Contributed By Grupo Wolf
In the context of IT outsourcing in Chile, there have been notable trends and key developments in recent years within the technology and outsourcing field. Firstly, there has been a significant increase in the adoption of cloud computing, with companies migrating their IT operations to cloud environments. This has generated a higher demand for IT outsourcing services related to cloud infrastructure and application management. This shift to the cloud has also brought about heightened concerns regarding cybersecurity, with companies demanding rigorous data security standards from their IT service providers.
On the other hand, the integration of technologies, such as artificial intelligence and automation in IT management, has driven efficiency in outsourcing processes. These technological solutions are increasingly being incorporated into outsourcing agreements to enhance productivity and reduce operational costs. Finally, it is important to highlight that the COVID-19 pandemic has had a lasting impact on IT outsourcing services in Chile, accelerating the adoption of remote work models and the need for technological solutions to support this new work dynamic. Remote work and business continuity have become common practices in IT outsourcing, demonstrating companies’ adaptability to changing circumstances.
In the realm of business process outsourcing (BPO) in Chile, significant trends and key developments have been identified, including the following.
Furthermore, the COVID-19 pandemic has also influenced the BPO industry in Chile in various ways, including those set out below.
As a result, in the Chilean market, BPO is undergoing significant changes driven by technology and adaptation resulting from the COVID-19 pandemic. Investment in technology, cybersecurity and customer care are key areas of focus, and the common practices that emerged from the pandemic are reshaping how BPO companies operate in Chile.
New technologies have had and continue to have a significant impact on the Chilean and global markets. These technological innovations have driven efficiency, automation and security across various industries.
For instance, AI and machine learning are propelling automation and efficiency in various sectors. Chatbots and machine learning are being used to enhance customer service and streamline internal processes, thereby positively impacting productivity and service quality. Additionally, robotics and process automation have improved operational efficiency, revolutionising manufacturing and logistics in Chile. Blockchain and cryptocurrencies have transformed the financial industry, ushering in new, faster, secure and cost-effective forms of investment and transactions. Similarly, NFTs have revolutionised the digital art industry and any sector seeking to provide services in a unique manner, fostering the creation of communities and loyal audiences for the goods and services offered.
Smart contracts themselves represent a disruption, as they prevent parties from breaching their agreements, making human relationships much more effective without the need to initiate legal proceedings to enforce obligations. The authors have advised clients in this field and have been involved in some processes with them.
It is of utmost importance for businesses and legal professionals to be aware of these technologies and their legal implications to adapt to an ever-evolving market and be prepared for the new way of practising the profession.
Outsourcing has experienced significant growth in recent years. Chilean companies opt to outsource a range of services to optimise operational efficiency, reduce costs and focus on their core competencies. While the outsourcing landscape may vary by industry and specific company needs, there are areas that stand out as the most outsourced in Chile.
IT services are one of the primary services outsourced in Chile. This includes the maintenance of IT infrastructure, technical support, application management and software development. IT outsourcing enables companies to access specialised expertise and stay up to date with the latest technological trends. Additionally, outsourcing of customer service and call centre services is common in Chile. This encompasses telephone support, online assistance, and social media management. The goal of this outsourcing is to ensure efficient and 24/7 customer service.
Furthermore, the outsourcing of data processing and accounting is prevalent among companies. They subcontract tasks such as financial accounting, payroll, billing, and accounts payable and receivable management to reduce administrative burdens and ensure accuracy in financial management. Closely related to the previous point, outsourcing of human resources services, including payroll administration, benefit management and talent acquisition, is a common strategy in the Chilean market.
In Chile, technological transactions and outsourcing of services are subject to a legal and regulatory framework aimed at promoting security, data protection and efficiency in commercial operations.
Chile has a Personal Data Protection Law that establishes strict rules for the collection, processing and transfer of personal data. Companies must obtain the consent of data subjects and ensure adequate security measures when handling personal information. This Regulation aims to safeguard the privacy of individuals and has a significant impact on technological transactions and outsourcing involving personal data.
