       It is also important to understand information about other businesses of company

along with businesses of subsidiaries and parents to determine if there are conflicts of interest

exist with business model of prospective partners. Many times outsourcee organizations are

part of large conglomerate. In that case, outsourcer will need to evaluate if outsourcee is not

benefited due to potential exposure of any of IP assets. Indian IT giant Wipro Ltd. is large

conglomerate with businesses apart from IT outsourcing in PC Original Equipment

Manufacturer, cosmetics and electrical equipment. A client like Lenovo which is large PC

OEM, may not possibly prefer to outsource services relating to its core business as there is

possible case of conflict of interest as it competes with other business (PC) of Wipro

conglomerate.

   3. Outsourcee and outsourcer’s customers
Intellectual Property Issues in Global Software Outsourcing                                       29


       As companies outsource IT services to outsourcee vendors, it’s not just their IP that is

exposed. But many times it involves confidential data of their customers. Hence, based on

kind of customer data that may be possibly exposed the conflict of interest needs to be

evaluated. Microsoft Corp. is not in business of PC manufacturing. But it is vendor to all PC

businesses in the world which involves selling Windows operating system. Since, Microsoft

is a large company, not all the divisions are involved in Windows sales. HCL Infosystems is

another Indian IT major which is also top PC OEM in India. Microsoft’s those divisions

which deal with PC business cannot possibly outsource to HCL as that would expose data of

other customers like Dell or HP which are competitors of HCL. Also, in OEM business

Microsoft and HCL have customer-buyer relationship. In same business, establishing parallel

partner relationship clearly creates possible opportunity for exploitation of each other’s IP.

However, unrelated divisions of Microsoft like Database Product Development can establish

outsourcing relationship with HCL without any conflict of interest.

   4. Corporate Governance

       To ensure proper protection and respect of partner’s IP, it is important that

prospective partners rate high on modern corporate governance. It involves maturity of

internal security processes, financial and other statutory disclosures and fair business

practices.

   5. Feedback from clients

       When establishing relationship with outsourcee first time, it is recommended to seek

feedback from other clients. For marketing purpose, outsourcee will be making a lot of claims

in its bids or proposals. Hence, checking the reputation of firm on fulfilling the promises may

be helpful in analyzing the vendor.

   6. Financial Strength
Intellectual Property Issues in Global Software Outsourcing                                          30


       Generally outsourcing relationships are established between partners which have

similar relative size in their respective industries. It is unlikely that large organizations like

GE would create outsourcing relationship with a startup unless it is seeking particular skillset.

This is primarily due to confidence in conducting large projects, financial stability required to

deliver on long term contracts. Moreover, large companies also provide large and long-term

contracts and do not like to see disruptions in outsourcee operations due to consolidation

activities like mergers and acquisitions, which are more prevalent in small and medium size

companies.

       IP due diligence and corporate intelligence on prospective partners help companies to

take decision on which products they can outsource and to whom. It is critical decision in

strategic outsourcing.
Intellectual Property Issues in Global Software Outsourcing                                        31


                                       Research Methodology

       We have now reached the final stage of this research work. So far we have reviewed

several articles and papers in order to establish various factors that impact the intellectual

property transfer in global outsourcing scenario. Now in this section, we will design

framework that captures the inputs from secondary literature survey along with exploratory

analysis based on expert survey conducted on initial list of variables in order to summarize

them with resulting factors. In this section, we will discuss each step in detail.

       The step-by-step research methodology is as follows:

1. Establish research problem definition.

2. Identify variables impacting intellectual property transfer in global software outsourcing

   through secondary research i.e. literature survey

3. Conduct primary research i.e. expert survey in order to gather opinion on extracted list of

   variables.

4. Use statistical summarization technique like perform Exploratory Factor Analysis in order

   to reduce these variables and extract critical factors that explain the variance.

5. Prepare model indicating critical factors impacting intellectual property transfer in global

   software outsourcing.


Problem Definition

       We are aware of the phenomenon that global software outsourcing will have

implications on the intellectual property transfers between involving partners. From the

survey of literature we can enlist various observable variables that can imply these issues.

However, we are not aware of underlying factors with which these variables are interrelated.

       Based on mathematical model in Wikipedia, let’s build model applicable in this
           [31]
scenario          . We assume that any indicator (variable) may be associated with any number of

factors. We have no theory or hypothesis in place with respect to these factors and their
Intellectual Property Issues in Global Software Outsourcing                                              32


relation. Let’s assume that there are n such variables - x1, x2, x3…..xn. Let there be m

underlying factors f1, f2, f3,….fm. We will be conducting survey of N number of person to

obtain scores for n variables. Therefore xi,j represents score of jth person against variable xi.

Let µ1, µ2,… µn be means of all observed values of variables x1, x2,….xn. Let li,k represent

factor loadings for ith variable for kth factor. Hence l1,2 will represent factor loading of xi on f2.

We can define mathematical model for ith response of variable x1 as:

                                 x1,i = µ1 + l1,1*f1 + l1,2*f2 + . . . + l1,m*fm + ε1,i

Therefore, a generic matrix based model can be defined as:

                                                X = µI + LF + ε

Where,          I is identity matrix of order 1 x N.

                X is matrix of observable random variables of order n x N

                µ is column matrix of means of all n variables of order n x 1

                L is factor loading matrix of order n x m

                F is underlying factor matrix of order m x N

                ε is variance unexplained by factors or error in observation

         We have now established the fundamental mathematical model of factor analysis. We

therefore, can summarize the problem definition as follows –

         “Identify underlying factors that impact intellectual property transfer in global

software outsourcing scenario based on observable variables based on the feedback of the

experts in the related field.”

         In this research we will perform factor analysis independently for three aspects –

Legal, Human Resource and Strategic, which are mutually exclusive of each other. The data

reduction will be applied for variables under these categories separately.
Intellectual Property Issues in Global Software Outsourcing                                         33


Variables Extracted

       Based on the secondary research (literature review) done in this report, following 39

variables have been identified. These variables are classified into three aspects – Legal,

Human Resource and Strategic, in line with the organization of the report.

  Section     Variable ID                                   Variable Description
              VAR00001      IP asset identification in contract
              VAR00002      IP asset valuation in contract
              VAR00003      Single language contract
              VAR00004      Dispute jurisdiction
              VAR00005      Applicable law in dispute
    Legal
              VAR00006      Licensing terms - rights, geographies and time
              VAR00007      knowledge of Patent, Copyright, Non-disclosure/Confidentiality Laws
              VAR00008      knowledge of Non-disclosure/IP annexure signed in employment contract
              VAR00009      knowledge of IP laws in home country
              VAR00010      knowledge of IP laws in Country of origin of partner
              VAR00011      Establishing communication protocol with partner and train employees
              VAR00012      Employee Training on what all constitutes as IP assets
              VAR00013      Employee Training on Strategic importance of those IP assets
              VAR00014      National cultural dimensions: similarities and differences between client/vendor
              VAR00015      More number of messages exchanged
              VAR00016      More time spent in communication
  Human
              VAR00017      Communication between employees at multiple levels
 Resources
              VAR00018      Communication between employees from different functions
              VAR00019      Proactive sharing of information required to perform task
              VAR00020      Face-to-face communication
              VAR00021      Informal/personal communication Incl. Facebook, Google Chat, LinkedIn
              VAR00022      Trust on capability of other partner on delivering on promises
              VAR00023      Trust on ethical and professional behavior of other partner
              VAR00024      Recording IP in desired format (documentation, diagrams, KM systems)
              VAR00025      Market reputation of partner company
              VAR00026      Internal Project Progress Reporting, Review and Tracking (Within firm)
              VAR00027      Periodical Project Progress Reporting, Review and Tracking with/to/for the client
              VAR00028      Perform regular IP Audit (assets, life, benefits, importance)
              VAR00029      Engage IP experts (internal or external consultants)
  Strategic   VAR00030      Classify IP assets based on value and importance
              VAR00031      Evaluate potential assets exposed using IP due diligence checklist
              VAR00032      Organizational policy on what to outsource
              VAR00033      Business relationship of partner with your competitors
              VAR00034      Other businesses of your partner (Possible Conflict of Interest)
              VAR00035      Relationship between partner and your customers
              VAR00036      Corporate Governance policies of partner
Intellectual Property Issues in Global Software Outsourcing                                          34


              VAR00037      Market reputation/Feedback from others about your partner
              VAR00038      Financial strength of partner
              VAR00039      Political, Economical and Social conditions in partner's country(s) of operation

Survey Design

       In order to reduce these variables using Exploratory Factor Analysis (EFA) method, a

primary research survey was conducted.

Survey Nature:

       An anonymous survey was created. No personally identifiable content was captured.

Apart from responses to specific questionnaire described below, some additional profile

information was captured. It included user’s role whether outsourcer (client/customer) or

outsourcee (vendor or contractor). Position title and work experience in years was also asked.

Also the geographical location of user was captured. This data has no direct role in

identifying factor weightages, but it may be used for qualitative analysis of the data. It also

indicates diversity of responses gathered.

Questionnaire:

       A survey questionnaire was designed with one question corresponding to each of the

39 variables. The questions were not organized as per sections of analysis to eliminate any

inherent bias. Rather questions were combined based on topics like contract, training,

communication etc. Audience was asked to rate importance of the variable as output. All

questions were positive in nature i.e. higher importance of presence of variable will always be

indicated by 7 for from intellectual property impact, while 1 would indicate no or lesser

importance of particular variable.

Specific Questions:

       Only 1 specific question was asked – “According to you, which of the following is the

correct representation of IP exposure risk in software outsourcing?” The intention is to
Intellectual Property Issues in Global Software Outsourcing                                        35


measure perception of IP issues faced by vendors or clients among audience. We will discuss

qualitatively these responses in later section.

Scale:

         All responses were gathered on Likert’s 7 point scale from “Not Important” to “Very

Important”. All questions had same response scale, so no standardization of responses was

required. Among Likert’s scales, 5-point and 7-point are considered most accurate and

reliable as they represent adequate intervals from both user distinguishability point of view as

well as statistical significance. However, though there is no conclusive evidence, many

psychometricians recommend 7-point scale over 5-point in obtaining observation scores for

exploratory factor analysis. Hence, the 7-point Likert scale is used in this survey.


Survey Responses

         In this section we will discuss sampling method employed in conducting survey and

descriptive analysis of audience profile.

Sampling Method:

         It was decided to conduct the survey as Expert survey. The method used was

Snowball sampling which is non-probability sampling method. Invitations were sent out to

known practitioners in software outsourcing or offshoring model. The audience involved

professionals on both client as well as vendor side. Individuals were also asked to forward

invitations to people they know who have experience in managing outsourced projects from

either side. We have received considerable number of responses from such secondary level of

contacts.

         The survey was setup using user-friendly UI of the surveymonkey.com and was

administered online. The target audience was contacted using personal email invitations with

standard 1 reminder 2 days prior to deadline using messaging on their social networking

(Facebook) profile.
Intellectual Property Issues in Global Software Outsourcing                                       36


       A total of 35 participants undertook the survey. Out of those responses a total of 28

responses were considered valid after eliminating inconsistent and incomplete responses. In

following section we will discuss brief profile of the audience.

Participant Profile:

       Overall audience represents diverse set of individuals from both sides of outsourcing,

in various positions and with wider work experience range. Although majority audience

comes from India, there was decent representation from matured markets like North America,

Hong Kong and Western Europe. The audience profile is discussed with help of graphical

diagrams.




                           10
                                                                        Outsourcee (Vendor /
                                                                        Contractor)
                                                      18
                                                                        Outsourcer (Client /
                                                                        Customer)




                                 Figure 5 Participant Statistics by Role




                                  3             7
                                                                           People Managers
                       8
                                                                           Developers
                                                                           Consultants/Analysts
                                              10
                                                                           Test/Support




                                Figure 6 Participant Statistics by Position
Intellectual Property Issues in Global Software Outsourcing                                           37




                                         4         5
                                                                                     Upto 2 years
                      6
                                                                                     Upto 5 years
                                                                                     Upto 8 years
                                                        13
                                                                                     8+ years




                          Figure 7 Participant Statistics by Related Work Experience




                                 2       1
                  6                                                          India
                                                                             North America
                                                          19                 Hong Kong/Singapore
                                                                             Western Europe




                               Figure 8 Participant Statistics by Work Location




                                                                          Client has more risks
                                     2
                          4
                                                       13
                                                                          Client and vendor have
                                                                          equal risks

                      9                                                   Only client IP is exposed


                                                                          Vendor has more risks




                                 Figure 9 Participants’ perception of IP risks

       Above diagram represents the participants’ perception on IP risks involved in

software outsourcing. Since the survey was within expert audience, everyone agrees that

there are considerable IP risks involved in software outsourcing. However, most believe that

client is more susceptible. But convincing number of individuals consent to our opinion that
Intellectual Property Issues in Global Software Outsourcing                                        38


both client and vendor face equal risks with respect to IP in software outsourcing. The minor

variations may be accorded to different scenarios like type of outsourcing, types of

companies involved and different level of involvement of participant with respect to given

software project. The opinion on risks is not subject to further analysis as part of this study.


Factor Analysis Configuration

       Software used for analysis was IBM SPSS version 16.0 licensed to Indian Institute of

Management Lucknow which is made available to students for academic purposes. The tool

supports out-of-box functionality for statistical analysis using Factor reduction method. This

helps summarizing large factors into more compact components. The tool also supports

Varimax rotation.

Statistical Analysis Package                      IBM SPSS v16.0

Descriptives                                      1. Kaiser-Meyer-Olkin Measure

                                                  2. Bartlett’s Test of Sphericity

Extraction Method                                 Principle Component Extraction

Factor Extraction Criteria                        Eigen Value > 1.0

Rotation Method                                   Varimax rotation with Kaiser Normalization

Interpretation Method                             Identify loading >= 0.5 in rotated component

                                                  matrix



       Following are various details regards to Exploratory Factor Analysis method

conducted.

Descriptives:

       We will use following descriptives to check validity of factor reduction analysis.
Intellectual Property Issues in Global Software Outsourcing                                          39


       (1)     Kaiser-Meyer-Olkin Measure (KMO) of sampling adequacy: This measures

partial correlations between variables. If > 0.5, it indicates that the given sample is sufficient

for factor reduction. Otherwise, it may indicate that the factor analysis is satisfactory.

       (2)     Bartlett’s Test of Sphericity: The null hypothesis that factors are uncorrelated

must be rejected in order to proceed with the factor analysis. If significance is less than 0.05,

it indicates there is sufficient evidence to reject null hypothesis and the factors have strong

correlation among themselves, hence factor analysis can be conducted.

Extraction Method:

       The motive is to extract minimum number of factors that explain variation. Hence, we

will use Principle Component Method for extraction.

No. of factors to be extracted:

       There is no requirement to extract fixed number of factors. We will extract all those

factors which have Eigen Value higher than 1.0.

Rotation Method:

       Since we want to reduce number of variables with high loading on a factor, we use

orthogonal rotation. The particular method used here is Varimax rotation with Kaiser

Normalization.

Interpretation Method:

       We will interpret loading of variables on factor using rotated component matrix. We

will follow general thumb rule of identifying loadings which are >=0.5. In some cases, where

variable did not load on any factor, we have taken factor loadings which are close to 0.5, due

to inadequacy of sample size.


Factor Analysis Results

       The 3 sections – Legal, Human Resource Practices and Organizational Strategy are

not factors but aspects of organizational operations. Hence, factor analysis was performed
Intellectual Property Issues in Global Software Outsourcing                                                  40


separately for each section. There is sufficient literature available to say that these three

aspects are independent. This would avoid any random pattern to emerge among variables

from different sections. Let’s look at EFA results one-by-one.

Legal Aspects:

SSPS Output

Descriptive                                    Value   Remark

KMO sampling adequacy                          0.607   Sample sufficient for factor analysis

Barlett’s Test of sphericity sig. 0.000                Null Hypothesis rejected, Factor Analysis possible


                                                                     a
                                          Rotated Component Matrix
                                                                                       Component
                                   Variables                                   1           2       3
IP asset identification in contract                                             .099       -.095    .894
IP asset valuation in contract                                                  .261       .042     .879
Single language contract                                                        .577       .279     .292
Dispute jurisdiction                                                            .956       .089     .078
Applicable law in dispute                                                       .950       .033     .085
Licensing terms - rights, geographies and time                                  .759       -.047    .313
knowledge of Patent, Copyright, Non-disclosure/Confidentiality Laws            -.172       .915     .195
knowledge of Non-disclosure/IP annexure signed in employment contract           .118       .945    -.029
knowledge of IP laws in home country                                            .390       .804    -.305
knowledge of IP laws in Country of origin of partner                            .668       .614    -.149
Extraction Method: Principal Component Analysis.
Rotation Method: Varimax with Kaiser Normalization.
Rotation converged in 6 iterations.


Interpretation

         The factors are interpreted as follows-

               Factor        Variance              Loadi
  #        Interpretation    Explained              ng                       Variables in Factor
 F1     Legal intricacies of   34.45%              0.577   Single language contract
        contractual contents                       0.956   Dispute jurisdiction
                                                    0.95   Applicable law in dispute
                                                   0.759   Licensing terms - rights, geographies and time
                                                   0.668   Knowledge of IP laws in Country of origin of partner
 F2      Employee       training       28.53%      0.915   knowledge       of     Patent,     Copyright,    Non-
Intellectual Property Issues in Global Software Outsourcing                                                      41

        on legal matters                                    disclosure/Confidentiality Laws
        related to IP                                       knowledge of Non-disclosure/IP annexure signed in
                                                 0.945      employment contract
                                                 0.804      knowledge of IP laws in home country
                                                 0.614      knowledge of IP laws in Country of origin of partner
 F3     Formal               IP       19.23%     0.894      IP asset identification in contract
        assessment                               0.879      IP asset valuation in contract


Human Resource Aspects:

SSPS Output

Descriptive                                   Value Remark

KMO sampling adequacy                         0.545   Sample sufficient for factor analysis

Barlett’s Test of sphericity sig.             0.000   Null Hypothesis rejected, Factor Analysis possible


                                                                         a
                                              Rotated Component Matrix
                                                                                           Component
                                  Variables
                                                                               1       2       3        4       5
Establishing communication protocol with partner and train employees          .624    -.062   .359     .039    -.438
Employee Training on what all constitutes as IP assets                        .880    .213    -.186    .005    .059
Employee Training on Strategic importance of those IP assets                  .879    .228    -.172    .082    -.001
National cultural dimensions: similarities and differences between            .839    -.030   .268     .069    .009
client/vendor
More number of messages exchanged                                             -.043   .290    .893     -.002   .173
More time spent in communication                                              .052    .312    .781     .041    .180
Communication between employees at multiple levels                            .055    .702    .416     .327    .124
Communication between employees from different functions                      .201    .803    .236     -.152   -.205
Proactive sharing of information required to perform task                     .094    .809    .159     .137    .262
Face-to-face communication                                                    .337    .391    .157     -.258   .588
Informal/personal communication Incl. Facebook, Google Chat, LinkedIn         -.141   -.021   .299     .092    .879
Trust on capability of other partner on delivering on promises                .026    .074    .188     .911    -.081
Trust on ethical and professional behavior of other partner                   .107    .042    -.129    .933    .063
Extraction Method: Principal Component Analysis.
Rotation Method: Varimax with Kaiser Normalization.
Rotation converged in 6 iterations.


