SCL Event Report - Outsourcing Group: New Models for Outsourcing

Steve Holmes reports on the 'New Models for Outsourcing' panel event and presentation held on 2 March 2017 and hosted by Baker McKenzie.

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 on-shoring.

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 solution?

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.

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