While the standard of this legislation may not be as high as that of the European Union’s General Data Protection Regulation (GDPR), significant legislative advances have been made with the processing of bills seeking to strengthen and enhance this legislation. These efforts focus not only on personal data protection but also on cybersecurity. All of this was accelerated with the publication and entry into force of the Fintech Law, which includes principles such as open banking, demanding higher standards of information protection and security. This is because, by law, the parties involved or actors in the ecosystem will be required to share important user information.
In Chile, the specific restrictions and compliance issues in technological transactions or outsourcing vary depending on the industry. For example, in the financial services sector, there are strict regulations related to the protection of financial data and cybersecurity, with a particular focus on complying with the regulations of the Financial Market Commission (CMF). Financial institutions must ensure that technology service providers comply with the required regulations and security standards.
In recent years, there has been an increase in regulatory scrutiny in various sectors, including financial services, in response to the COVID-19 pandemic and the relatively recent Fintech Law. Regulatory authorities have issued additional guidelines on cybersecurity and business continuity in the remote working environment, requiring companies to review and adjust their technology and outsourcing contracts to comply with these new regulations.
In Chile, industry-specific restrictions and compliance issues in technological transactions or outsourcing depend on the sector in question, with a special focus on financial services in recent years due to the pandemic and regulations related to cybersecurity and business continuity.
In Chile, the current legislation regarding data protection dates to 1999, with some subsequent amendments, and is considered inadequate to address the current demands in this field. However, there is currently an advanced project for a new personal data protection law aimed at addressing these deficiencies. This new legislation includes several noteworthy aspects that will revolutionise the way personal data is handled in the country.
Furthermore, Law No 21.459 on Computer Crimes represents a significant advancement in the regulation of cybercrimes and the protection of cybersecurity in Chile. This updated law addresses the growing challenges of cybercrimes and cybersecurity by including new cybercrimes, granting greater authority to investigative bodies, and expanding the criminal liability of legal entities.
These two laws are essential for addressing cybersecurity threats, safeguarding personal data and promoting online security in Chile. They also provide a legal framework that can deter digital criminals and facilitate the prosecution of those who commit digital crimes. Their proper implementation will be crucial to ensuring their effectiveness in practice and securing data protection and cybersecurity in the country.
In Chile, there is no standard contract, but the type of contract commonly used is the service provision contract. This type of contract outlines the terms and conditions under which a service provider will provide services to a specific client, including aspects such as the description of services, deadlines, fees, responsibilities of the parties, payment terms, and the relationship with workers, among others.
Furthermore, it is common to incorporate specific clauses related to data protection and information security since these are critical aspects in IT transactions and outsourcing of services or workers. However, it is important to note that the specific terms and conditions can vary significantly depending on the circumstances and the needs of the parties involved. Therefore, it is essential to have a contract tailored to the particularities of each business and avoid using standard or template contracts.
In the context of outsourcing transactions in Chile, while there is no standard contract, there are various ways in which these services are outsourced. These models can vary depending on the complexity of outsourcing and the business objectives involved. Some examples include the following.
It is important to note that the choice of the contract model will depend on the specific objectives of the company, available resources and particular circumstances. Additionally, Chilean legislation and regulations must be considered in the drafting of these contracts to ensure legal compliance and the protection of the rights of the parties involved.
The digital transformation, including technologies such as cloud computing, SAAS and infrastructure as a service (IAAS), has had a significant impact and growth in outsourcing contract models in Chile, especially considering the recent pandemic.
These technological advancements have led to the review and adaptation of contracts to reflect the new dynamics and challenges in the provision of IT services. For example, contracts now include specific provisions related to data security, cloud management, intellectual property, remote services, and other technology and information-related aspects.
Additionally, clauses have been incorporated to address liability in the case of failures in the provision of technology services, ensuring greater protection for all parties involved in the transaction.