Interpretation

         The factors are interpreted as follows-
Intellectual Property Issues in Global Software Outsourcing                                                    42


               Factor             Variance Loadi
  #        Interpretation         Explained  ng                     Variables in Factor
 F4      Employee training          21.88%        Establishing communication protocol with partner
         on soft skills and                 0.624 and train employees
         awareness of IP                     0.88 Employee Training on what all constitutes as IP assets
                                                  Employee Training on Strategic importance of those
                                            0.879 IP assets
                                                  National cultural dimensions: similarities and
                                            0.839 differences between client/vendor
 F5      Holistic      and          17.20%        Communication between employees at multiple
         proactive                          0.702 levels
         communication                            Communication between employees from different
                                            0.803 functions
                                                  Proactive sharing of information required to perform
                                            0.809 task
 F6      Frequent contact           16.09% 0.893 More number of messages exchanged
                                            0.781 More time spent in communication
 F7      Trusted relationship       14.91%        Trust on capability of other partner on delivering on
         between partners                   0.588 promises
                                                  Trust on ethical and professional behavior of other
                                            0.879 partner
 F8      Encourage informal         11.65% 0.911 Face-to-face communication
         contact                                  Informal/personal communication Incl. Facebook,
                                            0.933 Google Chat, LinkedIn


Corporate Strategic Aspects:

SSPS Output

Descriptive                                Value       Remark

KMO sampling adequacy                      0.587       Sample sufficient for factor analysis

Barlett’s Test of sphericity sig. 0.000                Null Hypothesis rejected, Factor Analysis possible



                                                                          a
                                               Rotated Component Matrix
                                                                                          Component
                                   Variables
                                                                               1      2         3      4       5
Recording IP in desired format (documentation, diagrams, KM systems)          .164   .269      .001   -.145   .780
Market reputation of partner company                                          .701   .333      .356   -.292   .068
Internal Project Progress Reporting, Review and Tracking (Within firm)        .255   .252      .111   .863    .058
Periodical Project Progress Reporting, Review and Tracking with/to/for the    .330   .209      .203   .797    .140
client
Perform regular IP Audit (assets, life, benefits, importance)                 .163   .179      .763   .146    .248
Intellectual Property Issues in Global Software Outsourcing                                                         43


Engage IP experts (internal or external consultants)                               .100    .167    .623   .018    -.151
Classify IP assets based on value and importance                                   .053    .115    .595   .125    .498
Evaluate potential assets exposed using IP due diligence checklist                 .296    .187    .652   .153    .094
Organizational policy on what to outsource                                         -.045   .785    .219   .320    .025
Business relationship of partner with your competitors                             .142    .779    .179   -.026   .453
Other businesses of your partner (Possible Conflict of Interest)                   .203    .814    .280   .208    .034
Relationship between partner and your customers                                    -.006   -.040   .143   .396    .675
Corporate Governance policies of partner                                           .803    -.073   .110   .168    .156
Feedback from others about your partner                                            .650    .074    .032   .191    .605
Financial strength of partner                                                      .767    .115    .102   .420    .090
Political, Economical and Social conditions in partner's country(s) of operation   .851    .150    .293   .265    -.048
Extraction Method: Principal Component Analysis.
Rotation Method: Varimax with Kaiser Normalization.
Rotation converged in 9 iterations.

Interpretation

         The factors are interpreted as follows-

                                      Variance  Loadi
  #     Factor Interpretation         Explained  ng                            Variables in Factor
 F9     Assessing partner’s              20.40% 0.701        Market reputation of partner company
        ability to deliver on                   0.803        Corporate Governance policies of partner
        promises
                                                 0.65        Feedback from others about your partner
                                                0.767        Financial strength of partner
                                                             Political, Economical and Social conditions in
                                                0.851        partner's country(s) of operation
 F10    Evaluate conflict of             14.58% 0.785        Organizational policy on what to outsource
        interest                                             Business relationship of partner with your
                                                    0.779    competitors
                                                             Other businesses of your partner (Possible Conflict
                                                    0.814    of Interest)
 F11    IP due diligence and             13.87%              Perform regular IP Audit (assets, life, benefits,
        audit                                       0.763    importance)
                                                    0.623    Engage IP experts (internal or external consultants)
                                                    0.595    Classify IP assets based on value and importance
                                                             Evaluate potential assets exposed using IP due
                                                    0.652    diligence checklist
 F12    Regular        progress          13.51%              Internal Project Progress Reporting, Review and
        tracking                                    0.863    Tracking (Within firm)
                                                             Periodical Project Progress Reporting, Review and
                                                    0.797    Tracking with/to/for the client
 F13    Record IP for storage            12.74%              Recording IP in desired format (documentation,
        and transfer                                 0.78    diagrams, KM systems)
        (other variables                            0.675    Relationship between partner and your customers
        unidentifiable)
                                                    0.605    Feedback from others about your partner
Intellectual Property Issues in Global Software Outsourcing                                                 44


                                                Conclusion

        The model framework can be summarized as follows. It can serve as checklist before

any organization ventures into software outsourcing decisions. The factors are in decreasing

order of importance (based on total percentage explained variance) in each category. The

categories are independent of each other.



 •Legal intricacies of contractual         •Employee training on soft skills   •Assessing partner's ability to
  contents                                  and awareness of IP                 deliver on promises
 •Employee training on legal               •Holistic and proactive             •Evaluate conflict of interest
  matters related to IP                     communication                      •IP due diligence and audit
 •Formal IP assessment                     •Frequent contact                   •Regular progress tracking
                                           •Trusted relationship between       •Record IP for storage and
                                            partners                            transfer
                                           •Encourage informal contact

                                           Human                               Corporate
  Legal
                                           Resources                           Strategy


Figure 10 Checklist Framework for IP transfer

Managerial Implications

        While all the factors are more or less important, and factor analysis does not provide a

particular descending order for them, what we need to note is the variance is based on

perception of experts about importance of such factors. The factors at top in each category

had higher variance compared to factor in the end. That may mean that companies need to

take into account factors at top at priority compared to factors at bottom due to higher

variance in understanding importance of those.

        It is also identified that while legal measures may provide remedy to safeguard

interests in case of violations, litigations are costly, time-consuming and sometimes

unpredictable in international scenario due to heterogeneity of the laws. Therefore,

companies should give more importance to factors identified under Human Resource and
Intellectual Property Issues in Global Software Outsourcing                                       45


Strategic aspects. Companies should identify their partners appropriately on multi-

dimensional parameters and not just consideration for lower costs. Companies should also

take proactive steps to raise awareness among employees and establish communication that

builds trust based relationships between employees of both organizations while they work

together.

       We also need to take into account certain other factors which were not subjected to

the survey due to more complex legal nature. It was certain that survey audience does not

have legal background as generally these are taken care of by the legal experts inside or hired

by the organization. These include structuring of employment contracts with IP specific

clause that enable employers to secure rights to work authored by the employees. Applicable

laws with respect to copyrights and trade secrets vary greatly compared to their patent

counterparts across the globe. Therefore the company operating in international segment

needs to hire legal experts locally in order to safeguard its interest in countries outside its

origin. Companywide policies may not be valid across borders.


Limitations and Future Scope

       The main limitation of the study remains associated with survey. Although the survey

was able to achieve balance of opinions between both sides of outsourcing relationship, the

geographic balance was not obtained with audience from India largely dominating it. Triad

market like Western Europe was heavily underrepresented. The survey was also dominated

by audience of around 5 years of work experience and majorly from development

background. Due to limitation of time, we were able to obtain only 28 valid responses.

Though it was statistically sufficient, higher number of more diverse responses will certainly

help derive more meaningful conclusions.

       As future scope, the survey diversity in terms of geographical location, gender and

work experience can be enhanced with increased sample size and timeframe. Another aspect
Intellectual Property Issues in Global Software Outsourcing                                        46


of diversity required is in terms of size of organization. Current survey was rolled to

employees of very large enterprises like Microsoft, Accenture, TCS, IBM, Google etc.

Inclusion of employees from Small and Medium segment will be helpful. Also, higher

sample size will enable to classify service sector vs. product sector as significantly different

IP issues affect these two sectors of Information Technology/Software Development. These

enhancements will help make the conclusions more significant as customized for respective

companies.
Intellectual Property Issues in Global Software Outsourcing                                   47


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Intellectual Property Issues in Global Software Outsourcing                                          48


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Intellectual Property Issues in Global Software Outsourcing                                    50


                                 Appendix-I: SPSS Outputs

Refer codified list of variables in section “Research Methodology” >> sub-section “Variables

Extracted” on page number: 41.

Attached:

PDF printouts of detailed SPSS output for factor analysis in each three sections.

Order: -

   1. Legal

   2. Human Resources

   3. Strategic



For future reference, the SPSS outputs, additional links and appendices are available on

project homepage at http://research.vaibhavsathe.com for download.

Thank You.
FACTOR
  /VARIABLES VAR00001 VAR00002 VAR00003 VAR00004 VAR00005 VAR00006 VAR00007 VAR00008 VAR00009 VAR00010
  /MISSING LISTWISE
  /ANALYSIS VAR00001 VAR00002 VAR00003 VAR00004 VAR00005 VAR00006 VAR00007 VAR00008 VAR00009 VAR00010
  /PRINT UNIVARIATE INITIAL KMO EXTRACTION ROTATION FSCORE
  /CRITERIA MINEIGEN(1) ITERATE(25)
  /EXTRACTION PC
  /CRITERIA ITERATE(25)
  /ROTATION VARIMAX
  /METHOD=CORRELATION.




Factor Analysis
                                           Notes
 Output Created                                                  26-Apr-2012 21:51:16
 Comments
 Input                    Data                     E:term VIIThesisSPSSthesis.sav
                          Active Dataset           DataSet0
                          Filter                   <none>
                          Weight                   <none>
                          Split File               <none>
                          N of Rows in Working
                          Data File                                                 28
 Missing Value Handling   Definition of Missing    MISSING=EXCLUDE: User-defined
                                                   missing values are treated as
                                                   missing.
                          Cases Used               LISTWISE: Statistics are based on
                                                   cases with no missing values for
                                                   any variable used.
 Syntax                                            FACTOR
                                                    /VARIABLES VAR00001 VAR00002
                                                   VAR00003 VAR00004 VAR00005
                                                   VAR00006 VAR00007 VAR00008
                                                   VAR00009 VAR00010
                                                    /MISSING LISTWISE
                                                    /ANALYSIS VAR00001 VAR00002
                                                   VAR00003 VAR00004 VAR00005
                                                   VAR00006 VAR00007 VAR00008
                                                   VAR00009 VAR00010
                                                    /PRINT UNIVARIATE INITIAL KMO
                                                   EXTRACTION ROTATION FSCORE
                                                    /CRITERIA MINEIGEN(1) ITERATE
                                                   (25)
                                                    /EXTRACTION PC
                                                    /CRITERIA ITERATE(25)
                                                    /ROTATION VARIMAX
                                                    /METHOD=CORRELATION.
 Resources                Processor Time                                   00:00:00.078
                          Elapsed Time                                     00:00:00.034
                          Maximum Memory
                          Required                 13480 (13.164K) bytes
[DataSet0] E:term VIIThesisSPSSthesis.sav

                           Descriptive Statistics

                                  Mean       Std. Deviation   Analysis N
 IP asset identification in
 contract                         5.9643            1.17006          28
 IP asset valuation in
 contract                         5.6071            1.19689          28
 Single language contract         4.8571            1.48360          28
 Dispute jurisdiction             5.3929            1.28638          28
 Applicable law in dispute        5.5000            1.37437          28
 Licensing terms - rights,
 geographies and time             5.6786            1.58823          28
 knowledge of Patent,
 Copyright, Non-
 disclosure/Confidentiality       5.8571            1.38013          28
 Laws
 knowledge of Non-
 disclosure/IP annexure
 signed in employment             5.8929            1.42307          28
 contract
 knowledge of IP laws in
 home country                     5.3571            1.59198          28
 knowledge of IP laws in
 Country of origin of             5.5714            1.34519          28
 partner

                         KMO and Bartlett's Test
 Kaiser-Meyer-Olkin Measure of Sampling Adequacy.
                                                                  .607

 Bartlett's Test of             Approx. Chi-Square            229.299
 Sphericity
                                df                                 45
                                Sig.                              .000

                        Communalities

                                  Initial    Extraction
 IP asset identification in
 contract                            1.000          .818
 IP asset valuation in
 contract                            1.000          .842
 Single language contract            1.000          .496
 Dispute jurisdiction                1.000          .928
 Applicable law in dispute           1.000    .910
 Licensing terms - rights,
 geographies and time             1.000       .677
 knowledge of Patent,
 Copyright, Non-
 disclosure/Confidentiality       1.000       .904
 Laws
 knowledge of Non-
 disclosure/IP annexure
 signed in employment             1.000       .908
 contract
    Extraction Method: Principal Component Analysis.
Communalities

                                Initial Extraction
knowledge of IP laws in
home country                      1.000      .892
knowledge of IP laws in
Country of origin of              1.000      .845
partner
   Extraction Method: Principal Component Analysis.

                                                    Total Variance Explained

                                                                                                              Rotation
                                                                                                              Sums of
                                                                                                              Squared
                              Initial Eigenvalues                   Extraction Sums of Squared Loadings       Loadings
Component        Total       % of Variance      Cumulative %        Total      % of Variance   Cumulative %     Total
     1            4.195             41.954             41.954         4.195          41.954          41.954      3.445
      2           2.527             25.265             67.219         2.527          25.265          67.219      2.853
      3           1.500             14.996             82.215         1.500          14.996          82.215      1.923
      4            .762               7.623            89.837
      5            .339               3.388            93.225
      6            .294               2.936            96.162
      7            .181               1.813            97.975
      8            .115               1.154            99.128
      9            .057                .568            99.696
      10           .030                .304           100.000
  Extraction Method: Principal Component Analysis.

              Total Variance Explained

                 Rotation Sums of Squared
                          Loadings
Component      % of Variance       Cumulative %
     1                   34.451           34.451
      2                  28.534           62.985
      3                  19.230           82.215
      4
      5
      6
      7
      8
      9
      10
  Extraction Method: Principal Component Analysis.
Component Matrixa

                                            Component
                                   1            2         3
IP asset identification in
contract                           .197         .612      .636
IP asset valuation in
contract                           .402         .560      .606
Single language contract           .679         .166      .089
   Extraction Method: Principal Component Analysis.
   a. 3 components extracted.

                       Component Matrixa

                                            Component
                                   1            2         3
Dispute jurisdiction               .847         .322      -.328
Applicable law in dispute         .812       .366         -.341
Licensing terms - rights,
geographies and time              .656       .486         -.105
knowledge of Patent,
Copyright, Non-
disclosure/Confidentiality        .390      -.630         .596
Laws
knowledge of Non-
disclosure/IP annexure
signed in employment              .603      -.675         .299
contract
knowledge of IP laws in
home country                      .698      -.629         -.100
knowledge of IP laws in
Country of origin of              .852      -.299         -.174
partner
   Extraction Method: Principal Component Analysis.
   a. 3 components extracted.

                  Rotated Component Matrixa

                                            Component
                                   1            2         3
IP asset identification in
contract                           .099         -.095     .894
IP asset valuation in
contract                           .261         .042      .879
Single language contract           .577         .279      .292
Dispute jurisdiction               .956         .089      .078
Applicable law in dispute          .950         .033      .085
Licensing terms - rights,
geographies and time              .759      -.047         .313
knowledge of Patent,
Copyright, Non-
disclosure/Confidentiality       -.172       .915         .195
Laws
knowledge of Non-
disclosure/IP annexure
signed in employment              .118       .945         -.029
contract
   Extraction Method: Principal Component Analysis.
    Rotation Method: Varimax with Kaiser Normalization.
   a. Rotation converged in 6 iterations.
Rotated Component Matrixa

                                             Component
                                     1      2             3
knowledge of IP laws in
home country                      .390       .804         -.305
knowledge of IP laws in
Country of origin of              .668       .614         -.149
partner
   Extraction Method: Principal Component Analysis.
    Rotation Method: Varimax with Kaiser Normalization.
    a. Rotation converged in 6 iterations.

            Component Transformation Matrix

Co…           1              2           3
1             .820           .541         .188
2             .360           -.742        .566
3             -.445          .396         .803
    Extraction Method: Principal Component Analysis.
    Rotation Method: Varimax with Kaiser Normalization.

              Component Score Coefficient Matrix

                                             Component
                                     1           2        3
IP asset identification in
contract                             -.063       .014     .487
IP asset valuation in
contract                             -.022       .048     .468
Single language contract             .130        .062     .115
Dispute jurisdiction                 .309        -.072    -.066
Applicable law in dispute            .312        -.093    -.065
Licensing terms - rights,
geographies and time              .229      -.086         .082
knowledge of Patent,
Copyright, Non-
disclosure/Confidentiality       -.190       .393         .195
Laws
knowledge of Non-
disclosure/IP annexure
signed in employment             -.067       .355         .036
contract
knowledge of IP laws in
home country                      .076       .248         -.163
knowledge of IP laws in
Country of origin of              .175       .152         -.122
partner
   Extraction Method: Principal Component Analysis.
    Rotation Method: Varimax with Kaiser Normalization.

           Component Score Covariance Matrix

Co…           1              2           3
1            1.000           .000         .000
2             .000          1.000         .000
3             .000           .000        1.000
    Extraction Method: Principal Component Analysis.
    Rotation Method: Varimax with Kaiser Normalization.
FACTOR
  /VARIABLES VAR00011 VAR00012 VAR00013 VAR00014 VAR00015 VAR00016 VAR00017 VAR00018 VAR00019 VAR00020 VAR00021 VAR00022 VAR00023
  /MISSING LISTWISE
  /ANALYSIS VAR00011 VAR00012 VAR00013 VAR00014 VAR00015 VAR00016 VAR00017 VAR00018 VAR00019 VAR00020 VAR00021 VAR00022 VAR00023
  /PRINT UNIVARIATE INITIAL KMO EXTRACTION ROTATION FSCORE
  /CRITERIA MINEIGEN(1) ITERATE(25)
  /EXTRACTION PC
  /CRITERIA ITERATE(25)
  /ROTATION VARIMAX
  /METHOD=CORRELATION.




