Imagine that you have made a very innovative and essential project for your company. If your competitor finds out what you did and copies it, there is a risk that he’ll reach the market before you do. Or Imagine you are sharing some very senstive data which you dont wish to be leaked

The solution to such instance is a Non-disclosure agreement (NDA). Or is it?

There are two types of NDA contracts―or rather, there are two types of companies that sign NDAs:

• Type 1: For this type of company, an NDA is a standard thing that only needs to be signed so that you can proceed. They know it’s almost impossible, not to mention very expensive, to enforce an NDA. So they just sign without a  fuss to get started right away.
• Type 2: There is another type that sees an NDA as something that will have a limiting effect on their business because they intend to comply with each word in the contract. For these types of companies, the price often rises if they sign an NDA.

The problem with NDAs

When a supplier signs an NDA, they need to take various precautions to ensure that they are complying with what they signed—and the thing is, it costs money to 100% comply with an NDA. For starters, they have to make sure that:

• Only the people working on the project have access to information about the project while everyone else in the company does not. It sounds easy in theory, but it’s more complicated in practice; and
• The people assigned on the project will not work for companies in the same industry as the client with whom they have an NDA, as a conflict situation might come up otherwise.

In addition, the team that will work on the project must be informed and briefed about the NDA and be willing to comply with it 100%.

A real-world example

Two software developers, let’s call them ‘developer A’ and ‘developer B’, work in the same software development company.

Developer A works for a client with whom an NDA was signed.

Developer B works for a client who is a competitor of developer A’s client, and with whom there is no NDA.

An unfortunate accident happens to developer B, making him unable to work for two months. Things could have been easier for the software development company if they could assign developer A to work on developer B’s tasks.

However, this is not possible because of the NDA with developer A’s client. In small businesses, this is not practical and can be a huge problem.

In reality…

As we weigh the pro and cons and the business volume the potential client will generate it is not pragamtic to sign an NDA for every client who approached us.