In summary, digital transformation has led to a significant evolution in outsourcing contract models in Chile to adapt to the needs and challenges of modern technology.
In Chile, technology and outsourcing transactions are subject to a series of protections for customers, aiming to ensure that the parties involved fulfil their contractual obligations and protect the rights of customers.
One of the initial levels of protection is the drafting of detailed and clear contracts that clearly establish the obligations and responsibilities of both parties. This includes the description of services, delivery timelines, service level agreements (SLAs), pricing and other essential terms. A well-structured contract provides a solid foundation for resolving disputes and enforcing agreed-upon terms.
Customers have the right to demand assurances that technology services or products will meet the agreed-upon standards. If the promises are not met, customers can require corrections or financial compensation as stipulated in the contract. In this regard, penalty clauses are often included, which represent an advance assessment of damages. If one of the parties fails to meet its obligations, the complying party will not need to prove the damages before a court but will only need to establish the breach to claim the penalty clause.
In cases where the service provider does not enter a formal contract with the customer but regulates their relationship solely through the terms and conditions of its platform, it is essential to carefully review its content before engaging its services. While there is no standard content requirement for terms and conditions in Chile, they are becoming increasingly relevant due to the impact of technology services on various industries. As a recommendation, always verify the jurisdiction in which potential disputes are resolved and whether the obligations of the service provider are detailed comprehensively.
At this juncture, what holds the utmost significance is the stipulations laid down by the parties within the respective contract. Nevertheless, one can identify certain common scenarios in which both the client and the provider may terminate the contract, as set out below.
Upon the conclusion of a contract, regardless of the underlying cause for termination, the client retains the entitlement to have all data and assets provided to the provider during the contract’s duration returned. This is particularly crucial in the context of data storage or processing services. Furthermore, the client may request that the provider continues to adhere to confidentiality and data protection obligations even after the contract’s termination, particularly if it concerns sensitive information.
In the realm of contracts and Chilean law, it is possible to seek compensation for losses suffered because of a breach of contractual obligations. These losses are generally referred to as "damages." Among the losses that may be compensable are, for instance, expenses incurred to repair or replace damaged goods, lost profits due to the contract breach, and additional expenditures made because of such breach.
Furthermore, a distinction is made between direct and indirect losses. Direct losses are those that immediately arise from a contract breach. For example, if a supplier fails to deliver products on time, the direct loss could be the additional cost incurred to obtain those products from another supplier. In contrast, indirect losses are not the immediate result of the breach but are a consequence of the direct loss. Using the same example, an indirect loss could be the loss of profits on a project because it could not commence on time due to a delayed delivery. In some cases, the ability to recover indirect losses may be subject to limitations established by the contract or the law, for example, in Chile, losses without a clear causal relationship are not indemnified.
In Chile, as in many jurisdictions, the ability to recover certain types of losses such as reputation or potential business opportunities can be complex, as previously mentioned in this section. Often, this will depend on specific circumstances and contractual provisions in force. For instance, it may be necessary to demonstrate that such profits would have been obtained if the contract had been properly fulfilled, hence constituting a loss. Similarly, filing claims for damages related to reputation or harm to the business may require strong evidence of how the contractual breach directly caused these losses.
Additionally, some losses may not be subject to liability limitations. Typically, this applies to losses resulting from intentional misconduct or gross negligence on the part of the breaching party. If the other party intentionally breaches the contract or acts with extreme negligence, it may be possible to recover a wider range of damages, including those that might otherwise be limited by the contract or the law.
It is important to note that the determination of what type of damages can be claimed depends on the explicit terms of the contract, the interpretation that can be drawn from its text and the applicable law in the specific case.