Factor Analysis
                                             Notes
 Output Created                                                         26-Apr-2012 21:53:44
 Comments
 Input                      Data                          E:term VIIThesisSPSSthesis.sav
                            Active Dataset                DataSet0
                            Filter                        <none>
                            Weight                        <none>
                            Split File                    <none>
                            N of Rows in Working
                            Data File                                                       28
 Missing Value Handling     Definition of Missing         MISSING=EXCLUDE: User-defined
                                                          missing values are treated as
                                                          missing.
                            Cases Used                    LISTWISE: Statistics are based on
                                                          cases with no missing values for
                                                          any variable used.
 Syntax                                                   FACTOR
                                                           /VARIABLES VAR00011 VAR00012
                                                          VAR00013 VAR00014 VAR00015
                                                          VAR00016 VAR00017 VAR00018
                                                          VAR00019 VAR00020 VAR00021
                                                          VAR00022 VAR00023
                                                           /MISSING LISTWISE
                                                           /ANALYSIS VAR00011 VAR00012
                                                          VAR00013 VAR00014 VAR00015
                                                          VAR00016 VAR00017 VAR00018
                                                          VAR00019 VAR00020 VAR00021
                                                          VAR00022 VAR00023
                                                           /PRINT UNIVARIATE INITIAL KMO
                                                          EXTRACTION ROTATION FSCORE
                                                           /CRITERIA MINEIGEN(1) ITERATE
                                                          (25)
                                                           /EXTRACTION PC
                                                           /CRITERIA ITERATE(25)
                                                           /ROTATION VARIMAX
                                                           /METHOD=CORRELATION.
 Resources                  Processor Time                                        00:00:00.062
                            Elapsed Time                                          00:00:00.035
                            Maximum Memory
                            Required                      21700 (21.191K) bytes
[DataSet0] E:term VIIThesisSPSSthesis.sav

                          Descriptive Statistics

                                 Mean      Std. Deviation    Analysis N
 Establishing
 communication protocol
 with partner and train          5.8214            1.12393          28
 employees
 Employee Training on
 what all constitutes as IP      5.7857            1.42354          28
 assets
 Employee Training on
 Strategic importance of         5.4643            1.47779          28
 those IP assets
 National cultural
 dimensions: similarities
 and differences between         5.1786            1.27812          28
 client/vendor
 More number of
 messages exchanged              4.6786            1.49204          28
 More time spent in
 communication                   4.9286            1.24510          28
 Communication between
 employees at multiple           5.2500            1.23603          28
 levels
 Communication between
 employees from different        4.9643            1.34666          28
 functions
 Proactive sharing of
 information required to         5.6071            1.42307          28
 perform task
 Face-to-face
 communication                   4.6071            1.70705          28
 Informal/personal
 communication Incl.
 Facebook, Google Chat,          3.5000            2.00924          28
 LinkedIn
 Trust on capability of
 other partner on                5.4643            1.26146          28
 delivering on promises
 Trust on ethical and
 professional behavior of        5.8571             .93152          28
 other partner

                        KMO and Bartlett's Test
 Kaiser-Meyer-Olkin Measure of Sampling Adequacy.
                                                                 .545

 Bartlett's Test of            Approx. Chi-Square            195.673
 Sphericity
                               df                                 78
                               Sig.                              .000

                      Communalities

                                 Initial Extraction
 Establishing
 communication protocol
 with partner and train            1.000      .716
 employees
    Extraction Method: Principal Component Analysis.
Communalities

                                 Initial Extraction
Employee Training on
what all constitutes as IP         1.000      .858
assets
Employee Training on
Strategic importance of            1.000      .862
those IP assets
National cultural
dimensions: similarities
and differences between            1.000      .782
client/vendor
More number of
messages exchanged                 1.000      .913
More time spent in
communication                      1.000      .744
Communication between
employees at multiple              1.000      .791
levels
Communication between
employees from different           1.000      .806
functions
Proactive sharing of
information required to            1.000      .775
perform task
Face-to-face
communication                      1.000      .704
Informal/personal
communication Incl.
Facebook, Google Chat,             1.000      .891
LinkedIn
Trust on capability of
other partner on                   1.000      .877
delivering on promises
Trust on ethical and
professional behavior of           1.000      .905
other partner
    Extraction Method: Principal Component Analysis.

                                                  Total Variance Explained

                                                                                                            Rotation
                                                                                                            Sums of
                                                                                                            Squared
                            Initial Eigenvalues                   Extraction Sums of Squared Loadings       Loadings
Component        Total     % of Variance      Cumulative %        Total      % of Variance   Cumulative %     Total
     1            3.942           30.326               30.326       3.942          30.326          30.326      2.845
      2           2.611           20.085               50.411       2.611          20.085          50.411      2.235
      3           1.878           14.448               64.859       1.878          14.448          64.859      2.092
      4           1.181             9.084              73.943       1.181           9.084          73.943      1.939
      5           1.012             7.784              81.727       1.012           7.784          81.727      1.514
      6            .719             5.529              87.256
      7            .575             4.421              91.677
      8            .311             2.391              94.068
      9            .256             1.966              96.034
      10           .211             1.625              97.659
      11           .157             1.206              98.864
      12           .092              .711              99.575
      13           .055              .425           100.000
  Extraction Method: Principal Component Analysis.
Total Variance Explained

                 Rotation Sums of Squared
                          Loadings
Component      % of Variance    Cumulative %
     1                21.881           21.881
      2               17.195           39.077
      3               16.090           55.167
      4               14.913           70.079
      5               11.648           81.727
      6
      7
      8
      9
      10
      11
      12
      13
  Extraction Method: Principal Component Analysis.

                                 Component Matrixa

                                                       Component
                                  1          2             3       4       5
Establishing
communication protocol
with partner and train             .392       .517         .004    -.439   .321
employees
Employee Training on
what all constitutes as IP         .521       .709         -.118   .261    -.039
assets
Employee Training on
Strategic importance of            .539       .724         -.037   .209    -.053
those IP assets
National cultural
dimensions: similarities
and differences between            .575       .545         -.046   .025    .389
client/vendor
More number of
messages exchanged                 .640      -.548         -.097   -.288   .331
More time spent in
communication                      .658      -.431         -.062   -.213   .275
Communication between
employees at multiple              .762      -.322         .208    -.092   -.235
levels
Communication between
employees from different           .661      -.019         -.237   -.324   -.455
functions
Proactive sharing of
information required to            .714      -.254         .004    .125    -.430
perform task
Face-to-face
communication                      .575      -.110         -.412   .438    .000
Informal/personal
communication Incl.
Facebook, Google Chat,             .254      -.582         -.017   .611    .338
LinkedIn
    Extraction Method: Principal Component Analysis.
  a. 5 components extracted.
Component Matrixa

                                                      Component
                                  1          2            3       4       5
Trust on capability of
other partner on                  .303      -.042         .880    -.070   .061
delivering on promises
Trust on ethical and
professional behavior of          .199       .110         .896    .218    -.051
other partner
   Extraction Method: Principal Component Analysis.
  a. 5 components extracted.

                             Rotated Component Matrixa

                                                      Component
                                  1          2            3       4       5
Establishing
communication protocol
with partner and train             .624      -.062        .359    .039    -.438
employees
Employee Training on
what all constitutes as IP         .880       .213        -.186   .005    .059
assets
Employee Training on
Strategic importance of            .879       .228        -.172   .082    -.001
those IP assets
National cultural
dimensions: similarities
and differences between            .839      -.030        .268    .069    .009
client/vendor
More number of
messages exchanged                -.043       .290        .893    -.002   .173
More time spent in
communication                      .052       .312        .781    .041    .180
Communication between
employees at multiple              .055       .702        .416    .327    .124
levels
Communication between
employees from different           .201       .803        .236    -.152   -.205
functions
Proactive sharing of
information required to            .094       .809        .159    .137    .262
perform task
Face-to-face
communication                      .337       .391        .157    -.258   .588
Informal/personal
communication Incl.
Facebook, Google Chat,            -.141      -.021        .299    .092    .879
LinkedIn
Trust on capability of
other partner on                   .026       .074        .188    .911    -.081
delivering on promises
Trust on ethical and
professional behavior of           .107       .042        -.129   .933    .063
other partner
    Extraction Method: Principal Component Analysis.
    Rotation Method: Varimax with Kaiser Normalization.
  a. Rotation converged in 6 iterations.
Component Transformation Matrix

Co…          1            2           3           4           5
1             .531        .628        .501        .180        .200
2             .786        -.192       -.438       .002        -.392
3            -.120        -.095       -.056       .979        -.124
4             .158        -.069       -.461       .096        .865
5             .246        -.745       .585        .017        .206
    Extraction Method: Principal Component Analysis.
    Rotation Method: Varimax with Kaiser Normalization.

                          Component Score Coefficient Matrix

                                                      Component
                                  1           2           3           4       5
Establishing
communication protocol
with partner and train             .228      -.186        .319        -.010   -.314
employees
Employee Training on
what all constitutes as IP         .317       .050        -.174       -.016   .111
assets
Employee Training on
Strategic importance of            .308       .061        -.164       .022    .064
those IP assets
National cultural
dimensions: similarities
and differences between            .342      -.234        .198        .011    .048
client/vendor
More number of
messages exchanged                -.031      -.080        .480        -.039   -.023
More time spent in
communication                      .001      -.050        .400        -.015   .002
Communication between
employees at multiple             -.077       .313        .045        .132    -.042
levels
Communication between
employees from different          -.056       .473        -.042       -.128   -.278
functions
Proactive sharing of
information required to           -.068       .442        -.165       .037    .078
perform task
Face-to-face
communication                      .129       .095        -.067       -.153   .394
Informal/personal
communication Incl.
Facebook, Google Chat,             .024      -.200        .087        .058    .618
LinkedIn
Trust on capability of
other partner on                  -.023      -.034        .082        .468    -.076
delivering on promises
Trust on ethical and
professional behavior of           .020       .003        -.135       .493    .083
other partner
    Extraction Method: Principal Component Analysis.
    Rotation Method: Varimax with Kaiser Normalization.

                 Component Score Covariance Matrix

Co…          1            2           3           4           5
1           1.000         .000        .000        .000        .000
2             .000       1.000        .000        .000        .000
    Extraction Method: Principal Component Analysis.
    Rotation Method: Varimax with Kaiser Normalization.
Component Score Covariance Matrix

Co…          1            2          3           4        5
3             .000        .000      1.000        .000      .000
4             .000        .000       .000       1.000      .000
5             .000        .000       .000        .000     1.000
    Extraction Method: Principal Component Analysis.
    Rotation Method: Varimax with Kaiser Normalization.
FACTOR
  /VARIABLES VAR00024 VAR00025 VAR00026 VAR00027 VAR00028 VAR00029 VAR00030 VAR00031 VAR00032 VAR00033 VAR00034 VAR00035 VAR00036 VA
   R00037 VAR00038 VAR00039
  /MISSING LISTWISE
  /ANALYSIS VAR00024 VAR00025 VAR00026 VAR00027 VAR00028 VAR00029 VAR00030 VAR00031 VAR00032 VAR00033 VAR00034 VAR00035 VAR00036 VAR
   00037 VAR00038 VAR00039
  /PRINT UNIVARIATE INITIAL KMO EXTRACTION ROTATION FSCORE
  /CRITERIA MINEIGEN(1) ITERATE(25)
  /EXTRACTION PC
  /CRITERIA ITERATE(25)
  /ROTATION VARIMAX
  /METHOD=CORRELATION.




Factor Analysis
                                              Notes
 Output Created                                                           26-Apr-2012 21:57:39
 Comments
 Input                       Data                          E:term VIIThesisSPSSthesis.sav
                             Active Dataset                DataSet0
                             Filter                        <none>
                             Weight                        <none>
                             Split File                    <none>
                             N of Rows in Working
                             Data File                                                        28
 Missing Value Handling      Definition of Missing         MISSING=EXCLUDE: User-defined
                                                           missing values are treated as
                                                           missing.
                             Cases Used                    LISTWISE: Statistics are based on
                                                           cases with no missing values for
                                                           any variable used.
 Syntax                                                    FACTOR
                                                            /VARIABLES VAR00024 VAR00025
                                                           VAR00026 VAR00027 VAR00028
                                                           VAR00029 VAR00030 VAR00031
                                                           VAR00032 VAR00033 VAR00034
                                                           VAR00035 VAR00036 VAR00037
                                                           VAR00038 VAR00039
                                                            /MISSING LISTWISE
                                                            /ANALYSIS VAR00024 VAR00025
                                                           VAR00026 VAR00027 VAR00028
                                                           VAR00029 VAR00030 VAR00031
                                                           VAR00032 VAR00033 VAR00034
                                                           VAR00035 VAR00036 VAR00037
                                                           VAR00038 VAR00039
                                                            /PRINT UNIVARIATE INITIAL KMO
                                                           EXTRACTION ROTATION FSCORE
                                                            /CRITERIA MINEIGEN(1) ITERATE
                                                           (25)
                                                            /EXTRACTION PC
                                                            /CRITERIA ITERATE(25)
                                                            /ROTATION VARIMAX
                                                            /METHOD=CORRELATION.
Notes
 Resources      Processor Time                                          00:00:00.062
                Elapsed Time                                            00:00:00.029
                Maximum Memory
                Required                        31864 (31.117K) bytes




[DataSet0] E:term VIIThesisSPSSthesis.sav

                         Descriptive Statistics

                                 Mean      Std. Deviation     Analysis N
 Recording IP in desired
 format (documentation,          5.5714            1.03382              28
 diagrams, KM systems)
 Market reputation of
 partner company                 5.4286             .99735              28
 Internal Project Progress
 Reporting, Review and           5.8929            1.03062              28
 Tracking (Within firm)
 Periodical Project
 Progress Reporting,
 Review and Tracking             6.0357             .96156              28
 with/to/for the client
 Perform regular IP Audit
 (assets, life, benefits,        5.9643             .88117              28
 importance)
 Engage IP experts
 (internal or external           5.1429            1.20844              28
 consultants)
 Classify IP assets based
 on value and importance         6.0000             .90267              28
 Evaluate potential assets
 exposed using IP due            6.2143             .73822              28
 diligence checklist
 Organizational policy on
 what to outsource               5.9286            1.21499              28
 Business relationship of
 partner with your               6.0000            1.08866              28
 competitors
 Other businesses of your
 partner (Possible Conflict      5.9643             .92224              28
 of Interest)
 Relationship between
 partner and your                5.5714            1.28894              28
 customers
 Corporate Governance
 policies of partner             5.7500            1.23603              28
 Market
 reputation/Feedback from        5.7857             .91721              28
 others about your partner
 Financial strength of
 partner                         5.1429            1.29713              28
 Political, Economical and
 Social conditions in
 partner's country(s) of         5.1786            1.36228              28
 operation

             KMO and Bartlett's Test
 Kaiser-Meyer-Olkin Measure of
 Sampling Adequacy.                         .587
KMO and Bartlett's Test
Bartlett's Test of             Approx. Chi-Square      266.583
Sphericity
                               df                         120
                               Sig.                       .000

                      Communalities

                                 Initial Extraction
Recording IP in desired
format (documentation,             1.000      .728
diagrams, KM systems)
Market reputation of
partner company                    1.000      .819
Internal Project Progress
Reporting, Review and              1.000      .889
Tracking (Within firm)
Periodical Project
Progress Reporting,
Review and Tracking                1.000      .848
with/to/for the client
Perform regular IP Audit
(assets, life, benefits,           1.000      .724
importance)
Engage IP experts
(internal or external              1.000      .449
consultants)
Classify IP assets based
on value and importance            1.000      .633
Evaluate potential assets
exposed using IP due               1.000      .580
diligence checklist
Organizational policy on
what to outsource                  1.000      .769
Business relationship of
partner with your                  1.000      .865
competitors
Other businesses of your
partner (Possible Conflict         1.000      .826
of Interest)
Relationship between
partner and your                   1.000      .635
customers
Corporate Governance
policies of partner                1.000      .715
Market
reputation/Feedback from           1.000      .832
others about your partner
Financial strength of
partner                            1.000      .797
Political, Economical and
Social conditions in
partner's country(s) of            1.000      .906
operation
    Extraction Method: Principal Component Analysis.
Total Variance Explained

                                                                                                             Rotation
                                                                                                             Sums of
                                                                                                             Squared
                             Initial Eigenvalues                   Extraction Sums of Squared Loadings       Loadings
Component       Total       % of Variance      Cumulative %        Total      % of Variance   Cumulative %     Total
     1           6.241             39.004             39.004         6.241          39.004          39.004      3.264
     2           1.869             11.680             50.684         1.869          11.680          50.684      2.332
     3           1.492               9.326            60.010         1.492           9.326          60.010      2.219
  Extraction Method: Principal Component Analysis.

             Total Variance Explained

                Rotation Sums of Squared
                         Loadings
Component     % of Variance       Cumulative %
     1                  20.402           20.402
     2                  14.575           34.977
     3                  13.871           48.848
  Extraction Method: Principal Component Analysis.

                                                   Total Variance Explained

                                                                                                             Rotation
                                                                                                             Sums of
                                                                                                             Squared
                             Initial Eigenvalues                   Extraction Sums of Squared Loadings       Loadings
Component       Total       % of Variance      Cumulative %        Total      % of Variance   Cumulative %     Total
     4           1.410               8.812            68.821         1.410           8.812          68.821      2.161
     5           1.004               6.274            75.095         1.004           6.274          75.095      2.039
     6            .886               5.536            80.631
     7            .845               5.283            85.914
     8            .629               3.934            89.848
     9            .463               2.894            92.742
     10           .315               1.968            94.710
     11           .274               1.714            96.424
     12           .253               1.583            98.007
     13           .139                .870            98.877
     14           .084                .526            99.403
     15           .064                .400            99.804
     16           .031                .196           100.000
  Extraction Method: Principal Component Analysis.
Total Variance Explained

                Rotation Sums of Squared
                         Loadings
Component     % of Variance    Cumulative %
     4               13.505           62.353
     5               12.742           75.095
     6
     7
     8
     9
     10
     11
     12
     13
     14
     15
     16
  Extraction Method: Principal Component Analysis.
Component Matrixa

                                                       Component
                                 1           2             3       4       5
Recording IP in desired
format (documentation,             .424       .240         .656    .192    -.152
diagrams, KM systems)
Market reputation of
partner company                    .627      -.092         .220    -.585   -.164
Internal Project Progress
Reporting, Review and              .661      -.134         -.469   .463    -.008
Tracking (Within firm)
Periodical Project
Progress Reporting,
Review and Tracking                .731      -.154         -.358   .398    .064
with/to/for the client
Perform regular IP Audit
(assets, life, benefits,           .658       .248         .015    -.171   .447
importance)
Engage IP experts
(internal or external              .367       .186         -.214   -.371   .311
consultants)
Classify IP assets based
on value and importance            .567       .288         .235    .048    .414
Evaluate potential assets
exposed using IP due               .640       .099         -.077   -.240   .313
diligence checklist
Organizational policy on
what to outsource                  .542       .526         -.353   .069    -.261
Business relationship of
partner with your                  .644       .536         .208    -.007   -.345
competitors
Other businesses of your
partner (Possible Conflict         .688       .418         -.258   -.114   -.315
of Interest)
Relationship between
partner and your                   .427       .083         .290    .545    .254
customers
Corporate Governance
policies of partner                .609      -.553         .152    -.112   -.044
    Extraction Method: Principal Component Analysis.
  a. 5 components extracted.

                                 Component Matrixa

                                                       Component
                                 1          2              3       4       5
Market
reputation/Feedback from          .709      -.297          .442    .186    -.103
others about your partner
Financial strength of
partner                           .739      -.476          -.085   .023    -.126
Political, Economical and
Social conditions in
partner's country(s) of           .784      -.453          -.119   -.261   -.066
operation
   Extraction Method: Principal Component Analysis.
  a. 5 components extracted.
Rotated Component Matrixa

                                                        Component
                                    1           2           3          4       5
Recording IP in desired
format (documentation,             .164       .269          .001       -.145   .780
diagrams, KM systems)
Market reputation of
partner company                    .701       .333          .356       -.292   .068
Internal Project Progress
Reporting, Review and              .255       .252          .111       .863    .058
Tracking (Within firm)
Periodical Project
Progress Reporting,
Review and Tracking                .330       .209          .203       .797    .140
with/to/for the client
Perform regular IP Audit
(assets, life, benefits,           .163       .179          .763       .146    .248
importance)
Engage IP experts
(internal or external              .100       .167          .623       .018    -.151
consultants)
Classify IP assets based
on value and importance            .053       .115          .595       .125    .498
Evaluate potential assets
exposed using IP due               .296       .187          .652       .153    .094
diligence checklist
Organizational policy on
what to outsource                 -.045       .785          .219       .320    .025
Business relationship of
partner with your                  .142       .779          .179       -.026   .453
competitors
Other businesses of your
partner (Possible Conflict         .203       .814          .280       .208    .034
of Interest)
Relationship between
partner and your                  -.006      -.040          .143       .396    .675
customers
Corporate Governance
policies of partner                .803      -.073          .110       .168    .156
Market
reputation/Feedback from           .650       .074          .032       .191    .605
others about your partner
Financial strength of
partner                            .767       .115          .102       .420    .090
Political, Economical and
Social conditions in
partner's country(s) of            .851       .150          .293       .265    -.048
operation
    Extraction Method: Principal Component Analysis.
     Rotation Method: Varimax with Kaiser Normalization.
    a. Rotation converged in 9 iterations.

