SCL Event Report – Outsourcing Group: New Models for Outsourcing

March 12, 2017

The event began with a recognition that
whilst new and fresh ideas have largely escaped adoption in the outsourcing
world in recent years, the industry is quickly embracing innovative ideas that
will change the landscape dramatically in the time ahead. Event chair, Susan
McLean, of Counsel at Morrison and Foerster, noted that the journey of
outsourcing has, in some ways, come full circle. Off-shoring was once a ‘new
model for outsourcing’ but recent trends include emphasis on near-shoring and

Rick Simmonds, Managing Partner, Head of
Financial Services, Aecus, noted that there has been a radical change in the
preceding 12 months as customers are no longer simply talking about automation
for the future but are looking for suppliers who can deliver this in areas like
benchmarking and implementation. Rick explained that Robotic Process Automation
(RPA) had much to offer customers ‘here and now’ and that professional advisors
need to adapt to recognise the new challenges clients face when contracting.
Rick proposed that the future landscape may involve companies taking these
services back in-house or contracting for a supplier off-the-shelf solution.

Joel Harrison, Partner at Milbank, noted that
traditional forms of outsourcing would still exist, but he challenged attendees
to consider how these services would develop and survive in the era of
exponential automation. As an example, Joel considered incremental migration to
a cloud-based service and questioned the fitness for purpose of some existing
agreements to flex to meet this transition. Issues like exclusivity, exit
obligations, termination rights and charges were discussed and Joel outlined
how these issues could impact across the various migration options. Joel
explained that partial migration presents issues when apportioning the
cost-savings or reductions in the legacy agreement. For example, have service
towers been identified against specific charges or taken together as an entire

Sam Parr, VP & Associate General Counsel,
Hewlett Packard Enterprise, outlined how HPE as a supplier were adapting to
offer new models for outsourcing. HPE have developed off-the-shelf solutions
that come with ‘fair’ terms and conditions through their ‘FastTrack’ service.
Sam explained that protracted negotiations between customer and supplier often
take many months but in most circumstances the parties reach this ‘fair’
position, and so this new approach can reduce expended time, costs and achieve
savings more quickly.

The event drew to a close with some
interesting questions to the panel on how they thought customers would conduct,
develop and assess RFPs in an environment with potentially less bespoke
supplier offerings. Further questions considered the willingness of customers
to embrace supplier-developed ‘fair’ terms without negotiation. The event
rounded up with some drinks, refreshments and further discussions on the new
models for outsourcing.

Steve Holmes is a Partner and the head of the
IT & Commercial group with Baker McKenzie.