In Chile, certain implicit terms are recognised, which may be relevant to technology or outsourcing contracts. These implicit terms are based on general principles of the legal framework. The most significant one is good faith in contracts. In Chile, as in many jurisdictions, there is an implicit obligation of good faith in the formation and execution of contracts. This implies that the parties involved in a contract must act honestly and fairly towards each other. In the context of technology and outsourcing contracts, this means that the parties must fulfil their obligations fairly and must not engage in actions that could unfairly hinder the contract's performance.
Another general principle of law is known as Pacta Sunt Servanda, which translates to "agreements must be kept." This principle establishes that the parties entering a contract are obligated to fulfil its terms and conditions as they are set out in the contract.
In other words, when parties voluntarily agree to the terms of a contract and sign it, they are legally bound to adhere to those terms. This principle reflects the fundamental idea that contracts are binding, and trust and security in commercial transactions rely on the fulfilment of contractual agreements.
It is essential to note that if the parties wish to modify or clarify these implicit obligations, they can do so through specific provisions in the contract. Additionally, Chilean legislation can also influence the interpretation of implicit terms and the rights and responsibilities of the parties.
In Chile, cybersecurity has become a paramount concern for both clients and providers. Clients often demand that providers have well-defined and documented information security policies. This includes the implementation of access policies, strong password protocols, patch and update management, and other measures to safeguard data confidentiality and integrity.
Furthermore, providers are required to strictly adhere to personal data protection standards. On the other hand, clients may request regular security audits to assess the strength of cybersecurity measures implemented by the provider. These audits may encompass penetration testing, vulnerability assessments, and security policy reviews. Additionally, the implementation of antivirus software, firewalls and measures to detect and prevent cybersecurity threats, such as ransomware and malware, is essential for the security of technological operations. For business continuity assurance, providers in Chile are adopting proactive approaches to ensure that technology services remain operational even in adverse situations. Therefore, providers often have business continuity plans in place describing how they will maintain operations in the event of significant disruptions, such as natural disasters or cyber-attacks. Providers establish incident response teams that can act swiftly in the event of cyberthreats or unexpected interruptions. Finally, the parties generally enter into service level agreements (SLAs) that set clear expectations regarding uptime, disaster recovery and other aspects related to business continuity, providing clients with confidence in service delivery.
There are common contractual clauses that assist the client in managing and measuring the provider’s performance. These clauses are used to establish clear expectations, ensure service quality and enable proper oversight. As an illustrative example, SLAs are an essential clause that defines performance standards and key indicators that the provider must meet. SLAs address aspects such as uptime, response time and issue resolution, allowing the client to quantitatively measure the provider’s performance.
Contracts often include provisions that allow the client to monitor and audit the provider’s operations. This may include regular security audits, compliance assessments and quality reviews. Additionally, these clauses define how changes in services will be managed and how continuous performance improvements will be driven. This allows for flexible adaptation to changing client needs.
These contractual clauses help establish a robust framework for managing and measuring the provider’s performance in technology and outsourcing transactions in Chile. They enable the client to closely monitor service compliance and ensure that the desired quality is maintained throughout the contractual relationship.
The cloud services contract is a specific agreement designed for clients who wish to use applications or platforms provided remotely by a provider. In this context, this type of contract may have considerations that are important to consider.
Firstly, the client has the freedom to use the applications, if they adhere to intellectual property rules and any restrictions imposed by the provider. This implies that the client must use the applications in a legal and ethical manner, respecting the provider's intellectual property rights. It should also be clearly established that the provider is the sole owner or proprietor of the applications or programs that can be accessed remotely. Furthermore, it is assumed that the provider holds the necessary licences and permissions to use other applications or software required to access their cloud service.
Additionally, these contracts often include non-competition clauses. These clauses aim to prevent the provider from using the information and expertise acquired in their favour to compete unfairly with the client. For instance, they seek to prevent the provider from launching a business using client data collected on their server.
First and foremost, it is important to note that Chile has a strong legal tradition in labour matters, and there is a high level of protection for workers’ rights. Therefore, any employee transfer related to outsourcing must adhere to the fundamental principles of labour protection and respect for workers’ rights.