                  Component Transformation Matrix

Co…           1            2            3           4           5
1             .588         .430         .451        .385        .342
2             -.673        .620         .295        -.188       .202
3             .154         -.205        -.108       -.567       .775
4             -.331        -.111        -.415       .688        .482
5             -.259        -.613        .725        .146        .097
    Extraction Method: Principal Component Analysis.
    Rotation Method: Varimax with Kaiser Normalization.
Component Score Coefficient Matrix

                                                      Component
                                  1          2             3           4       5
Recording IP in desired
format (documentation,             .015       .097         -.145       -.176   .441
diagrams, KM systems)
Market reputation of
partner company                    .295       .129         .069        -.345   -.078
Internal Project Progress
Reporting, Review and             -.045       .034         -.081       .457    -.064
Tracking (Within firm)
Periodical Project
Progress Reporting,
Review and Tracking               -.023      -.022         -.017       .400    -.020
with/to/for the client
Perform regular IP Audit
(assets, life, benefits,          -.101      -.134         .459        -.009   .055
importance)
Engage IP experts
(internal or external             -.048      -.045         .405        -.050   -.168
consultants)
Classify IP assets based
on value and importance           -.144      -.155         .354        .001    .241
Evaluate potential assets
exposed using IP due              -.008      -.085         .364        -.012   -.046
diligence checklist
Organizational policy on
what to outsource                 -.124       .415         -.062       .110    -.099
Business relationship of
partner with your                 -.020       .405         -.131       -.147   .165
competitors
Other businesses of your
partner (Possible Conflict        -.004       .423         -.060       -.003   -.121
of Interest)
Relationship between
partner and your                  -.153      -.181         .046        .211    .394
customers
Corporate Governance
policies of partner                .310      -.127         -.053       -.026   .010
Market
reputation/Feedback from           .202      -.062         -.157       -.019   .290
others about your partner
Financial strength of
partner                            .259      -.020         -.113       .119    -.059
Political, Economical and
Social conditions in
partner's country(s) of            .303      -.019         .023        .002    -.163
operation
    Extraction Method: Principal Component Analysis.
     Rotation Method: Varimax with Kaiser Normalization.

                 Component Score Covariance Matrix

Co…          1            2          3            4            5
1           1.000         .000        .000        .000          .000
2             .000       1.000        .000        .000          .000
3             .000        .000       1.000        .000          .000
4             .000        .000        .000       1.000          .000
5             .000        .000        .000        .000         1.000
    Extraction Method: Principal Component Analysis.
    Rotation Method: Varimax with Kaiser Normalization.

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Ip issues in global software outsourcing

