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The New International Outsourcing Standard: ISO 37500:2014

On October 31, 2014, the International Organization for Standardization (“ISO”) published a new standard ISO 37500:2014 – Guidance on Outsourcing (the “Standard” or “ISO 37500”) to provide general guidance on outsourcing. It is likely that the Standard will impact outsourcing practices in Canada, both because of the comprehensive nature of the Standard and because of Canada’s role in its development. In this note I want to look at ISO 37500 in more detail. The discussion is divided into three parts:

(i) Part I provides some background to the publication of the Standard;
(ii) Part II summarizes ISO 37500’s approach to . . . [more]

Posted in: Practice of Law

Re Outsourcing the Wheel

To carry on my Vroom Vroom theme from a few months ago, I suggest that there are some more potential similarities between the legal and automotive industries. Talk of the “Law Factory” from thought leaders such as Ron Friedmann, has encouraged further consideration. At a high level, both industries have “benefitted” from protectionism, though it did neither industry a favour, long term.

The Australian Federation of Automotive Products Manufacturers (FAPM) website says:

There are about 200 Australian firms supplying components to the automotive industry. The vehicle assemblers have also undergone massive rationalisation and increasing global integration. Globalisation provides both threats

. . . [more]
Posted in: Legal Technology

Service Level Earn Backs in Outsourcing: Thinking About the Issues

As service levels and service level credits have become a standard component of outsourcing agreements, service providers have responded with requests for earn backs: the right, if a specified level of performance is achieved, to earn back, or not have to pay, the service level credit. However, if earn backs are to be included in an outsourcing agreement as part of a service level regime, they need to be defined carefully at the beginning and integrated into the service level methodology: when they are included late in the game, as a concession granted by the customer in response to a . . . [more]

Posted in: Practice of Law, Substantive Law

Mandatory Change in an Outsourcing Relationship

Although it is now customary for outsourcing agreements to include extensive change management provisions, not all of them include “Mandatory Change” or “Directive” provisions. These are provisions that entitle a Customer to require its Service Provider to start work on a particular change on a priority basis and without compliance with the often extensive provisions that have been inserted into the outsourcing agreement specifically to ensure that the Service Provider does not start work on a change until there is a written agreement around all of the terms and conditions. The need for Mandatory Change provisions can arise, for example, . . . [more]

Posted in: Outsourcing

Service Level Agreement in Outsourcing Contracts

A service level agreement (SLA) is a critical part of any outsourcing contract. SLA defines the boundaries of outsourcing project in terms of the functions and services that the service provider will deliver and identifies the service standards that the service provider must meet. A well-drafted SLA accurately sets expectations for both parties and provides guidance for measuring performance to the defined targets.

Although there is no hard and fast rule governing how many measurements the parties should include in each SLA, it only makes sense to measure what matters to customer. Customer may tend to think that the more . . . [more]

Posted in: Outsourcing

Legal Issues in Offshore Outsourcing Contracts

Recent research published by industry analyst Gartner shows that the business process outsourcing sector will expand by 5 per cent in 2012, with multinational companies leading the charge. Business process outsourcing is seen by many companies as a means of reducing costs. Companies have been engaging in outsourcing (both information technology and business process services) for many years. Use of foreign-based third party service providers is also not new. While many of the issues are not unique to offshore outsourcing engagements, offshoring highlights the importance of some of the challenges.

Companies have been outsourcing various types of business processes to . . . [more]

Posted in: Outsourcing

Termination Right in an Outsourcing Contract

Exit provisions are one of the most important contractual protections for a customer in an outsourcing relationship. The provisions provide the framework to allow a customer to continue its business during transition and provide leverage for the customer in renegotiating the contractual terms. It is important to carefully draft the exit provisions because they will be used when the relationship between customer and service provider is not at its best.

A well-drafted outsourcing contract enables either party to terminate the arrangement prior to the agreed-to end date in a fair and reasonable manner. This is not to say that the . . . [more]

Posted in: Outsourcing

Long Term Outsourcing Relationships – Price Adjustment Provisions

My last column focussed on customer and service provider concerns that arise with various aspects of long term outsourcing relationships. I now want to discuss structuring specific provisions to take those concerns into account. This week’s posting will look at price adjustment provisions and the one to follow will discuss change management.

The price adjustment provisions of long term outsourcing arrangements need to respond to the concerns of the customer and the service provider. For the customer, these concerns are based on the worry that, after a few years, the customer will be paying too much for its outsourcing services: . . . [more]

Posted in: Outsourcing

Long Term Outsourcing Relationships – Customer and Service Provider Concerns

The Clock for the Long Now, a project of the Long Now Foundation, is intended to keep time accurately for 10,000 years. It was conceived by Danny Hillis in 1986 as a way of connecting us with future generations. Unable to predict what the world would look like in 10,000 years, but faced with the challenge of developing an object that would last that long, keep time accurately over the duration and be useful, the designers were forced to abandon short term thinking in favour of the long term. They had to deal with the most fundamental issues such as . . . [more]

Posted in: Outsourcing

Vested Outsourcing

[With special contribution by Jim Eckler]

In this article, I follow up on the statement made in my last column in which I said “I’d seek to bust the myth that what’s good for a vendor must be bad for a customer and vice versa.” In writing those words, what I had in mind was to explore a newly developing genre of outsourcing known as “Vested Outsourcing”fn. To help with this undertaking, I’ve turned to the colleague who first introduced me to this outsourcing model – Jim Eckler, President of Eckler Associates and a leading expert in outsourcing . . . [more]

Posted in: Outsourcing

Renewing Outsourcing Contracts

According to a survey conducted by the Outsourcing Centre, almost 50 percent of the ITO and HRO deals were renewed. Companies often instinctively renew outsourcing contracts, especially if the existing relationship has no major issues. While it may be tempting to renew the deal because negotiating a new deal requires both parties to invest significant energy, time and money, customer must decide whether or not renewal is the best option. Renewal is not always the right choice. 

The survey conducted by the Outsourcing Centre also shows that about 30 percent of the customers renewed the deals for a better pricing . . . [more]

Posted in: Outsourcing

Outsourcing in the Cloud

In my last column, I discussed the convergence between the SaaS contracting model and the outsourcing contracting model. In this column, I wish to explore a strongly related topic: the increasing trend of using cloud elements in outsourcings.

There is some overlap between software-as-a-service (SaaS) services and cloud services. Before the cloud became the marketing buzzword we know and love today, a SaaS service referred to a contracting model where software features were provided over the Internet. From a legal perspective, there was not much of a difference between SaaS and the application service provider (ASP) model that preceded . . . [more]

Posted in: Outsourcing