Online meetup on outsourcing solutions for the health tech industry — Key Takeaways

On November 10, Israeli-Ukrainian Alliance held an online meetup “Addressing COVID Challenges and Opportunities with Outsourcing Solutions” for the founders, CEOs, and CTOs of Israeli health tech businesses who were willing to explore outsourcing opportunities in Ukraine.

During the 2-hour event they got to listen to the presentations by several of Ukrainian outsourcing firms and their clients, learn their experiences and success stories, as well get expert legal advice to help them avoid common legal issues associated with outsourcing. Here are a few key points and takeaways from the presentations of our speakers.

Ruben Melkonian, CEO of Quantum, a Ukrainian-based firm providing data science and custom software engineering solutions to start-ups and large-scale companies worldwide:

• Data access and exchange are still among the biggest challenges of the healthcare industry due to its overly regulated nature and absence of uniform data exchange standards.
• Coronavirus has led to a surge of investments into the healthcare industry with 4 most productive niches being medical devices, telemedicine, medical information systems, and analytical solutions.
• With business opportunities abound, new solutions are coming in each day and companies wishing to benefit from the pandemic need to act faster than ever to stay ahead of the curve.
• Outsourcing offers companies a way to stay flexible, quickly scale up their workforce or explore new business opportunities while keeping in mind long term sustainability.
• In today’s fast-changing world, traditional outsourcing business models like fixed price or T&M may not be the most effective. Alternative solutions to look for, especially in health care startups, are success bonuses or a partnership, where the client and the supplier share profits if a certain project turns out to be a success.

Inal Tomaev, founder at SmartOmica, a EU-based firm and Quantum client that builds and delivers comprehensive AI solutions for translating scientific data into clinically applicable language:

• During the pandemic, SmartOmica cooperated with Quantum on Ariadna, a data-driven system aimed at saving doctors’ time during the pandemic by automating the creation of patient records and helping them follow standard procedures for the diagnosis and treatment of COVID-19 patients.
• Using Quantum’s development and analytical capabilities helped SmartOmica focus on the product ideation without the need to invest extra time and effort into building a dedicated development team for the project.

Slava Vaniukov, CEO of Softermii, the US custom software development company with headquarters in Ukraine:

• Videoconferencing, one of Softermii’s key services, has seen a huge surge in popularity following massive corona-related lockdowns.
• While not seen as something truly worth the effort before the pandemic, teleconferencing and telemedicine solutions are now highly sought-after in healthcare with governments worldwide easing regulations that allow for the remote provision of medical services.
• Using telemedicine solutions offers plenty of benefits to healthcare providers, such as:

a.      helping them reach patients in remote areas and the patients with limited mobility options;

b.      reducing workload because of decreased number of hospital visits by patients;

c.       offering better and faster collaboration and coordination option to doctors from different cities or even countries;

d.      cutting healthcare costs by up to 27% for the patients by removing facility charges and expensive office visits.

• Softermii is a development team behind HIPAA Video, a cloud-based teleconferencing platform connecting healthcare practitioners with patients using secure real-time video, chat and file transfer functionality.

David Larson Levine, social impact entrepreneur, founder and CEO at Scoby Social and Softermii client:

• David has been an entrepreneur for over 30 years, having built a web development company, a fintech company, a video game tech company, and a renewable energy company. However, it’s been only with Scoby Social that he decided to go with outsourcing rather than hiring his own development team.
• With Softermii, David managed to quickly set up a qualified development team while sticking to agile development methods that he’s used to. Acting as a mashup between an outsourcing firm and a coworking space, Softermii hired developers to David’s exact specifications to work as his own team with a support and guidance from Sorftermii’s in-house stuff including DevOps, project managers, UI/UX specialists and more — all the workforce David had no time or resource to hire locally in the US. Eventually, outsourcing the development meant David could limit his startup’s team to only 5 key people.

Uri Milshtein, partner in the Israeli-based law firm ZAG:

• Zag is one of Israel's leading law firms focusing on hi-tech industry, innovation and life sciences with an emphasis on medical equipment, pharmaceuticals, biotechnology, and medical IT.
• Outsourcing, if made right, is often the best solution for companies that want to grow fast without taking too much risk.
• Startups should be especially careful with intellectual property (IP) because it’s often their main and only asset. If startups seek investment, they should make sure their IP rights are crystal clear.
• How to make Outsourcing Agreement work:

a.      Do an in-depth background check before contracting

b.      Sign an NDA

c.       IP ownership should be the key clause of an Outsourcing Agreement and it should be based on the applicable law (the law of the country where your outsourcing provider is based);

d.       You should always know if your outsourcing provider is using any open source software or third party intellectual property that can interfere with your own IP rights and have the clause about it included in the Outsourcing Agreement;

e.       Have an ongoing audit of how your IP is managed by an outsourcing provider;

f.        Limit access to your IP by having only pre-approved subcontractors and its employees gain access to it;

g.       Include a clause on the conflict of interest making sure an outsourcing provider isn’t also working for your competitors;

h.       Add a change of control clause to protect your IP in case your outsourcing firm changes ownership through merger or acquisition;

i.         In case of a bilingual contract English should always prevail (but always read the other language version too)

• NDA with an outsourcing provider should include three key provisions: 1) non-disclosure of any confidential information; 2) non-use for any other purpose except for providing the agreed services; and 3) reasonable degree of care when handling confidential information.
• NDAs aren’t a surefire way to protect the company from IP leaks, but they are still a must for two key reasons: 1) Patentability (e.g. disclosure of IP without an NDA will often make it unpatentable); 2) Enforcement of trade secret (e.g. disclosure without an NDA will often make it make trade secret unenforceable).
• When outsourcing requires transfer of personal data to the outsourcing company, especially in another country, always seek expert advice as the data protection legislation is changing rapidly and becoming increasingly complex.