  • 1. MEMOIRE DE RECHERCHE 2011/2012 NOM et PRENOM de l’auteur 1: SATHE Vaibhav Vishwanath, E113001 SUJET DU MEMOIRE Intellectual Property Issues in Global Software Outsourcing Development of framework analyzing critical factors that impact intellectual property transfers in global software development outsourcing scenarios - NOM DU DIRECTEUR DE RECHERCHE: Prof. Dr. LEMAIRE Jean-Paul La diffusion de ce recueil CONFIDENTIEL Non  est strictement réservée à ESCP Europe.
  • 2. Affidavit I the undersigned, SATHE Vaibhav Vishwanath, E113001, certify on the honor that I have not plagiarized the paper enclosed, which means that I am the only author of all the sentences this text is composed of. Any sentence from a different author than me was written in quotation marks, with explicit indication of its source. I am aware that by contravening to the present rule, I break the recognised academic principles and I expose myself to the sanctions the disciplinary committee will decide on. I also confirm this work has never been submitted during studies prior to ESCP Europe. If this work has been written during studies conducted in parallel, I must precise it. The remarks written in those pages only commit me. Paris, May-03-2012 SATHE Vaibhav Vishwanath
  • 3. École supérieure de commerce de Paris — Europe 79, avenue de la République, 75543 Paris cedex 11, France Intellectual Property Issues in Global Software Outsourcing (Questions de propriété intellectuelle dans le contexte mondial du logiciel sous-traitance) Vaibhav Sathe Master in Management 2012 student ESCP Europe, Paris Campus Submitted To: Prof. Dr. Jean-Paul Lemaire Professor, ESCP Europe Langue de la thèse: Anglais © 2012. ESCP Europe. Tous droits réservés.
  • 4. Contents Introduction ................................................................................................................................ 1 Distributed Delivery Models...................................................................................................... 3 Business Implications ............................................................................................................ 3 Outsourcing Levels ................................................................................................................ 4 Software Development........................................................................................................... 5 Outsourcing Contracts ........................................................................................................... 7 Intellectual Property ................................................................................................................... 9 IP in Products ......................................................................................................................... 9 IP in Services ....................................................................................................................... 11 Trainings .............................................................................................................................. 11 Management of IP ................................................................................................................ 12 Legal Framework ..................................................................................................................... 14 IP Laws in the world ............................................................................................................ 14 Contract Laws ...................................................................................................................... 16 Employment Contracts......................................................................................................... 17 Case Study: Pine Labs vs. Gemalto Terminals, High Court of Delhi [20] ............................ 19 Client-Vendor Relationship ..................................................................................................... 21 Trust ..................................................................................................................................... 21 Verification .......................................................................................................................... 22 Other Aspects of Interaction ................................................................................................ 23 Corporate Strategy ................................................................................................................... 26 IP due diligence.................................................................................................................... 26 Business Intelligence ........................................................................................................... 27 Research Methodology ............................................................................................................ 31 Problem Definition............................................................................................................... 31 Variables Extracted .............................................................................................................. 33 Survey Design ...................................................................................................................... 34 Survey Responses ................................................................................................................ 35 Factor Analysis Configuration ............................................................................................. 38 Factor Analysis Results........................................................................................................ 39 Conclusion ............................................................................................................................... 44 Managerial Implications ...................................................................................................... 44 Limitations and Future Scope .............................................................................................. 45 References ................................................................................................................................ 47 Appendix-I: SPSS Outputs ...................................................................................................... 50
  • 5. Executive Summary The objective of this study was to identify factors that affect Intellectual property Transfer in global software outsourcing scenario. The study also aimed at establishing relative importance of these factors based on variance in expert opinion. The report begins with overview of software outsourcing and offshoring models. It explains managerial implications and benefits vs. risks involved. After discussing types of contracts in outsourcing, the scenario with software is specifically discussed. The term Intellectual property is then defined with its application with respect to both software product and service sectors. Then the report establishes IP management approach. We then proceed with brief discussion on legal background and framework and establish how it varies in critical countries like USA, EU and India from software outsourcing point of view. A sample case study elaborating importance of legal understanding and intricacies of contract is also discussed. Report then proceeds with defining role of trust between partners and discussed various aspects of interaction between employees of two organization. Report discussed various factors that impact the communication and possible impact on smooth IP transfers between the partners. Report then discusses aspects from corporate strategy and defines role of corporate intelligence, IP due diligence in safeguarding company’s interests regards to intellectual property. After compiling list of all important variables, a primary expert survey was conducted in order to derive underlying factors using statistical summarization techniques. A summarization exercise reduced 39 variables into 13 factors among three aspects – Legal, Human Resources and Corporate Strategy. The explained variability helps companies decide the priority of the factors.
  • 6. Intellectual Property Issues in Global Software Outsourcing 1 Introduction Business landscape is changing at dramatically high speed today, thanks to modern technological developments especially in communication and computation areas. Competition has naturally exploded in its dynamic environment as traditional barriers have weakened and new opportunities have risen. This has created need of absolute efficiency in business environment. Companies have started focusing on their core competencies entrusting other activities to vendors specializing in those. That’s why we can see that in today’s businesses activities like recruitment, IT infrastructure & maintenance, internal payroll & accounting, supply of raw material are increasingly done by contractors. This allows the firm to focus on core business areas where it takes on head on with its competitors. [3] Simple and largest examples of it can be of Apple . It designs and markets devices like iPhone and iPad employing around 60,000 employees worldwide. But it has outsourced the task of manufacturing to Taiwan based Foxconn Group which employees over 800,000 in its factories which manufacture several hundred millions of these devices every year. Then Apple has contracted large oceanic freight services which ship these devices to retail shops owned by Apple or partners across the globe. Naturally, a computer company Apple has no expertise in running hardware manufacturing plants, worker management, operational management and transport. By negotiating best prices in advance, Apple can delegate these tasks to vendors which have expertise and ability to deliver as per mobile manufactures design requirements. This frees up large amount of Apple resources which are dedicated to activities like designing new devices, develop software and applications, run marketing campaigns and manage relationships with carriers, retailers and partners. From competition standpoint, these activities matter to the company and not way in which it is manufactured or transported. Apple registers hundreds of patents while designing these devices. But, when
  • 7. Intellectual Property Issues in Global Software Outsourcing 2 Foxconn or any other supplier manufactures these devices based on these technologies, can we believe that they learn nothing about it? Isn’t it possible that outsourcing vendors and employees get massive knowledge of specifications, techniques and know-how of making these devices? While company focusses on core expertise for competitive reasons, the ways employed pose risk that the same technology, same intellectual capital can fall into hands of competitor. It is known that Foxconn not only manufactures Apple handsets but also has large manufacturing contracts from Apple contractors namely, Samsung, Motorola, Microsoft and Nokia. So, how does Apple trust Foxconn with its ultimate intellectual secret? What are benefits companies get by outsourcing? How do companies protect knowledge leaks from their employees? Do inter-company contracts play any role? Do governments ensure such intellectual property is protected by laws in respective countries? Do benefits of outsourcing outweigh all the risks? In this thesis, we will try to look at global outsourcing of software projects and identify how companies create, identify, protect and transfer their intellectual capital. We will identify benefits and risks in outsourcing. We will also look at various forms of project delivery including outsourcing and offshoring. From literature survey we will identify various variables that affect intellectual property protection in global outsourcing scenario. The literature will include books, published journal papers, case studies and articles published in relevant area. We will conduct expert survey in order to gather opinions of people with regards to importance of the variables. We will then run exploratory factor analysis to summarize these variables and identify factors that affect IP protection. We will look from both sides of clients and vendors. This study will be useful to companies worldwide which are considering outsourcing of software products to take precautions while structuring the outsourcing contracts.
  • 8. Intellectual Property Issues in Global Software Outsourcing 3 Distributed Delivery Models Introduction Let’s look at some basic definitions related to outsourcing terms that have evolved [2] recently . Outsourcing means contracting out certain pre-defined tasks to third party. It is not necessarily outside country of origin of the firm. Offshoring means getting done certain tasks outside country of origin. Offshoring need not involve outsourcing as company itself may open subsidiary in a foreign country. Business strategy generally includes combination of both outsourcing and offshoring. Nearshoring means offshoring business activities to a country which is closer to country of origin on parameters like geographical distance, culture, language etc. This reduces significant number of management challenges encountered otherwise in offshore team management. Multisourcing means a business strategy which is a blend of internal and multiple external sources in order to optimize available resources. Onshore Offshore Insource Same firm/same country Same firm/different country Outsource Different firm/same country Different firm/different country Figure 1 Delivery Models Business Implications [2] A variety of reasons may exist for outsourcing based on case to case . The most critical benefit is cost savings due to economies of scale or geographical location. Next incentive of outsourcing is translation of fixed costs to variable costs. It reduces initial investment and instead firm makes payments on contract basis at regular intervals. Another benefit is also the ability to concentrate on core competencies of organization by out- contracting support functions. Many a times outsourcing is also used to address issues in variability of resources to address immediate or short time requirements of number of resources or particular expertise. Outsourcing or offshoring can also result in improving
  • 9. Intellectual Property Issues in Global Software Outsourcing 4 efficiency of organization due to better relocation of resources. Offshoring provides opportunities to tap into global talent pool, many times at cheaper cost. The flexibility gained by organization is critical in today’s delicate condition in terms of competition or economic outlook. However, Outsourcing is like a double edged sword. While there are many benefits as explained above, it also has several risks involved. In the past, profit making enterprises have operated with a certain amount of secrecy to guard their trade secrets from rest of the world. They also used to control a larger portion, sometimes entirely the value chain of the business. But, with increasing number of players participating in value chains, the businesses had to become more transparent. They have several trusted partnerships where partners have greater visibility into internal details of organization. Among other issues is the high rate of failure of marriage of two organizations due to variety of differences like organizational and national cultures, business priorities and operational methods. In each business scenario, company has to identify a win-win situation among all partners which include suppliers, clients and contractors. This definitely complicates the managers’ job of achieving hard business goals. Outsourcing Levels In any business outsourcing is done at multiple tiers of operations [4] [5]. At basic level is low-wage human capital involving unskilled or manual labor. A second level of outsourcing involves outsourcing of standardized production tasks, a typical semi-skilled factory labor, which adds limited value but at lower cost. A third level involves knowledge based outsourcing which includes educated workforce in science & technology working in state-of-art R&D facilities. The knowledge based outsourcing involves multiple stages. On one end it is manual knowledge delivery of tasks which cannot be automated, like data entry & processing. While on other end, it is research and development resulting into defining next
  • 10. Intellectual Property Issues in Global Software Outsourcing 5 generation products. The intellectual capital at stake increases exponentially as you move from lower stage to upper. Figure 2 Interactions among stakeholders in typical outsourcing scenario Software Development On global scale, software development is both outsourced and offshored, primarily for cost competitiveness. The inefficiencies in labor markets in matured economies like high costs of living and legal requirements on benefits, working hours and holidays result in much higher human resource costs. This forms fundamental costing for software development. But then how do distributed teams coordinate on delivering software globally? The global fiber optic network which powers the Internet is the fundamental enabler for this phenomenon. In addition to improvised communication network, other factors which contribute are higher availability of skilled, educated and English speaking workforce in developing countries like India, China, Mexico and South East Asia. Overall, software development factors in third stage of skilled knowledge based layer of outsourcing levels. Based on requirements of businesses it spreads across all stages in the third layer from basic level data entry operators to cutting edge research in areas related to computer science and information technology.
  • 11. Intellectual Property Issues in Global Software Outsourcing 6 Typical term used for this sector is IT/ITES which comprises of Information Technology and Information Technology Enabled Services. Information Technology Association of America [7] defines Information Technology as the study, design, development, implementation, support or management of computer-based information systems, particularly software applications and computer hardware. While ITES is defined as a form of outsourced service which includes industries like banking, insurance, telecommunications which includes use of modern IT evolution. Estimated size of total IT service industry was over 1.1 trillion USD [6]. IBM is the largest company in terms of market share, followed by HP and Accenture. This industry is typically considered highly fragmented as top 4 companies control only around 12% of market. The outsourced services comprise around 48% of total IT industry which is roughly a 500 billion dollar industry globally. The IT industry divisions as defined by Datamonitor are as below. Global IT Industry Data Processing and IT Consulting & other Outsourcing Market services Electronic Data IT & System Integration Processing (EDP) services Information Technology IT Consulting Outsourcing (ITO) Business Process Information Management Outsourcing (BPO) Services Figure 3 Organization of IT Industry A typical outsourcing of software development may involve making of software products or use of software products to make applications. When software products are made, the intention of company is to sell them further in the market to monetize the investment.
  • 12. Intellectual Property Issues in Global Software Outsourcing 7 Examples are again products like Microsoft Windows or Office in which a lot of contractors are involved in development or testing activities. On other hand, when applications or services are deployed using existing product, these are for sole use of client. Examples are integration and customization of ERP like SAP for use of organization like AT&T by vendor like IBM. Depending upon business model, a variety of ownership patterns may exist in such business models. The bulk of outsourcing projects consist of second type i.e. development of applications and services for purpose of running business operations of client. Outsourcing Contracts Typically firms participating in an outsourcing relationship sign contracts that define terms of engagement, quality parameters of expected output and penalties in violation of the [22] terms . Since the contracts are typically international, they are subject to differences in legal structures of individual home countries of the participating companies. Hence, it is important that certain factors like following are agreed upon. 1. The contract is signed in only one language. This copy is considered as master for all disputes. Other translated versions can be made available. This ensures that interpretations don’t change due to translation issues. 2. The jurisdiction under which any dispute will be subject to is agreed in advance. 3. Ownership of intellectual property including geographies, rights and period is mentioned. 4. Appropriate License of intellectual property owned by vendor but used in making the product which is generally owned by the client. Typically Outsourcing Contracts can be categorized into 4 types [23]. 1. Time and Material Contracts: Customer pays accepted hourly rate per resource. Typically used when vendor company does not own the full delivery and is only providing manpower to client,
  • 13. Intellectual Property Issues in Global Software Outsourcing 8 which is executing the project. Also, it is used in full vendor-owned models when it is difficult to pre-estimate the cost of deliverables. The resources are billed/invoiced to client on month or quarter basis. 2. Fixed Price Contracts: When cost of deliverables can be accurately estimated, clients pay a fixed amount for pre-defined requirements to be delivered in given time with given quality. Either side needs to compensate the other for any variations in original conditions on their part. The number of resources used by vendor is not concern of the client. 3. Revenue Share Contracts: These are partnership contracts, where clients won’t pay vendor for making the product. But, instead it will promise a certain share in sales. While a vendor has significant risks in this model, if the potential product succeeds, then it would get higher returns than it would have got in case of Fixed Price contracts. 4. Hybrid Contracts: Hybrid contracts are those in which combinations of above models are used to hedge the risk on either party.
  • 14. Intellectual Property Issues in Global Software Outsourcing 9 Intellectual Property World IP Organization [8] defines Intellectual Property (IP) as legal rights which result from intellectual activity in the industrial, scientific, literary and artistic fields. IP rights provide moral and economic right to the creator over his creation. It helps in establishing trade of IP with fair pricing where IP can be put to use in social and commercial development where original creators are justly compensated. Some of the common ways in which state governs IP are trademarks, copyright and patents. Although there is great amount of heterogeneity in legislations and enforcement levels across countries. It is considered that in matured markets of North America and Western Europe, the Intellectual Property laws are more matured compared to emerging economies like India and China where these are in nascent stage. However, enforcements of these laws have remained a continuous challenge for companies across the globe. IP in Products In this section we will discuss typical intellectual property that gets exposed in software outsourcing contracts. As defined by A. Story [9], the software is of two fundamental types with respect to intellectual property protection. First is Proprietary Software, in which software code is under private ownership of creator which can be individual developer or the company employing the developer. We will see in next section how employers govern IP created by their employees. Most common example of proprietary software is software product like Microsoft Windows. Such software is never sold to end consumer, but licensed. Read excerpt from Microsoft Windows EULA [10]. Microsoft Windows 7 Professional End User License Agreement (EULA) Excerpt SCOPE OF LICENSE. The software is licensed, not sold. This agreement only gives you some rights to use the features included in the software edition you licensed. Microsoft reserves all other rights. Unless applicable law gives you more rights despite this limitation, you may use the software only as expressly permitted in this agreement. In doing so, you must comply with any technical limitations in the software that only allow you to use it in certain ways. You may not -  Work around any technical limitations in the software;
  • 15. Intellectual Property Issues in Global Software Outsourcing 10  Reverse engineer, decompile or disassemble the software, except and only to the extent that applicable law expressly permits, despite this limitation;  Use components of the software to run applications not running on the software;  Make more copies of the software than specified in this agreement or allowed by applicable law, despite this limitation;  Publish the software for others to copy;  Rent, lease or lend the software; or  Use the software for commercial software hosting services. Second type of software is commonly known as FLOSS which stands for [9] Free/Liberal/Open Source Software . Generally such software is governed by GNU General Public License, which is structured exactly reverse as that of Microsoft’s EULA. The software source code is open and users can modify, redistribute, copy or use it for personal or commercial use. Modified GNUs allow users to sell additional features built on top of FLOSS based software frameworks for commercial purposes. There are many companies like IBM which are building large scale commercial software on platforms like Java or Linux which are Open Source Software. As we discussed in previous section on software development delivery models, the IP exposed in two models of product development vs. service development can be as follows. In product development, the company which is proprietary owner of product invests a lot in R&D efforts, typically in new features, algorithms. Typically a large number of patents are registered across countries to protect this information. Vendors working on these products in development, testing or deployment phases, depending upon their involvement, get exposed to this intellectual information. Vendors involved belong to software companies typically not competing with client itself. But same company can serve client’s competitors. The same person may be working for competing company in the future. The humans can’t be ramped down. So, although the actual source code is protected by patents and copyrights, the knowledge gained by person in terms of ideas and processes stays with him permanently. The same risk exists for permanent employees of client. But, considering attrition rate higher with contractors than product firms themselves, the risk of leakage of such information is high when it comes to involvement of vendors (outsourced contractors).
  • 16. Intellectual Property Issues in Global Software Outsourcing 11 IP in Services In custom application or services developed, although there is less involvement of research protected by patents, the code developed is intellectual property of vendors. But in such contracts, it’s not the code that is critical IP. It is knowledge of business processes of clients that vendors gain in order to develop software for them. A company typically maintains a lot of information on business processes, suppliers, channels, margins, distributor contracts and pricing secret as it gains competitive advantage out of it. As part of software development, vendor gains deep insight into these processes. This is the real IP exposed to outsiders. In fact, such knowledge is hard to quantify and hence difficult to protect even with copyright or patent laws. Similar risks exist due to attrition of vendor resources to competing organization. But, in software industry new business models are evolving, where vendor providing service to traditional customers can retain the IP rights i.e. Contractors will not make software on demand for the client which is owned by client but managed by vendor. Now, evolving models of cloud computing and Software as a Service (SaaS) [11] are resulting in the vendors renting these services to their clients rather than selling their software. Google rents various enterprise services like Gmail, Google Docs where enterprises have to pay per usage to the Google. But they don’t have to worry about hosting and storing these services large data centers. In this model, various APIs are designed by the vendor, which need to be consumed by client side software in order to consume the services. While, APIs are largely in public domain thereby reducing IP risks of vendors, integrating vendors still are exposed to client’s business processes and internal data. Trainings Employees are provided various trainings which are related or unrelated to work they do. This is futuristic investment that employers do in their employees. It includes a variety of
