Stressing on detailed negotiations while signing a business process outsourcing contract, Assocham on Tuesday said the Indian BPO vendors should comply with foreign laws and industry rules for long term success of outsourcing transactions.

"The crux of any transaction concerning the Indian outsourcing industry is the negotiation of the contract. It governs the outsourcing relationship between the client and the vendors," the chamber said in a report.

It noted there was a need to ensure careful negotiation of the BPO contract keeping in consideration various risks, operational and legal, and said it should have a well-defined exit clause.

The provisions that a BPO contract should include are compliance to foreign laws and industry specific rules, timely payment of fees for services to the vendor, protection of intellectual property rights of the customer, vendor's liability limitation and a sub-contracting clause, it said.

Pointing out that the absence of a data protection law could hamper the growth of the sector, it said the Indian outsourcing industry needed to be compliant with the requirements of data protection as existing in the American and European Union jurisdictions.

"Confidentiality is a matter of immense concern for all clients and potential clients," said Assocham president M K Sanghi in the report.