The company planning to outsource must inform the affected employees of the decision. This consultation is essential to ensure that workers’ rights are respected. Transferred employees retain their labour rights and previously acquired benefits, including seniority, compensation and social benefits. The new employer (external service provider) must respect and comply with these rights. Ensuring employment continuity is particularly important, as there must be a guarantee of job continuity for transferred employees. This means that workers cannot experience a significant reduction in their employment conditions because of outsourcing.
Furthermore, all parties involved must strictly comply with Chilean labour legislation, which includes adhering to limits on working hours, safety conditions and the payment of legal benefits such as health insurance and social security contributions.
Lastly, workers will need to sign their new contract with the new employer, which must fulfil the obligations.
In Chile, the involvement of a trade union or workers’ council in the outsourcing process is regulated by labour legislation and is contingent on several factors. Firstly, if there is a collective agreement addressing outsourcing, it must be respected and consulted before any decisions are made. Secondly, a trade union will only become involved if an affiliated worker expressly requests their intervention due to concerns regarding outsourcing and the safeguarding of their labour rights. Additionally, certain collective agreements or legislation may require the employer to consult with the trade union before undertaking any significant actions related to workforce organisation. In summary, the consultation and participation of a trade union in outsourcing in Chile hinge on contractual factors and the explicit will of the workers, supported by prevailing legal provisions.
In Chile, the outsourcing of services, whether using onshore, offshore or nearshore resources, is a common business practice and has been a strategy adopted by many companies to optimise costs and operational efficiency. However, in recent years, and especially because of the economic impact of the pandemic, there has been a significant increase in preference for nearshoring compared to offshore and onshore.
This shift in the trend can be attributed to several key factors. Firstly, the pandemic highlighted the importance of geographical proximity and seamless communication in project management and corporate collaboration. Nearshoring offers an advantage in this regard by allowing for greater physical proximity and similar time zones, facilitating project co-ordination and monitoring.
Secondly, nearshoring has proven to be an attractive option in terms of quality control and regulatory compliance. By selecting neighbouring or nearby countries for outsourcing services, companies can maintain greater control over the quality of work and ensure more effective compliance with local and global regulations.
Furthermore, nearshoring has shown itself to be a cost-effective alternative compared to onshore, while also mitigating some of the risks associated with offshore outsourcing, such as cultural differences and logistical complications due to geographical distance.
In summary, although onshore, offshore and nearshore practices remain common in Chile, the significant increase in preference for nearshoring in recent years, especially post-pandemic, reflects a response to evolving business needs, highlighting the importance of geographical proximity, effective communication and quality control in today’s business environment.
In Chile, labour regulation does not establish specific restrictions for remote work, but there are some general provisions and relevant considerations aimed at the fair regulation of this new form of employment. Employers must ensure that remote workers enjoy the same labour rights and benefits as those working on-site, including aspects such as breaks, workplace safety and access to social security.
It is essential to maintain proper control over the working hours of remote employees to comply with the regulations on working hours and rest established in the Chilean Labour Code, unless they are exempt from adhering to their regular working hours. Employers must also ensure a safe and healthy working environment in the homes of remote workers, as well as compliance with health and occupational safety regulations.
Since March 2021, a law has been enacted establishing the right to digital disconnection after working hours, aiming to protect the personal lives of remote workers and achieve a balance between work and personal life for employees working remotely.
Regarding the primary business considerations when allowing remote work, companies must ensure the provision of necessary technology and data security to protect company information and maintain productivity. Clear internal policies related to remote work should also be established, addressing issues such as working hours, availability, communication expectations and project management.
Fostering an organisational culture that promotes trust and collaboration among remote employees and those in the workplace is crucial to maintaining a cohesive and productive team. Finally, it is important for companies to assess the costs and benefits of remote work, including office cost savings and the potential to access a more diverse and global talent pool when considering this mode of work.