  • 17. Intellectual Property Issues in Global Software Outsourcing 12 internal and external trainings, certifications and mentorship programs. The knowledge gained by individual is part of organization’s intellectual capital. In order to gain contracts in outsourcing world, employers require their workforce trained in appropriate areas. Even sometimes client firms provide trainings to contractors in order to ramp them up on the project work they are doing. The knowledge always stays with person and benefits his throughout the career, but it comes at cost of one of the companies he worked with. Management of IP What do we mean by management of IP? Global organizations are in continuous exposure of IP due to larger partner involvement in their value chain. IP Management is defined as Identification, Protection and Exploitation of the intellectual assets of the organization. In software development, the code is open to those who work on it. And this code forms major component of IP assets of the company. So, from corporate strategy point of view, it is important that company identifies its short term and long term goals. Then it should identify what is the key intellectual asset it has/need in order to achieve them. Then the strategies to protect those assets are needed to be devised. In order to balance company’s other goals, there will be need to exploit and expose these assets to various partners involved in delivery chain. So, based on nature of engagement, the company should review periodically its strategy with respect to protection and enhancement of those IP assets. Accordingly, such changes should be made. Important point to note here is that software is generally protected through assemblies, which are binary versions of the working code. This means that code is not visible to users. This is typical method used by proprietary software. But, there are ways to reverse engineer those assemblies and generate equivalent code segments that perform the binary tasks. If we apply principles of VRIO (Valuable, Rare, Not Imitable, Exploitable by
  • 18. Intellectual Property Issues in Global Software Outsourcing 13 organization), then we can hardly classify code as Not Imitable. There are many alternative ways to make it look different than original but performing same function. This is the easiest way adopted to work around patents and copyrights. That’s why over period of time, the IP assets of software firm deteriorate. Figure 4 IP Management Workflow: Software Development *Source: Based on figure from Govt. of Australia’s guide for IP [25], Modified for Software Development
  • 19. Intellectual Property Issues in Global Software Outsourcing 14 Legal Framework In this section, we will take overview of Intellectual Property laws in some leading countries in software world. We will also look at contract laws between partner companies and employer-employee contracts. IP Laws in the world Due to large concentration of software companies, United States has been leading in creating legal framework for protection of intellectual property. The laws exist at both federal and individual state level. They deal with trademarks, copyright, patents, trade secrets and other aspects of intellectual property [12]. A patent is traditional way of protecting inventions [14] . But a patent restricts use by inventor to gain economic benefit. But it does not keep information secret. By registering patent, the entire technical information is revealed. In world of software, it is relatively easy for organizations to make certain replacements in approach and bypass patents in order to copy features in competing products. Typical example is Apple has hundreds of patens on capacitive touch screen. But, patents limit the idea to design of screen. All competitors have come up with capacitive touch screens in their [13] devices by twisting certain design methods. But Trade secret is defined as the proprietary information that generates economic advantage for particular business. The organization does not disclose it anywhere and continues to receive benefits till it remains secret. Economic Espionage Act of 1996, by Federal government passed under National Information Infrastructure Protection Act of 1996 provides protection for trade secrets of organization which covers prohibition of usage of trade secret and its usage or inclusion in any product for economic benefit of any entity other than owner. This specially covers for use of trade secrets of US based companies for benefit of foreign entities. Economic Espionage Act as equated trade secret threat with threat to the national security of United States. From global outsourcing scenario, this is important legal framework.
  • 20. Intellectual Property Issues in Global Software Outsourcing 15 European Union, largest economic entity in the world, controls patents in the territory governed through European Patent Office. It was established through conventions and treaties at European or International levels like Strasbourg Convention 1963, European Patent Convention 1973, London Agreement 2008, Patent Law Treaty and WTO agreements. EU member states may or may not govern patents in their respective treaties. But, EU patent override patents issued by member states. European Union is however criticized for weaker [15] laws on trade secret protection as compared to United States. As described by DeMarco , let’s look at case of Samarth Agrawal who worked for French bank Société Générale in New York. He copied and printed source code of algorithm used by bank with intention to sell it to competing hedge fund. On basis of evidence from video surveillance and print logs, FBI agents arrested him the day it was detected. Accused was convicted and sentenced to penalty applicable under law. However, in European Union, criminal law is not applied immediately in such cases. Also the investigating agencies lack resources and experience to investigate such cases of electronic trade secret theft. This means that Samarth if had done this crime sitting in Paris HQ of Société Générale, might have walked free after being detected for such a crime. Situation in developing world is far worse. India, which is largest country hosting IT services outsourcing projects outside United States, there are no laws defining term trade [16] secret . India is signatory on WTO’s agreement on Trade Related Aspects of Intellectual Property (TRIP) and has enacted certain IP laws through new acts or amendments to existing laws. These include laws related to patents and copyrights. However, Indian legal framework does not define the term “trade secret”. There are no text or reference cases available with the courts. However, the Indian Contract Law Section 27 provides a sort of remedy to organizations. We will see in detail in next section on contract laws.
  • 21. Intellectual Property Issues in Global Software Outsourcing 16 Typically, from software development point of view, the IP laws related to patent, copyright and trade secrets are the most important ones. We need to take a note of copyright law and how the copyright law and contract law work together. The copyright is typically [19] owned by the author himself. In India, the Copyright Act, 1957 (amended as per international treaties like TRIPS, 1995) defines ownership of copyright as to the person who is the author/creator/causer of it. Causer is the term used specifically for computer generated work including literary, dramatic, musical or artistic work. Note that person who operates the computer is not the copyright owner. E.g. If author of book is getting his work computerized, the person typing the book, thereby creating computerized copy is not entitled to copyright. It stays with the author, who caused the computerized work to be created. A computer programming is defined by this law under literary work and hence, the programmer (the one who conceptualizes and writes or develops code which composes into working software program) is entitled to the copyright. This however is overridden by employment contract. The Copyright Law specifies (Clause 17.a) that when a person develops literary work (programming included) as part of employment contract, the employer is first owner of copyright of such work, if it relates to function of the employer as defined unless contrary is defined in employment contract. This means that company (employer) is default owner of copyright and employment contracts can override it if necessary. This leaves out case of outsourcing. The outsourcing relationship is not an employee-employer relationship and hence is not covered by clauses above. We will look at interesting case regarding outsourcing later in this section. Contract Laws United States Contract Law varies depending on respective states. However, in general, there are provisions made which allow two parties to sign confidentiality or non- disclosure agreements. These agreements are typically used to protect information disclosed
  • 22. Intellectual Property Issues in Global Software Outsourcing 17 as part of proposed negotiation or business deal, which may or may not work out. The contract is expected to call out items marked as confidential, duration for which information is to be undisclosed. Contract Law prevents certain information that cannot be included in such contract. This includes information received by receiver (created or obtained from third party rightfully) before seller disclosed it, information commonly known in industry or in public domain and potential anti-national or information including activities deemed illegal. If such information includes trade secret then it is also governed by specific laws like Economic Espionage Law. [18] European Union Contract Law generally requires an explicit declaration of confidentiality in the contract. In addition, it says that certain information remains confidential even if explicit declaration is not made. Further, EU Contract law adds that certain information like trade secrets or know-how if disclosed during negotiation phase of contract, the other party can neither disclose nor use the information for its own use, should the contract is not formed as result of negotiation. Employment Contracts Typically, employers sign contracts with their employees upon joining. As we have seen, the provisions in contract laws across countries allow enforcing confidentiality clauses regards to information that employees get access to as part of their job. Such contracts are used in order to prevent employees from competing with employer or work for competitor of employer. This may also involve clauses like non-compete clause, where employees are forbidden from competing or working for competitor for certain period even after their employment ends with first employer. In India, the section 27 of the Indian Contract Act, 1872 states that agreements in the restraint of trade are void [17]. Indian Act prohibits employers to restrict use of skills, aptitude and general technical knowledge by employees in competition with employer during period
  • 23. Intellectual Property Issues in Global Software Outsourcing 18 of employment. So, wider than necessary restrictions may invalidate the employment contract itself. This means that the employer if finds that employee is likely to misuse the information he has received as part of employment agreement, then employer is entitled to injunction to prevent such use. It is very limited remedy to employers to protect their trade secrets compared to Economic Espionage Act of the United States. Moreover, if the act is committed in past then employer is only eligible for damages and no criminal action can be initiated against employee. The act also does not provide explicit protection to employers in case of revelation of such information by employees after their period of employment. Following are key aspects of employment contracts regards to intellectual property. [21] 1. Pre-employment Intellectual Property of Employee: Employer does not get entitlement to any IP earned by employee prior to joining even in business areas related. The employment contract must call out the list in case employer seeks use of such IP through employment and should disclose how assignment of rights happen and who gets rights in case employee leaves the company in future. However, in absence of any specific clause, if any employee incorporates his own intellectual property into product owned by employer, then the employer receives non-exclusive, perpetual, royalty-free, worldwide, make-modify-copy-sell access to said IP. 2. IP generated during employment: Intellectual Property generated by employee can include patents, copyrights and other information not covered by either. Patents and copyrights are governed by their respective laws. However, by default, laws in some countries like India grant copyright to employee (author). In such scenarios, the employment contract must include that the employee agrees to transfer rights to all such IP to the employer. Items not covered by Patent and
  • 24. Intellectual Property Issues in Global Software Outsourcing 19 Copyright laws are solely governed by non-disclosure and confidentiality agreements under Contract Law. 3. Recording of IP generated by employee: There are no laws which specify recording of IP. Hence, the employment contract should include that employee is required to comply with company requirement of up-to-date recording of IP in forms like designs, KM systems, notes & documentation. The company remains sole owner of such recordings after employee quits the job. Case Study: Pine Labs vs. Gemalto Terminals, High Court of Delhi [20] Pine Labs Pvt. Ltd. (hereafter referred as Pine Labs) is a software development company. Gemalto Terminals Pvt. Ltd. (former Schlumberger company, hereafter referred as Gemalto) provides computer hardware terminals for retail establishments. Gemalto does not have any expertise in software development. So, it engaged Pine Labs multiple times to write software applications and backend systems for multiple of clients. Gemalto received contract from IOCL (Indian Oil Corporation Ltd.) card fleet program in 2004. It hired services of Pine Labs to develop software for same. Later on in 2009 Gemalto received another contract for cards from HPCL (Hindustan Petroleum Corporation Ltd.). Gemalto approached Pine Labs for this sub-contract, however negotiations did not work out. As a result, Gemalto awarded the contract to other sub-contractor named M/S QCI Technologies Pvt. Ltd. (hereafter referred as QCI). As part of system design, the software for HPCL would require to interact with existing IOCL system. Gemalto asked Pine Labs to hand over the source code to QCI in order to facilitate that. Pine Labs and Gemalto had signed Master Agreement for Development and Services (MSA). As part of agreement and subsequent correspondence it was agreed upon by both companies that Pine Labs has been compensated fairly by Gemalto and thereby does not claim any right over the software code developed for use of Gemalto. Therefore, Gemalto’s
  • 25. Intellectual Property Issues in Global Software Outsourcing 20 understanding was that it owns the source code rights of all the software developed by Pine Labs under contracts with Gemalto. However, the agreement did not mention the time period and territorial limits of the copyright claim. As per section 19 of Indian Copyright Act, default period was 5 years and default territorial limits as India. Section 17 of the Copyright Act states that the copyrights of the given program code are vested with the employee as default unless contrary statement is agreed upon in the contract of employment. Since Indian Copyright Act does not specifically provide guidelines in case of outsourcing contracts, the same employment contract provisions can be used. Section 18 of the Copyright Act specifies that copyright can be assigned to other owner, wholly or partially in terms of duration and/or territorial limits. So, honorable court determined that outsourcing contract comes under Section 18 which determines Assignment of copyright and not first ownership. Therefore, court determined that due to no mention of duration, Gemalto was entitled to assignment of copyright only for 5 years. Moreover, assignment of copyright code may not permit further redistribution of the code unless specifically mentioned by the contract of assignment. Hence, since the HPCL program request was after 5 years, the rightful owner of the source code was determined to be Pine Labs. This case highlights legal complexities in outsourcing of intellectual property like software code. In case of outsourcing across countries, applicability of laws for such disputes is another issue as the laws vary greatly across geographies. It is therefore important that the contract calls out duration, territorial limits and redistribution rights for source code copyrights. Also, the contract should specify the country laws which will be applicable in case of any disputes.
  • 26. Intellectual Property Issues in Global Software Outsourcing 21 Client-Vendor Relationship Clients and Vendors are both independent companies operating in different PESTEL environment. The relationship between these companies may well extend beyond particular contract. In this section, we will look into various factors (non-contractual or legal) which define this relationship and any impact they have on the IP exposure risk. Roy and Sivakumar [24] in their paper empirically test impact of factors like trust and external controls/verification on intellectual property management in client-vendor relationship. In this section we will study impact of various aspects of this relationship on management of IP i.e. Identification, Sharing, Protection, Enhancement, Transfer and Surrender. Trust Authors add interesting dimension by distinguishing between Interactions and Communication. Communication is said to be more formal, while former is regarded as informal and unstructured which helps in building knowledge and trust in business relationship. In section on distributed delivery models, we have already explained the outsourcing model of interactions which are between employees of vendor and employees of client. While inter-company communication is more formal in terms of MoUs and agreements, we can easily imagine that when it drills down to individual employee level, the interaction among them is more informal and the amount of friendliness in this interaction increases over time as the trust increases. This is typical human psychological behavior. The authors further classify the trust into two types – Competence Trust i.e. the trust that the vendor is capable of delivering on its promises and Goodwill Trust i.e. the trust that vendor is performing the tasks in ethical and professional intentions. While authors confine their analysis as one way i.e. Client expectations from vendors, we would like to highlight that this relationship should be viewed bidirectional. As we have already established that it’s not only client’s IP which is at stake but vendor’s IP also matters significantly in outsourcing
  • 27. Intellectual Property Issues in Global Software Outsourcing 22 relationships in software development industry. Moreover, with the fact that software vendors are also large size companies, in many cases much bigger than their average client size (e.g. IBM, Hewlett Packard, Accenture etc.), which naturally tilts bargaining power balance in favor of vendor than the client. Authors conclude that trust has 3 important dimensions which should be taken into account - they are Quantity, Scope and Mode of communication. Please refer to appendix for list of survey questions related to these dimensions. Verification As authors suggest, verification can be classified into two forms. First is External Control, which is a more formal engagement. It involves reporting of elements for oversight purpose. This reporting or audit can be related to inputs, processes and outcomes. In the case of Software Development, the outcomes are very subjective or unstructured i.e. difficult to measure. However, typical variances tracked are schedule and budget. Typically outsourcing contract defines the reporting items, methodology and items. This step is useful in tracking inventory of intellectual assets which may mean design documentation, reusable components, interfaces, modules etc. from software design point of view. Client can get direct idea into progress made by the vendor through these reporting. Second form of verification is Internal Control or self-verification. In outsourcing contract, if the client sets expectations beforehand and vendor assures to deliver on certain SLAs, tracking responsibility of client reduces. But, this accountability to perform on vendor’s side results in processes of control for internal point of view. Typical documentation, status reporting, checkpoint meetings are some of the popular ways. We need to note one important factor i.e. attrition. Since, employees of vendor are not in any employment agreement with the client, they are subject to change their jobs at their free will. Even in typical outsourcing engagements, vendor companies keep their workforce
  • 28. Intellectual Property Issues in Global Software Outsourcing 23 highly mobile and rotate them through their entire portfolio. In country like India, where IT [30] industry is facing over 20% attrition each year, this problem is significant . As already established, not all the intellectual property can be recorded in form of documentation. So, in such cases of employee attrition a large portion of their knowledge is lost each year and companies need to spend extra resources to make up for those. Attrition impacts the vendor- client relationship significantly. There is also chance that the employees of vendor may work for competitors of client after they leave their position with vendor organization. Since, employees of vendor sign no agreement with client, there is practically no way the client can seek injunction against this hiring. This results in loss of IP (typically unsecured), valuable know-how and skillset for the client. Other Aspects of Interaction The language plays critical role in conveying thoughts therefore impact understanding [26] and transfer of Intellectual Property to large extent. As Gasparro says, even if offshore executives learn the English language, they may not be versed in the quirky phrases and local dialects which make English difficult to comprehend. The geographic proximity helps in certain ways. First, it facilitates easy hassle-free travel and enables face-to-face communication more frequently than in case of remote offshoring. It is opinion of experts in software industry that personal communication is more effective than digitally enabled communication (video conferencing) in case of knowledge transfers. Second, the geographic proximity ensures temporal closeness i.e. time zones are closer. West Coast of U.S. and India have time zonal difference of nearly 12 hours. In order to work together, the team located across continents need to work long hours to achieve overlap. It also provides relatively shorter bandwidth for such meetings compared to possibility of accessing full working hours of employees. Working in shifts or overtime has its own costs in personal life of employee as well as to business.
  • 29. Intellectual Property Issues in Global Software Outsourcing 24 In today’s era of multinationals, the unique issue of conflict of cultures has arisen. MNCs typically maintain consistent culture across countries of operations. Sometimes they customize some policies to local culture in order to accommodate legal and social requirements. It results in conflicts on two fronts. First is Inter-subsidiary cultural difference. Second is organization-national culture difference. Hofstede proposed framework to evaluate organizational cultures and national cultures, called as cultural dimension theory. He proposed this theory as result of study done in IBM Corp. As result of Hofstede’s work followed up by renowned psychologist, we can define following cultural dimensions that impact organizational cultures. 1. Power Distance Index, 2. Individualism vs. Collectivism, 3. Uncertainty Avoidance Index, 4. Masculinity vs. Femininity, 5. Long term orientation, and 6. Indulgence vs. Restraint These dimensions are largely responsible for different legal frameworks and differences in interpretations of individual’s rights. E.g. People in U.S. consider software piracy as criminal offence at par with physical thefts and are punishable by law there. But in countries like China and India, the recognition of intangibles (software) vs. tangibles differs greatly. Similar is the case with idea of patents, copyrights and any other protection given globally to intangibles. Though under international treaties, the law makes piracy punishable offense, the enforcement has largely remained non-existent as authorities are not exception to these cultural dimensions. The culture, therefore, appears critical obstacle in stringent implementation of Intellectual Property laws. Cultural differences also result in affecting
  • 30. Intellectual Property Issues in Global Software Outsourcing 25 team dynamics and therefore may affect knowledge transfers. It also requires companies to provide additional trainings to their global employees, which means additional costs. Some researchers have coined the term “Nearshoring” which means outsourcing to the country sharing borders or having proximity on one or more dimensions like linguistic, [27] geographic, cultural, political, temporal (time zone), economic or historical . However, such nearshoring may not satisfy skill or cost benefits typically associated with software outsourcing decisions. Hence, it may not prove strategic.
  • 31. Intellectual Property Issues in Global Software Outsourcing 26 Corporate Strategy There are risks involved in outsourcing. Companies pursue outsourcing only when they conclude that benefits outweigh the risks involved. Hence, from strategic point of view the outsourcing is crucial decision and requires companies to perform more due diligence before pursuing this route. In this section, we will restrict the discussion to those aspects which deal with intellectual property issues. Strategic decision holds more significant from outsourcer’s point of view than vendors’. For vendors, it is their normal business process to seek out new clients and new businesses. So, the risks involved are well understood by management of vendor and they are well prepared on both managerial and legal front to handle these challenges. Opposite is true for small and medium companies which seek outsourcing of part of their business from cost saving point of view. IP due diligence There are multiple companies which run their own IT organizations and partly outsource the IT services. From strategic point of view it is important what to outsource and what not to. The key principle of management control is “If you can’t measure it, you can’t [29] manage it.” In order to effectively manage the IP assets, it is therefore important to perform IP Audit or Due Diligence check before making IP transfers or sharing with the outsourcee. An IP Audit is defined as systematic review of IP assets created, owned, used or acquired by the business. The key purpose is to identify under-utilized IP assets, identify threats to company’s future cash flows and enable business planners to devise informed [29] strategies . Typically the IP audit tracks various internal IP assets, their life over which company can rip benefits, extent of use, importance and estimated present value of monetary benefits. Such audit will enable company to classify the Intellectual Assets involved in various buckets on different parameters and help formulize policies on what to outsource and
  • 32. Intellectual Property Issues in Global Software Outsourcing 27 what not to. Generally IP audits are performed by internal experts or independent consultants. These are non-statutory audits and require no disclosure. IP due diligence can be performed during various business transactions like mergers and acquisitions, negotiating license or franchise agreement, sell of trademark or copyright, or outsourcing. From outsourcer’s point of view, following due diligence items are important [28] . 1. Discuss fully with your IP professional what it is that you think you are getting out of the transaction. 2. Enlist the protections along with their scope – operations, geographies and time 3. Understand your obligations to the outsourcee. 4. Understand in which geographies and timeline the outsourcee will transfer, use or modify the IP assets. From outsourcee’s point of view following due diligence checklist is important. 1. Obtain full detailed information on exposed IPs from outsourcer along with possible protections. 2. List the operations that may be possibly performed on those IPs – transfer, share, modify, use. Discuss the possible impact of those changes on protections already in place. Clarify the licensing rights you receive. 3. Ensure that for all the shared IPs, the outsourcer has full ownership rights to distribute those across geographies of operations or the areas in which such IP will be subjected to use or change, as applicable. 4. Identify if any of those IPs are subject to litigation or infringement suits. Business Intelligence The possible misuse of IP transfers requires motive. Risks involved in IP transfer vary largely based on ability of the receiver to exploit it. It is therefore critical that company has
  • 33. Intellectual Property Issues in Global Software Outsourcing 28 sufficient intelligence on the contracting partner it is going to tie up with. This is applicable for both outsourcee as well as outsourcer. 1. Outsourcer’s competitors First, it is important to gather information on business relationships between the partner company you are seeking and your business competitors. If exists, then the company must make certain disclosures on nature of business transactions and measures taken to protect the IP of customers so that party can decide if it can proceed with relationship. Many large IT organizations like IBM, HP serve large number of clients, many of them fierce competitors of each other. It is also possible that same facility of outsourcee at single location is serving multiple competitors. However, these companies are known to implement stringent measures to protect mutual exclusiveness of such business practices through protected bays, physical security, access control and providing awareness trainings to employees to prevent them disclosing details to other employees working on different client projects. 2. Outsourcee’s other businesses It is also important to understand information about other businesses of company along with businesses of subsidiaries and parents to determine if there are conflicts of interest exist with business model of prospective partners. Many times outsourcee organizations are part of large conglomerate. In that case, outsourcer will need to evaluate if outsourcee is not benefited due to potential exposure of any of IP assets. Indian IT giant Wipro Ltd. is large conglomerate with businesses apart from IT outsourcing in PC Original Equipment Manufacturer, cosmetics and electrical equipment. A client like Lenovo which is large PC OEM, may not possibly prefer to outsource services relating to its core business as there is possible case of conflict of interest as it competes with other business (PC) of Wipro conglomerate. 3. Outsourcee and outsourcer’s customers
  • 34. Intellectual Property Issues in Global Software Outsourcing 29 As companies outsource IT services to outsourcee vendors, it’s not just their IP that is exposed. But many times it involves confidential data of their customers. Hence, based on kind of customer data that may be possibly exposed the conflict of interest needs to be evaluated. Microsoft Corp. is not in business of PC manufacturing. But it is vendor to all PC businesses in the world which involves selling Windows operating system. Since, Microsoft is a large company, not all the divisions are involved in Windows sales. HCL Infosystems is another Indian IT major which is also top PC OEM in India. Microsoft’s those divisions which deal with PC business cannot possibly outsource to HCL as that would expose data of other customers like Dell or HP which are competitors of HCL. Also, in OEM business Microsoft and HCL have customer-buyer relationship. In same business, establishing parallel partner relationship clearly creates possible opportunity for exploitation of each other’s IP. However, unrelated divisions of Microsoft like Database Product Development can establish outsourcing relationship with HCL without any conflict of interest. 4. Corporate Governance To ensure proper protection and respect of partner’s IP, it is important that prospective partners rate high on modern corporate governance. It involves maturity of internal security processes, financial and other statutory disclosures and fair business practices. 5. Feedback from clients When establishing relationship with outsourcee first time, it is recommended to seek feedback from other clients. For marketing purpose, outsourcee will be making a lot of claims in its bids or proposals. Hence, checking the reputation of firm on fulfilling the promises may be helpful in analyzing the vendor. 6. Financial Strength
  • 35. Intellectual Property Issues in Global Software Outsourcing 30 Generally outsourcing relationships are established between partners which have similar relative size in their respective industries. It is unlikely that large organizations like GE would create outsourcing relationship with a startup unless it is seeking particular skillset. This is primarily due to confidence in conducting large projects, financial stability required to deliver on long term contracts. Moreover, large companies also provide large and long-term contracts and do not like to see disruptions in outsourcee operations due to consolidation activities like mergers and acquisitions, which are more prevalent in small and medium size companies. IP due diligence and corporate intelligence on prospective partners help companies to take decision on which products they can outsource and to whom. It is critical decision in strategic outsourcing.
  • 36. Intellectual Property Issues in Global Software Outsourcing 31 Research Methodology We have now reached the final stage of this research work. So far we have reviewed several articles and papers in order to establish various factors that impact the intellectual property transfer in global outsourcing scenario. Now in this section, we will design framework that captures the inputs from secondary literature survey along with exploratory analysis based on expert survey conducted on initial list of variables in order to summarize them with resulting factors. In this section, we will discuss each step in detail. The step-by-step research methodology is as follows: 1. Establish research problem definition. 2. Identify variables impacting intellectual property transfer in global software outsourcing through secondary research i.e. literature survey 3. Conduct primary research i.e. expert survey in order to gather opinion on extracted list of variables. 4. Use statistical summarization technique like perform Exploratory Factor Analysis in order to reduce these variables and extract critical factors that explain the variance. 5. Prepare model indicating critical factors impacting intellectual property transfer in global software outsourcing. Problem Definition We are aware of the phenomenon that global software outsourcing will have implications on the intellectual property transfers between involving partners. From the survey of literature we can enlist various observable variables that can imply these issues. However, we are not aware of underlying factors with which these variables are interrelated. Based on mathematical model in Wikipedia, let’s build model applicable in this [31] scenario . We assume that any indicator (variable) may be associated with any number of factors. We have no theory or hypothesis in place with respect to these factors and their
  • 37. Intellectual Property Issues in Global Software Outsourcing 32 relation. Let’s assume that there are n such variables - x1, x2, x3…..xn. Let there be m underlying factors f1, f2, f3,….fm. We will be conducting survey of N number of person to obtain scores for n variables. Therefore xi,j represents score of jth person against variable xi. Let µ1, µ2,… µn be means of all observed values of variables x1, x2,….xn. Let li,k represent factor loadings for ith variable for kth factor. Hence l1,2 will represent factor loading of xi on f2. We can define mathematical model for ith response of variable x1 as: x1,i = µ1 + l1,1*f1 + l1,2*f2 + . . . + l1,m*fm + ε1,i Therefore, a generic matrix based model can be defined as: X = µI + LF + ε Where, I is identity matrix of order 1 x N. X is matrix of observable random variables of order n x N µ is column matrix of means of all n variables of order n x 1 L is factor loading matrix of order n x m F is underlying factor matrix of order m x N ε is variance unexplained by factors or error in observation We have now established the fundamental mathematical model of factor analysis. We therefore, can summarize the problem definition as follows – “Identify underlying factors that impact intellectual property transfer in global software outsourcing scenario based on observable variables based on the feedback of the experts in the related field.” In this research we will perform factor analysis independently for three aspects – Legal, Human Resource and Strategic, which are mutually exclusive of each other. The data reduction will be applied for variables under these categories separately.
  • 38. Intellectual Property Issues in Global Software Outsourcing 33 Variables Extracted Based on the secondary research (literature review) done in this report, following 39 variables have been identified. These variables are classified into three aspects – Legal, Human Resource and Strategic, in line with the organization of the report. Section Variable ID Variable Description VAR00001 IP asset identification in contract VAR00002 IP asset valuation in contract VAR00003 Single language contract VAR00004 Dispute jurisdiction VAR00005 Applicable law in dispute Legal VAR00006 Licensing terms - rights, geographies and time VAR00007 knowledge of Patent, Copyright, Non-disclosure/Confidentiality Laws VAR00008 knowledge of Non-disclosure/IP annexure signed in employment contract VAR00009 knowledge of IP laws in home country VAR00010 knowledge of IP laws in Country of origin of partner VAR00011 Establishing communication protocol with partner and train employees VAR00012 Employee Training on what all constitutes as IP assets VAR00013 Employee Training on Strategic importance of those IP assets VAR00014 National cultural dimensions: similarities and differences between client/vendor VAR00015 More number of messages exchanged VAR00016 More time spent in communication Human VAR00017 Communication between employees at multiple levels Resources VAR00018 Communication between employees from different functions VAR00019 Proactive sharing of information required to perform task VAR00020 Face-to-face communication VAR00021 Informal/personal communication Incl. Facebook, Google Chat, LinkedIn VAR00022 Trust on capability of other partner on delivering on promises VAR00023 Trust on ethical and professional behavior of other partner VAR00024 Recording IP in desired format (documentation, diagrams, KM systems) VAR00025 Market reputation of partner company VAR00026 Internal Project Progress Reporting, Review and Tracking (Within firm) VAR00027 Periodical Project Progress Reporting, Review and Tracking with/to/for the client VAR00028 Perform regular IP Audit (assets, life, benefits, importance) VAR00029 Engage IP experts (internal or external consultants) Strategic VAR00030 Classify IP assets based on value and importance VAR00031 Evaluate potential assets exposed using IP due diligence checklist VAR00032 Organizational policy on what to outsource VAR00033 Business relationship of partner with your competitors VAR00034 Other businesses of your partner (Possible Conflict of Interest) VAR00035 Relationship between partner and your customers VAR00036 Corporate Governance policies of partner
  • 39. Intellectual Property Issues in Global Software Outsourcing 34 VAR00037 Market reputation/Feedback from others about your partner VAR00038 Financial strength of partner VAR00039 Political, Economical and Social conditions in partner's country(s) of operation Survey Design In order to reduce these variables using Exploratory Factor Analysis (EFA) method, a primary research survey was conducted. Survey Nature: An anonymous survey was created. No personally identifiable content was captured. Apart from responses to specific questionnaire described below, some additional profile information was captured. It included user’s role whether outsourcer (client/customer) or outsourcee (vendor or contractor). Position title and work experience in years was also asked. Also the geographical location of user was captured. This data has no direct role in identifying factor weightages, but it may be used for qualitative analysis of the data. It also indicates diversity of responses gathered. Questionnaire: A survey questionnaire was designed with one question corresponding to each of the 39 variables. The questions were not organized as per sections of analysis to eliminate any inherent bias. Rather questions were combined based on topics like contract, training, communication etc. Audience was asked to rate importance of the variable as output. All questions were positive in nature i.e. higher importance of presence of variable will always be indicated by 7 for from intellectual property impact, while 1 would indicate no or lesser importance of particular variable. Specific Questions: Only 1 specific question was asked – “According to you, which of the following is the correct representation of IP exposure risk in software outsourcing?” The intention is to
  • 40. Intellectual Property Issues in Global Software Outsourcing 35 measure perception of IP issues faced by vendors or clients among audience. We will discuss qualitatively these responses in later section. Scale: All responses were gathered on Likert’s 7 point scale from “Not Important” to “Very Important”. All questions had same response scale, so no standardization of responses was required. Among Likert’s scales, 5-point and 7-point are considered most accurate and reliable as they represent adequate intervals from both user distinguishability point of view as well as statistical significance. However, though there is no conclusive evidence, many psychometricians recommend 7-point scale over 5-point in obtaining observation scores for exploratory factor analysis. Hence, the 7-point Likert scale is used in this survey. Survey Responses In this section we will discuss sampling method employed in conducting survey and descriptive analysis of audience profile. Sampling Method: It was decided to conduct the survey as Expert survey. The method used was Snowball sampling which is non-probability sampling method. Invitations were sent out to known practitioners in software outsourcing or offshoring model. The audience involved professionals on both client as well as vendor side. Individuals were also asked to forward invitations to people they know who have experience in managing outsourced projects from either side. We have received considerable number of responses from such secondary level of contacts. The survey was setup using user-friendly UI of the surveymonkey.com and was administered online. The target audience was contacted using personal email invitations with standard 1 reminder 2 days prior to deadline using messaging on their social networking (Facebook) profile.
  • 41. Intellectual Property Issues in Global Software Outsourcing 36 A total of 35 participants undertook the survey. Out of those responses a total of 28 responses were considered valid after eliminating inconsistent and incomplete responses. In following section we will discuss brief profile of the audience. Participant Profile: Overall audience represents diverse set of individuals from both sides of outsourcing, in various positions and with wider work experience range. Although majority audience comes from India, there was decent representation from matured markets like North America, Hong Kong and Western Europe. The audience profile is discussed with help of graphical diagrams. 10 Outsourcee (Vendor / Contractor) 18 Outsourcer (Client / Customer) Figure 5 Participant Statistics by Role 3 7 People Managers 8 Developers Consultants/Analysts 10 Test/Support Figure 6 Participant Statistics by Position
  • 42. Intellectual Property Issues in Global Software Outsourcing 37 4 5 Upto 2 years 6 Upto 5 years Upto 8 years 13 8+ years Figure 7 Participant Statistics by Related Work Experience 2 1 6 India North America 19 Hong Kong/Singapore Western Europe Figure 8 Participant Statistics by Work Location Client has more risks 2 4 13 Client and vendor have equal risks 9 Only client IP is exposed Vendor has more risks Figure 9 Participants’ perception of IP risks Above diagram represents the participants’ perception on IP risks involved in software outsourcing. Since the survey was within expert audience, everyone agrees that there are considerable IP risks involved in software outsourcing. However, most believe that client is more susceptible. But convincing number of individuals consent to our opinion that
  • 43. Intellectual Property Issues in Global Software Outsourcing 38 both client and vendor face equal risks with respect to IP in software outsourcing. The minor variations may be accorded to different scenarios like type of outsourcing, types of companies involved and different level of involvement of participant with respect to given software project. The opinion on risks is not subject to further analysis as part of this study. Factor Analysis Configuration Software used for analysis was IBM SPSS version 16.0 licensed to Indian Institute of Management Lucknow which is made available to students for academic purposes. The tool supports out-of-box functionality for statistical analysis using Factor reduction method. This helps summarizing large factors into more compact components. The tool also supports Varimax rotation. Statistical Analysis Package IBM SPSS v16.0 Descriptives 1. Kaiser-Meyer-Olkin Measure 2. Bartlett’s Test of Sphericity Extraction Method Principle Component Extraction Factor Extraction Criteria Eigen Value > 1.0 Rotation Method Varimax rotation with Kaiser Normalization Interpretation Method Identify loading >= 0.5 in rotated component matrix Following are various details regards to Exploratory Factor Analysis method conducted. Descriptives: We will use following descriptives to check validity of factor reduction analysis.
  • 44. Intellectual Property Issues in Global Software Outsourcing 39 (1) Kaiser-Meyer-Olkin Measure (KMO) of sampling adequacy: This measures partial correlations between variables. If > 0.5, it indicates that the given sample is sufficient for factor reduction. Otherwise, it may indicate that the factor analysis is satisfactory. (2) Bartlett’s Test of Sphericity: The null hypothesis that factors are uncorrelated must be rejected in order to proceed with the factor analysis. If significance is less than 0.05, it indicates there is sufficient evidence to reject null hypothesis and the factors have strong correlation among themselves, hence factor analysis can be conducted. Extraction Method: The motive is to extract minimum number of factors that explain variation. Hence, we will use Principle Component Method for extraction. No. of factors to be extracted: There is no requirement to extract fixed number of factors. We will extract all those factors which have Eigen Value higher than 1.0. Rotation Method: Since we want to reduce number of variables with high loading on a factor, we use orthogonal rotation. The particular method used here is Varimax rotation with Kaiser Normalization. Interpretation Method: We will interpret loading of variables on factor using rotated component matrix. We will follow general thumb rule of identifying loadings which are >=0.5. In some cases, where variable did not load on any factor, we have taken factor loadings which are close to 0.5, due to inadequacy of sample size. Factor Analysis Results The 3 sections – Legal, Human Resource Practices and Organizational Strategy are not factors but aspects of organizational operations. Hence, factor analysis was performed
  • 45. Intellectual Property Issues in Global Software Outsourcing 40 separately for each section. There is sufficient literature available to say that these three aspects are independent. This would avoid any random pattern to emerge among variables from different sections. Let’s look at EFA results one-by-one. Legal Aspects: SSPS Output Descriptive Value Remark KMO sampling adequacy 0.607 Sample sufficient for factor analysis Barlett’s Test of sphericity sig. 0.000 Null Hypothesis rejected, Factor Analysis possible a Rotated Component Matrix Component Variables 1 2 3 IP asset identification in contract .099 -.095 .894 IP asset valuation in contract .261 .042 .879 Single language contract .577 .279 .292 Dispute jurisdiction .956 .089 .078 Applicable law in dispute .950 .033 .085 Licensing terms - rights, geographies and time .759 -.047 .313 knowledge of Patent, Copyright, Non-disclosure/Confidentiality Laws -.172 .915 .195 knowledge of Non-disclosure/IP annexure signed in employment contract .118 .945 -.029 knowledge of IP laws in home country .390 .804 -.305 knowledge of IP laws in Country of origin of partner .668 .614 -.149 Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization. Rotation converged in 6 iterations. Interpretation The factors are interpreted as follows- Factor Variance Loadi # Interpretation Explained ng Variables in Factor F1 Legal intricacies of 34.45% 0.577 Single language contract contractual contents 0.956 Dispute jurisdiction 0.95 Applicable law in dispute 0.759 Licensing terms - rights, geographies and time 0.668 Knowledge of IP laws in Country of origin of partner F2 Employee training 28.53% 0.915 knowledge of Patent, Copyright, Non-
  • 46. Intellectual Property Issues in Global Software Outsourcing 41 on legal matters disclosure/Confidentiality Laws related to IP knowledge of Non-disclosure/IP annexure signed in 0.945 employment contract 0.804 knowledge of IP laws in home country 0.614 knowledge of IP laws in Country of origin of partner F3 Formal IP 19.23% 0.894 IP asset identification in contract assessment 0.879 IP asset valuation in contract Human Resource Aspects: SSPS Output Descriptive Value Remark KMO sampling adequacy 0.545 Sample sufficient for factor analysis Barlett’s Test of sphericity sig. 0.000 Null Hypothesis rejected, Factor Analysis possible a Rotated Component Matrix Component Variables 1 2 3 4 5 Establishing communication protocol with partner and train employees .624 -.062 .359 .039 -.438 Employee Training on what all constitutes as IP assets .880 .213 -.186 .005 .059 Employee Training on Strategic importance of those IP assets .879 .228 -.172 .082 -.001 National cultural dimensions: similarities and differences between .839 -.030 .268 .069 .009 client/vendor More number of messages exchanged -.043 .290 .893 -.002 .173 More time spent in communication .052 .312 .781 .041 .180 Communication between employees at multiple levels .055 .702 .416 .327 .124 Communication between employees from different functions .201 .803 .236 -.152 -.205 Proactive sharing of information required to perform task .094 .809 .159 .137 .262 Face-to-face communication .337 .391 .157 -.258 .588 Informal/personal communication Incl. Facebook, Google Chat, LinkedIn -.141 -.021 .299 .092 .879 Trust on capability of other partner on delivering on promises .026 .074 .188 .911 -.081 Trust on ethical and professional behavior of other partner .107 .042 -.129 .933 .063 Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization. Rotation converged in 6 iterations. Interpretation The factors are interpreted as follows-
  • 47. Intellectual Property Issues in Global Software Outsourcing 42 Factor Variance Loadi # Interpretation Explained ng Variables in Factor F4 Employee training 21.88% Establishing communication protocol with partner on soft skills and 0.624 and train employees awareness of IP 0.88 Employee Training on what all constitutes as IP assets Employee Training on Strategic importance of those 0.879 IP assets National cultural dimensions: similarities and 0.839 differences between client/vendor F5 Holistic and 17.20% Communication between employees at multiple proactive 0.702 levels communication Communication between employees from different 0.803 functions Proactive sharing of information required to perform 0.809 task F6 Frequent contact 16.09% 0.893 More number of messages exchanged 0.781 More time spent in communication F7 Trusted relationship 14.91% Trust on capability of other partner on delivering on between partners 0.588 promises Trust on ethical and professional behavior of other 0.879 partner F8 Encourage informal 11.65% 0.911 Face-to-face communication contact Informal/personal communication Incl. Facebook, 0.933 Google Chat, LinkedIn Corporate Strategic Aspects: SSPS Output Descriptive Value Remark KMO sampling adequacy 0.587 Sample sufficient for factor analysis Barlett’s Test of sphericity sig. 0.000 Null Hypothesis rejected, Factor Analysis possible a Rotated Component Matrix Component Variables 1 2 3 4 5 Recording IP in desired format (documentation, diagrams, KM systems) .164 .269 .001 -.145 .780 Market reputation of partner company .701 .333 .356 -.292 .068 Internal Project Progress Reporting, Review and Tracking (Within firm) .255 .252 .111 .863 .058 Periodical Project Progress Reporting, Review and Tracking with/to/for the .330 .209 .203 .797 .140 client Perform regular IP Audit (assets, life, benefits, importance) .163 .179 .763 .146 .248
  • 48. Intellectual Property Issues in Global Software Outsourcing 43 Engage IP experts (internal or external consultants) .100 .167 .623 .018 -.151 Classify IP assets based on value and importance .053 .115 .595 .125 .498 Evaluate potential assets exposed using IP due diligence checklist .296 .187 .652 .153 .094 Organizational policy on what to outsource -.045 .785 .219 .320 .025 Business relationship of partner with your competitors .142 .779 .179 -.026 .453 Other businesses of your partner (Possible Conflict of Interest) .203 .814 .280 .208 .034 Relationship between partner and your customers -.006 -.040 .143 .396 .675 Corporate Governance policies of partner .803 -.073 .110 .168 .156 Feedback from others about your partner .650 .074 .032 .191 .605 Financial strength of partner .767 .115 .102 .420 .090 Political, Economical and Social conditions in partner's country(s) of operation .851 .150 .293 .265 -.048 Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization. Rotation converged in 9 iterations. Interpretation The factors are interpreted as follows- Variance Loadi # Factor Interpretation Explained ng Variables in Factor F9 Assessing partner’s 20.40% 0.701 Market reputation of partner company ability to deliver on 0.803 Corporate Governance policies of partner promises 0.65 Feedback from others about your partner 0.767 Financial strength of partner Political, Economical and Social conditions in 0.851 partner's country(s) of operation F10 Evaluate conflict of 14.58% 0.785 Organizational policy on what to outsource interest Business relationship of partner with your 0.779 competitors Other businesses of your partner (Possible Conflict 0.814 of Interest) F11 IP due diligence and 13.87% Perform regular IP Audit (assets, life, benefits, audit 0.763 importance) 0.623 Engage IP experts (internal or external consultants) 0.595 Classify IP assets based on value and importance Evaluate potential assets exposed using IP due 0.652 diligence checklist F12 Regular progress 13.51% Internal Project Progress Reporting, Review and tracking 0.863 Tracking (Within firm) Periodical Project Progress Reporting, Review and 0.797 Tracking with/to/for the client F13 Record IP for storage 12.74% Recording IP in desired format (documentation, and transfer 0.78 diagrams, KM systems) (other variables 0.675 Relationship between partner and your customers unidentifiable) 0.605 Feedback from others about your partner
  • 49. Intellectual Property Issues in Global Software Outsourcing 44 Conclusion The model framework can be summarized as follows. It can serve as checklist before any organization ventures into software outsourcing decisions. The factors are in decreasing order of importance (based on total percentage explained variance) in each category. The categories are independent of each other. •Legal intricacies of contractual •Employee training on soft skills •Assessing partner's ability to contents and awareness of IP deliver on promises •Employee training on legal •Holistic and proactive •Evaluate conflict of interest matters related to IP communication •IP due diligence and audit •Formal IP assessment •Frequent contact •Regular progress tracking •Trusted relationship between •Record IP for storage and partners transfer •Encourage informal contact Human Corporate Legal Resources Strategy Figure 10 Checklist Framework for IP transfer Managerial Implications While all the factors are more or less important, and factor analysis does not provide a particular descending order for them, what we need to note is the variance is based on perception of experts about importance of such factors. The factors at top in each category had higher variance compared to factor in the end. That may mean that companies need to take into account factors at top at priority compared to factors at bottom due to higher variance in understanding importance of those. It is also identified that while legal measures may provide remedy to safeguard interests in case of violations, litigations are costly, time-consuming and sometimes unpredictable in international scenario due to heterogeneity of the laws. Therefore, companies should give more importance to factors identified under Human Resource and
  • 50. Intellectual Property Issues in Global Software Outsourcing 45 Strategic aspects. Companies should identify their partners appropriately on multi- dimensional parameters and not just consideration for lower costs. Companies should also take proactive steps to raise awareness among employees and establish communication that builds trust based relationships between employees of both organizations while they work together. We also need to take into account certain other factors which were not subjected to the survey due to more complex legal nature. It was certain that survey audience does not have legal background as generally these are taken care of by the legal experts inside or hired by the organization. These include structuring of employment contracts with IP specific clause that enable employers to secure rights to work authored by the employees. Applicable laws with respect to copyrights and trade secrets vary greatly compared to their patent counterparts across the globe. Therefore the company operating in international segment needs to hire legal experts locally in order to safeguard its interest in countries outside its origin. Companywide policies may not be valid across borders. Limitations and Future Scope The main limitation of the study remains associated with survey. Although the survey was able to achieve balance of opinions between both sides of outsourcing relationship, the geographic balance was not obtained with audience from India largely dominating it. Triad market like Western Europe was heavily underrepresented. The survey was also dominated by audience of around 5 years of work experience and majorly from development background. Due to limitation of time, we were able to obtain only 28 valid responses. Though it was statistically sufficient, higher number of more diverse responses will certainly help derive more meaningful conclusions. As future scope, the survey diversity in terms of geographical location, gender and work experience can be enhanced with increased sample size and timeframe. Another aspect
  • 51. Intellectual Property Issues in Global Software Outsourcing 46 of diversity required is in terms of size of organization. Current survey was rolled to employees of very large enterprises like Microsoft, Accenture, TCS, IBM, Google etc. Inclusion of employees from Small and Medium segment will be helpful. Also, higher sample size will enable to classify service sector vs. product sector as significantly different IP issues affect these two sectors of Information Technology/Software Development. These enhancements will help make the conclusions more significant as customized for respective companies.
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  • 55. Intellectual Property Issues in Global Software Outsourcing 50 Appendix-I: SPSS Outputs Refer codified list of variables in section “Research Methodology” >> sub-section “Variables Extracted” on page number: 41. Attached: PDF printouts of detailed SPSS output for factor analysis in each three sections. Order: - 1. Legal 2. Human Resources 3. Strategic For future reference, the SPSS outputs, additional links and appendices are available on project homepage at http://research.vaibhavsathe.com for download. Thank You.
  • 56. FACTOR /VARIABLES VAR00001 VAR00002 VAR00003 VAR00004 VAR00005 VAR00006 VAR00007 VAR00008 VAR00009 VAR00010 /MISSING LISTWISE /ANALYSIS VAR00001 VAR00002 VAR00003 VAR00004 VAR00005 VAR00006 VAR00007 VAR00008 VAR00009 VAR00010 /PRINT UNIVARIATE INITIAL KMO EXTRACTION ROTATION FSCORE /CRITERIA MINEIGEN(1) ITERATE(25) /EXTRACTION PC /CRITERIA ITERATE(25) /ROTATION VARIMAX /METHOD=CORRELATION. Factor Analysis Notes Output Created 26-Apr-2012 21:51:16 Comments Input Data E:term VIIThesisSPSSthesis.sav Active Dataset DataSet0 Filter <none> Weight <none> Split File <none> N of Rows in Working Data File 28 Missing Value Handling Definition of Missing MISSING=EXCLUDE: User-defined missing values are treated as missing. Cases Used LISTWISE: Statistics are based on cases with no missing values for any variable used. Syntax FACTOR /VARIABLES VAR00001 VAR00002 VAR00003 VAR00004 VAR00005 VAR00006 VAR00007 VAR00008 VAR00009 VAR00010 /MISSING LISTWISE /ANALYSIS VAR00001 VAR00002 VAR00003 VAR00004 VAR00005 VAR00006 VAR00007 VAR00008 VAR00009 VAR00010 /PRINT UNIVARIATE INITIAL KMO EXTRACTION ROTATION FSCORE /CRITERIA MINEIGEN(1) ITERATE (25) /EXTRACTION PC /CRITERIA ITERATE(25) /ROTATION VARIMAX /METHOD=CORRELATION. Resources Processor Time 00:00:00.078 Elapsed Time 00:00:00.034 Maximum Memory Required 13480 (13.164K) bytes
  • 57. [DataSet0] E:term VIIThesisSPSSthesis.sav Descriptive Statistics Mean Std. Deviation Analysis N IP asset identification in contract 5.9643 1.17006 28 IP asset valuation in contract 5.6071 1.19689 28 Single language contract 4.8571 1.48360 28 Dispute jurisdiction 5.3929 1.28638 28 Applicable law in dispute 5.5000 1.37437 28 Licensing terms - rights, geographies and time 5.6786 1.58823 28 knowledge of Patent, Copyright, Non- disclosure/Confidentiality 5.8571 1.38013 28 Laws knowledge of Non- disclosure/IP annexure signed in employment 5.8929 1.42307 28 contract knowledge of IP laws in home country 5.3571 1.59198 28 knowledge of IP laws in Country of origin of 5.5714 1.34519 28 partner KMO and Bartlett's Test Kaiser-Meyer-Olkin Measure of Sampling Adequacy. .607 Bartlett's Test of Approx. Chi-Square 229.299 Sphericity df 45 Sig. .000 Communalities Initial Extraction IP asset identification in contract 1.000 .818 IP asset valuation in contract 1.000 .842 Single language contract 1.000 .496 Dispute jurisdiction 1.000 .928 Applicable law in dispute 1.000 .910 Licensing terms - rights, geographies and time 1.000 .677 knowledge of Patent, Copyright, Non- disclosure/Confidentiality 1.000 .904 Laws knowledge of Non- disclosure/IP annexure signed in employment 1.000 .908 contract Extraction Method: Principal Component Analysis.
  • 58. Communalities Initial Extraction knowledge of IP laws in home country 1.000 .892 knowledge of IP laws in Country of origin of 1.000 .845 partner Extraction Method: Principal Component Analysis. Total Variance Explained Rotation Sums of Squared Initial Eigenvalues Extraction Sums of Squared Loadings Loadings Component Total % of Variance Cumulative % Total % of Variance Cumulative % Total 1 4.195 41.954 41.954 4.195 41.954 41.954 3.445 2 2.527 25.265 67.219 2.527 25.265 67.219 2.853 3 1.500 14.996 82.215 1.500 14.996 82.215 1.923 4 .762 7.623 89.837 5 .339 3.388 93.225 6 .294 2.936 96.162 7 .181 1.813 97.975 8 .115 1.154 99.128 9 .057 .568 99.696 10 .030 .304 100.000 Extraction Method: Principal Component Analysis. Total Variance Explained Rotation Sums of Squared Loadings Component % of Variance Cumulative % 1 34.451 34.451 2 28.534 62.985 3 19.230 82.215 4 5 6 7 8 9 10 Extraction Method: Principal Component Analysis.
  • 59. Component Matrixa Component 1 2 3 IP asset identification in contract .197 .612 .636 IP asset valuation in contract .402 .560 .606 Single language contract .679 .166 .089 Extraction Method: Principal Component Analysis. a. 3 components extracted. Component Matrixa Component 1 2 3 Dispute jurisdiction .847 .322 -.328 Applicable law in dispute .812 .366 -.341 Licensing terms - rights, geographies and time .656 .486 -.105 knowledge of Patent, Copyright, Non- disclosure/Confidentiality .390 -.630 .596 Laws knowledge of Non- disclosure/IP annexure signed in employment .603 -.675 .299 contract knowledge of IP laws in home country .698 -.629 -.100 knowledge of IP laws in Country of origin of .852 -.299 -.174 partner Extraction Method: Principal Component Analysis. a. 3 components extracted. Rotated Component Matrixa Component 1 2 3 IP asset identification in contract .099 -.095 .894 IP asset valuation in contract .261 .042 .879 Single language contract .577 .279 .292 Dispute jurisdiction .956 .089 .078 Applicable law in dispute .950 .033 .085 Licensing terms - rights, geographies and time .759 -.047 .313 knowledge of Patent, Copyright, Non- disclosure/Confidentiality -.172 .915 .195 Laws knowledge of Non- disclosure/IP annexure signed in employment .118 .945 -.029 contract Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization. a. Rotation converged in 6 iterations.
  • 60. Rotated Component Matrixa Component 1 2 3 knowledge of IP laws in home country .390 .804 -.305 knowledge of IP laws in Country of origin of .668 .614 -.149 partner Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization. a. Rotation converged in 6 iterations. Component Transformation Matrix Co… 1 2 3 1 .820 .541 .188 2 .360 -.742 .566 3 -.445 .396 .803 Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization. Component Score Coefficient Matrix Component 1 2 3 IP asset identification in contract -.063 .014 .487 IP asset valuation in contract -.022 .048 .468 Single language contract .130 .062 .115 Dispute jurisdiction .309 -.072 -.066 Applicable law in dispute .312 -.093 -.065 Licensing terms - rights, geographies and time .229 -.086 .082 knowledge of Patent, Copyright, Non- disclosure/Confidentiality -.190 .393 .195 Laws knowledge of Non- disclosure/IP annexure signed in employment -.067 .355 .036 contract knowledge of IP laws in home country .076 .248 -.163 knowledge of IP laws in Country of origin of .175 .152 -.122 partner Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization. Component Score Covariance Matrix Co… 1 2 3 1 1.000 .000 .000 2 .000 1.000 .000 3 .000 .000 1.000 Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization.
  • 61. FACTOR /VARIABLES VAR00011 VAR00012 VAR00013 VAR00014 VAR00015 VAR00016 VAR00017 VAR00018 VAR00019 VAR00020 VAR00021 VAR00022 VAR00023 /MISSING LISTWISE /ANALYSIS VAR00011 VAR00012 VAR00013 VAR00014 VAR00015 VAR00016 VAR00017 VAR00018 VAR00019 VAR00020 VAR00021 VAR00022 VAR00023 /PRINT UNIVARIATE INITIAL KMO EXTRACTION ROTATION FSCORE /CRITERIA MINEIGEN(1) ITERATE(25) /EXTRACTION PC /CRITERIA ITERATE(25) /ROTATION VARIMAX /METHOD=CORRELATION. Factor Analysis Notes Output Created 26-Apr-2012 21:53:44 Comments Input Data E:term VIIThesisSPSSthesis.sav Active Dataset DataSet0 Filter <none> Weight <none> Split File <none> N of Rows in Working Data File 28 Missing Value Handling Definition of Missing MISSING=EXCLUDE: User-defined missing values are treated as missing. Cases Used LISTWISE: Statistics are based on cases with no missing values for any variable used. Syntax FACTOR /VARIABLES VAR00011 VAR00012 VAR00013 VAR00014 VAR00015 VAR00016 VAR00017 VAR00018 VAR00019 VAR00020 VAR00021 VAR00022 VAR00023 /MISSING LISTWISE /ANALYSIS VAR00011 VAR00012 VAR00013 VAR00014 VAR00015 VAR00016 VAR00017 VAR00018 VAR00019 VAR00020 VAR00021 VAR00022 VAR00023 /PRINT UNIVARIATE INITIAL KMO EXTRACTION ROTATION FSCORE /CRITERIA MINEIGEN(1) ITERATE (25) /EXTRACTION PC /CRITERIA ITERATE(25) /ROTATION VARIMAX /METHOD=CORRELATION. Resources Processor Time 00:00:00.062 Elapsed Time 00:00:00.035 Maximum Memory Required 21700 (21.191K) bytes
  • 62. [DataSet0] E:term VIIThesisSPSSthesis.sav Descriptive Statistics Mean Std. Deviation Analysis N Establishing communication protocol with partner and train 5.8214 1.12393 28 employees Employee Training on what all constitutes as IP 5.7857 1.42354 28 assets Employee Training on Strategic importance of 5.4643 1.47779 28 those IP assets National cultural dimensions: similarities and differences between 5.1786 1.27812 28 client/vendor More number of messages exchanged 4.6786 1.49204 28 More time spent in communication 4.9286 1.24510 28 Communication between employees at multiple 5.2500 1.23603 28 levels Communication between employees from different 4.9643 1.34666 28 functions Proactive sharing of information required to 5.6071 1.42307 28 perform task Face-to-face communication 4.6071 1.70705 28 Informal/personal communication Incl. Facebook, Google Chat, 3.5000 2.00924 28 LinkedIn Trust on capability of other partner on 5.4643 1.26146 28 delivering on promises Trust on ethical and professional behavior of 5.8571 .93152 28 other partner KMO and Bartlett's Test Kaiser-Meyer-Olkin Measure of Sampling Adequacy. .545 Bartlett's Test of Approx. Chi-Square 195.673 Sphericity df 78 Sig. .000 Communalities Initial Extraction Establishing communication protocol with partner and train 1.000 .716 employees Extraction Method: Principal Component Analysis.
  • 63. Communalities Initial Extraction Employee Training on what all constitutes as IP 1.000 .858 assets Employee Training on Strategic importance of 1.000 .862 those IP assets National cultural dimensions: similarities and differences between 1.000 .782 client/vendor More number of messages exchanged 1.000 .913 More time spent in communication 1.000 .744 Communication between employees at multiple 1.000 .791 levels Communication between employees from different 1.000 .806 functions Proactive sharing of information required to 1.000 .775 perform task Face-to-face communication 1.000 .704 Informal/personal communication Incl. Facebook, Google Chat, 1.000 .891 LinkedIn Trust on capability of other partner on 1.000 .877 delivering on promises Trust on ethical and professional behavior of 1.000 .905 other partner Extraction Method: Principal Component Analysis. Total Variance Explained Rotation Sums of Squared Initial Eigenvalues Extraction Sums of Squared Loadings Loadings Component Total % of Variance Cumulative % Total % of Variance Cumulative % Total 1 3.942 30.326 30.326 3.942 30.326 30.326 2.845 2 2.611 20.085 50.411 2.611 20.085 50.411 2.235 3 1.878 14.448 64.859 1.878 14.448 64.859 2.092 4 1.181 9.084 73.943 1.181 9.084 73.943 1.939 5 1.012 7.784 81.727 1.012 7.784 81.727 1.514 6 .719 5.529 87.256 7 .575 4.421 91.677 8 .311 2.391 94.068 9 .256 1.966 96.034 10 .211 1.625 97.659 11 .157 1.206 98.864 12 .092 .711 99.575 13 .055 .425 100.000 Extraction Method: Principal Component Analysis.
  • 64. Total Variance Explained Rotation Sums of Squared Loadings Component % of Variance Cumulative % 1 21.881 21.881 2 17.195 39.077 3 16.090 55.167 4 14.913 70.079 5 11.648 81.727 6 7 8 9 10 11 12 13 Extraction Method: Principal Component Analysis. Component Matrixa Component 1 2 3 4 5 Establishing communication protocol with partner and train .392 .517 .004 -.439 .321 employees Employee Training on what all constitutes as IP .521 .709 -.118 .261 -.039 assets Employee Training on Strategic importance of .539 .724 -.037 .209 -.053 those IP assets National cultural dimensions: similarities and differences between .575 .545 -.046 .025 .389 client/vendor More number of messages exchanged .640 -.548 -.097 -.288 .331 More time spent in communication .658 -.431 -.062 -.213 .275 Communication between employees at multiple .762 -.322 .208 -.092 -.235 levels Communication between employees from different .661 -.019 -.237 -.324 -.455 functions Proactive sharing of information required to .714 -.254 .004 .125 -.430 perform task Face-to-face communication .575 -.110 -.412 .438 .000 Informal/personal communication Incl. Facebook, Google Chat, .254 -.582 -.017 .611 .338 LinkedIn Extraction Method: Principal Component Analysis. a. 5 components extracted.
  • 65. Component Matrixa Component 1 2 3 4 5 Trust on capability of other partner on .303 -.042 .880 -.070 .061 delivering on promises Trust on ethical and professional behavior of .199 .110 .896 .218 -.051 other partner Extraction Method: Principal Component Analysis. a. 5 components extracted. Rotated Component Matrixa Component 1 2 3 4 5 Establishing communication protocol with partner and train .624 -.062 .359 .039 -.438 employees Employee Training on what all constitutes as IP .880 .213 -.186 .005 .059 assets Employee Training on Strategic importance of .879 .228 -.172 .082 -.001 those IP assets National cultural dimensions: similarities and differences between .839 -.030 .268 .069 .009 client/vendor More number of messages exchanged -.043 .290 .893 -.002 .173 More time spent in communication .052 .312 .781 .041 .180 Communication between employees at multiple .055 .702 .416 .327 .124 levels Communication between employees from different .201 .803 .236 -.152 -.205 functions Proactive sharing of information required to .094 .809 .159 .137 .262 perform task Face-to-face communication .337 .391 .157 -.258 .588 Informal/personal communication Incl. Facebook, Google Chat, -.141 -.021 .299 .092 .879 LinkedIn Trust on capability of other partner on .026 .074 .188 .911 -.081 delivering on promises Trust on ethical and professional behavior of .107 .042 -.129 .933 .063 other partner Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization. a. Rotation converged in 6 iterations.
  • 66. Component Transformation Matrix Co… 1 2 3 4 5 1 .531 .628 .501 .180 .200 2 .786 -.192 -.438 .002 -.392 3 -.120 -.095 -.056 .979 -.124 4 .158 -.069 -.461 .096 .865 5 .246 -.745 .585 .017 .206 Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization. Component Score Coefficient Matrix Component 1 2 3 4 5 Establishing communication protocol with partner and train .228 -.186 .319 -.010 -.314 employees Employee Training on what all constitutes as IP .317 .050 -.174 -.016 .111 assets Employee Training on Strategic importance of .308 .061 -.164 .022 .064 those IP assets National cultural dimensions: similarities and differences between .342 -.234 .198 .011 .048 client/vendor More number of messages exchanged -.031 -.080 .480 -.039 -.023 More time spent in communication .001 -.050 .400 -.015 .002 Communication between employees at multiple -.077 .313 .045 .132 -.042 levels Communication between employees from different -.056 .473 -.042 -.128 -.278 functions Proactive sharing of information required to -.068 .442 -.165 .037 .078 perform task Face-to-face communication .129 .095 -.067 -.153 .394 Informal/personal communication Incl. Facebook, Google Chat, .024 -.200 .087 .058 .618 LinkedIn Trust on capability of other partner on -.023 -.034 .082 .468 -.076 delivering on promises Trust on ethical and professional behavior of .020 .003 -.135 .493 .083 other partner Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization. Component Score Covariance Matrix Co… 1 2 3 4 5 1 1.000 .000 .000 .000 .000 2 .000 1.000 .000 .000 .000 Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization.
  • 67. Component Score Covariance Matrix Co… 1 2 3 4 5 3 .000 .000 1.000 .000 .000 4 .000 .000 .000 1.000 .000 5 .000 .000 .000 .000 1.000 Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization.
  • 68. FACTOR /VARIABLES VAR00024 VAR00025 VAR00026 VAR00027 VAR00028 VAR00029 VAR00030 VAR00031 VAR00032 VAR00033 VAR00034 VAR00035 VAR00036 VA R00037 VAR00038 VAR00039 /MISSING LISTWISE /ANALYSIS VAR00024 VAR00025 VAR00026 VAR00027 VAR00028 VAR00029 VAR00030 VAR00031 VAR00032 VAR00033 VAR00034 VAR00035 VAR00036 VAR 00037 VAR00038 VAR00039 /PRINT UNIVARIATE INITIAL KMO EXTRACTION ROTATION FSCORE /CRITERIA MINEIGEN(1) ITERATE(25) /EXTRACTION PC /CRITERIA ITERATE(25) /ROTATION VARIMAX /METHOD=CORRELATION. Factor Analysis Notes Output Created 26-Apr-2012 21:57:39 Comments Input Data E:term VIIThesisSPSSthesis.sav Active Dataset DataSet0 Filter <none> Weight <none> Split File <none> N of Rows in Working Data File 28 Missing Value Handling Definition of Missing MISSING=EXCLUDE: User-defined missing values are treated as missing. Cases Used LISTWISE: Statistics are based on cases with no missing values for any variable used. Syntax FACTOR /VARIABLES VAR00024 VAR00025 VAR00026 VAR00027 VAR00028 VAR00029 VAR00030 VAR00031 VAR00032 VAR00033 VAR00034 VAR00035 VAR00036 VAR00037 VAR00038 VAR00039 /MISSING LISTWISE /ANALYSIS VAR00024 VAR00025 VAR00026 VAR00027 VAR00028 VAR00029 VAR00030 VAR00031 VAR00032 VAR00033 VAR00034 VAR00035 VAR00036 VAR00037 VAR00038 VAR00039 /PRINT UNIVARIATE INITIAL KMO EXTRACTION ROTATION FSCORE /CRITERIA MINEIGEN(1) ITERATE (25) /EXTRACTION PC /CRITERIA ITERATE(25) /ROTATION VARIMAX /METHOD=CORRELATION.
  • 69. Notes Resources Processor Time 00:00:00.062 Elapsed Time 00:00:00.029 Maximum Memory Required 31864 (31.117K) bytes [DataSet0] E:term VIIThesisSPSSthesis.sav Descriptive Statistics Mean Std. Deviation Analysis N Recording IP in desired format (documentation, 5.5714 1.03382 28 diagrams, KM systems) Market reputation of partner company 5.4286 .99735 28 Internal Project Progress Reporting, Review and 5.8929 1.03062 28 Tracking (Within firm) Periodical Project Progress Reporting, Review and Tracking 6.0357 .96156 28 with/to/for the client Perform regular IP Audit (assets, life, benefits, 5.9643 .88117 28 importance) Engage IP experts (internal or external 5.1429 1.20844 28 consultants) Classify IP assets based on value and importance 6.0000 .90267 28 Evaluate potential assets exposed using IP due 6.2143 .73822 28 diligence checklist Organizational policy on what to outsource 5.9286 1.21499 28 Business relationship of partner with your 6.0000 1.08866 28 competitors Other businesses of your partner (Possible Conflict 5.9643 .92224 28 of Interest) Relationship between partner and your 5.5714 1.28894 28 customers Corporate Governance policies of partner 5.7500 1.23603 28 Market reputation/Feedback from 5.7857 .91721 28 others about your partner Financial strength of partner 5.1429 1.29713 28 Political, Economical and Social conditions in partner's country(s) of 5.1786 1.36228 28 operation KMO and Bartlett's Test Kaiser-Meyer-Olkin Measure of Sampling Adequacy. .587
  • 70. KMO and Bartlett's Test Bartlett's Test of Approx. Chi-Square 266.583 Sphericity df 120 Sig. .000 Communalities Initial Extraction Recording IP in desired format (documentation, 1.000 .728 diagrams, KM systems) Market reputation of partner company 1.000 .819 Internal Project Progress Reporting, Review and 1.000 .889 Tracking (Within firm) Periodical Project Progress Reporting, Review and Tracking 1.000 .848 with/to/for the client Perform regular IP Audit (assets, life, benefits, 1.000 .724 importance) Engage IP experts (internal or external 1.000 .449 consultants) Classify IP assets based on value and importance 1.000 .633 Evaluate potential assets exposed using IP due 1.000 .580 diligence checklist Organizational policy on what to outsource 1.000 .769 Business relationship of partner with your 1.000 .865 competitors Other businesses of your partner (Possible Conflict 1.000 .826 of Interest) Relationship between partner and your 1.000 .635 customers Corporate Governance policies of partner 1.000 .715 Market reputation/Feedback from 1.000 .832 others about your partner Financial strength of partner 1.000 .797 Political, Economical and Social conditions in partner's country(s) of 1.000 .906 operation Extraction Method: Principal Component Analysis.
  • 71. Total Variance Explained Rotation Sums of Squared Initial Eigenvalues Extraction Sums of Squared Loadings Loadings Component Total % of Variance Cumulative % Total % of Variance Cumulative % Total 1 6.241 39.004 39.004 6.241 39.004 39.004 3.264 2 1.869 11.680 50.684 1.869 11.680 50.684 2.332 3 1.492 9.326 60.010 1.492 9.326 60.010 2.219 Extraction Method: Principal Component Analysis. Total Variance Explained Rotation Sums of Squared Loadings Component % of Variance Cumulative % 1 20.402 20.402 2 14.575 34.977 3 13.871 48.848 Extraction Method: Principal Component Analysis. Total Variance Explained Rotation Sums of Squared Initial Eigenvalues Extraction Sums of Squared Loadings Loadings Component Total % of Variance Cumulative % Total % of Variance Cumulative % Total 4 1.410 8.812 68.821 1.410 8.812 68.821 2.161 5 1.004 6.274 75.095 1.004 6.274 75.095 2.039 6 .886 5.536 80.631 7 .845 5.283 85.914 8 .629 3.934 89.848 9 .463 2.894 92.742 10 .315 1.968 94.710 11 .274 1.714 96.424 12 .253 1.583 98.007 13 .139 .870 98.877 14 .084 .526 99.403 15 .064 .400 99.804 16 .031 .196 100.000 Extraction Method: Principal Component Analysis.
  • 72. Total Variance Explained Rotation Sums of Squared Loadings Component % of Variance Cumulative % 4 13.505 62.353 5 12.742 75.095 6 7 8 9 10 11 12 13 14 15 16 Extraction Method: Principal Component Analysis.
  • 73. Component Matrixa Component 1 2 3 4 5 Recording IP in desired format (documentation, .424 .240 .656 .192 -.152 diagrams, KM systems) Market reputation of partner company .627 -.092 .220 -.585 -.164 Internal Project Progress Reporting, Review and .661 -.134 -.469 .463 -.008 Tracking (Within firm) Periodical Project Progress Reporting, Review and Tracking .731 -.154 -.358 .398 .064 with/to/for the client Perform regular IP Audit (assets, life, benefits, .658 .248 .015 -.171 .447 importance) Engage IP experts (internal or external .367 .186 -.214 -.371 .311 consultants) Classify IP assets based on value and importance .567 .288 .235 .048 .414 Evaluate potential assets exposed using IP due .640 .099 -.077 -.240 .313 diligence checklist Organizational policy on what to outsource .542 .526 -.353 .069 -.261 Business relationship of partner with your .644 .536 .208 -.007 -.345 competitors Other businesses of your partner (Possible Conflict .688 .418 -.258 -.114 -.315 of Interest) Relationship between partner and your .427 .083 .290 .545 .254 customers Corporate Governance policies of partner .609 -.553 .152 -.112 -.044 Extraction Method: Principal Component Analysis. a. 5 components extracted. Component Matrixa Component 1 2 3 4 5 Market reputation/Feedback from .709 -.297 .442 .186 -.103 others about your partner Financial strength of partner .739 -.476 -.085 .023 -.126 Political, Economical and Social conditions in partner's country(s) of .784 -.453 -.119 -.261 -.066 operation Extraction Method: Principal Component Analysis. a. 5 components extracted.
  • 74. Rotated Component Matrixa Component 1 2 3 4 5 Recording IP in desired format (documentation, .164 .269 .001 -.145 .780 diagrams, KM systems) Market reputation of partner company .701 .333 .356 -.292 .068 Internal Project Progress Reporting, Review and .255 .252 .111 .863 .058 Tracking (Within firm) Periodical Project Progress Reporting, Review and Tracking .330 .209 .203 .797 .140 with/to/for the client Perform regular IP Audit (assets, life, benefits, .163 .179 .763 .146 .248 importance) Engage IP experts (internal or external .100 .167 .623 .018 -.151 consultants) Classify IP assets based on value and importance .053 .115 .595 .125 .498 Evaluate potential assets exposed using IP due .296 .187 .652 .153 .094 diligence checklist Organizational policy on what to outsource -.045 .785 .219 .320 .025 Business relationship of partner with your .142 .779 .179 -.026 .453 competitors Other businesses of your partner (Possible Conflict .203 .814 .280 .208 .034 of Interest) Relationship between partner and your -.006 -.040 .143 .396 .675 customers Corporate Governance policies of partner .803 -.073 .110 .168 .156 Market reputation/Feedback from .650 .074 .032 .191 .605 others about your partner Financial strength of partner .767 .115 .102 .420 .090 Political, Economical and Social conditions in partner's country(s) of .851 .150 .293 .265 -.048 operation Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization. a. Rotation converged in 9 iterations. Component Transformation Matrix Co… 1 2 3 4 5 1 .588 .430 .451 .385 .342 2 -.673 .620 .295 -.188 .202 3 .154 -.205 -.108 -.567 .775 4 -.331 -.111 -.415 .688 .482 5 -.259 -.613 .725 .146 .097 Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization.
  • 75. Component Score Coefficient Matrix Component 1 2 3 4 5 Recording IP in desired format (documentation, .015 .097 -.145 -.176 .441 diagrams, KM systems) Market reputation of partner company .295 .129 .069 -.345 -.078 Internal Project Progress Reporting, Review and -.045 .034 -.081 .457 -.064 Tracking (Within firm) Periodical Project Progress Reporting, Review and Tracking -.023 -.022 -.017 .400 -.020 with/to/for the client Perform regular IP Audit (assets, life, benefits, -.101 -.134 .459 -.009 .055 importance) Engage IP experts (internal or external -.048 -.045 .405 -.050 -.168 consultants) Classify IP assets based on value and importance -.144 -.155 .354 .001 .241 Evaluate potential assets exposed using IP due -.008 -.085 .364 -.012 -.046 diligence checklist Organizational policy on what to outsource -.124 .415 -.062 .110 -.099 Business relationship of partner with your -.020 .405 -.131 -.147 .165 competitors Other businesses of your partner (Possible Conflict -.004 .423 -.060 -.003 -.121 of Interest) Relationship between partner and your -.153 -.181 .046 .211 .394 customers Corporate Governance policies of partner .310 -.127 -.053 -.026 .010 Market reputation/Feedback from .202 -.062 -.157 -.019 .290 others about your partner Financial strength of partner .259 -.020 -.113 .119 -.059 Political, Economical and Social conditions in partner's country(s) of .303 -.019 .023 .002 -.163 operation Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization. Component Score Covariance Matrix Co… 1 2 3 4 5 1 1.000 .000 .000 .000 .000 2 .000 1.000 .000 .000 .000 3 .000 .000 1.000 .000 .000 4 .000 .000 .000 1.000 .000 5 .000 .000 .000 .000 1.000 Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization.