Not a day goes by that outsourcing isn’t in the news. Not just news, but NEWS. The Wall Street Journal, Information Week, The New York Times, Financial Times, CIO Magazine, American Banker. “Press 1 for Delhi, 2 for Dallas,” “Prove It’s Secure: Legislators Want CIOs and Service Providers to Show that Customer Data Sent Overseas is as Safe as it is at Home,” “Global Talk Gets Cheaper—Outsourcing Abroad Becomes Even More Attractive as Cost of Fiber-Optic Links Drop,” “Offshore Outsourcing: How to Safeguard Your Data in a Dangerous World,” “Weighing the Benefits of Offshore Outsourcing,” “Big-Bank Perspectives on Offshore Outsourcing,” “Lesson in India: Not Every Job Translates Overseas,” “Business Coalition Battles Outsourcing Backlash,” “More Work is Outsourced to U.S., Than Away From It, Data Show,” “Offshoring Can Generate Jobs in the United States”—well, you get the picture. Senator Liz Figueroa (D-Calif.) is seeking legislation prohibiting consumer medical and financial data from being sent overseas without assurances of strong privacy safeguards (remember the U.S. position on the European personal data directive?). Even Alan Greenspan has weighed in, cautioning, “These alleged cures would make matters worse rather than better.”
Both providers and customers consistently articulate several key themes. Many third-party providers can do it cheaper, faster and at higher quality – processing is their business – not yours. Third-party providers survive by keeping up with technology, training personnel and responding to changes quickly and efficiently – often a secondary priority and a headache for other companies. Further, companies are recognizing that allowing a third-party to perform functions and assist in providing services rarely requires relinquishing control or responsibility – in fact, proper management increases, and almost always in a positive way.
Like it or not, outsourcing is likely to remain a significant weapon in management’s arsenal of choices in managing business—an alternative available for consideration as requirements change. Although perhaps obvious, an outsourcing transaction should take into account the following key issues:
- All or Some?—Assess needs, evaluate priorities, costs and requirements, and understand which functions, process or operations should be outsourced and which retained. Outsourcing is a tool, not an end in itself.
- Control, Flexibility & Cost—A delicate balance considering the difficulty and implications—especially when entrusted to a third party, or if you are a third-party provider. Agreements must address varying objectives, priorities, customers and suppliers—hardly a trivial exercise.
- Human Resource—Outsourcing affects employees: seniority, pensions and benefits, decisions involving termination, changes in salary, and even relocation. Immigration issues arise when moving people around—even for temporary training or other assignments.
- Performance Standards—Defining and prioritizing standards is difficult enough internally and fixing accountability in a contract even more so.
- Corporate Compliance, Privacy & Security—These issues require careful examination. Functions can be outsourced, but rarely can the responsibility.
- Relationship Management—Customer and provider must develop a solid working relationship—in operation and spirit. From shifting priorities to changing performance standards—there is no substitute for a strong, effective team approach.
- International—Global outsourcing gives rise to issues relating to currency fluctuations, differing intellectual property protections, privacy and transborder data flow, surveillance and security, governing law, dispute resolution, and interpretation and enforcement of contracts in local courts; and
- Insourcing—Sometimes forgotten, no decisions are permanent. Leave room to re-evaluate or move functions from one service provider to another in an amicable transition process. Businesses, operations, requirements and costs change—don’t lose flexibility.
Did you know Rimon has significant experience in handling sourcing transactions—near, offshore, strategic and otherwise? Did you know Rimon may be the only law firm with attorneys here and abroad who have handled major international and multinational outsourcing transactions for financial institutions, airlines, health care providers, telecommunications and manufacturing companies, to name a few? Did you know Rimon lawyers are adept at looking at both the purely legal and contractual issues, as well as counseling clients for success and guiding clients through the process?
Whether understanding sensitivities of internal employee concerns, or preparing RFPs and negotiating and managing these complex contracts, Rimon lawyers understand and handle risks and issues new and unknown to many organizations—a host of human resource and performance issues, assignment, immigration and employment, warranty, insurance, indemnity and liability questions, growth, change control, customer service and termination issues. How to handle a migration plan? What about our people? What if I can’t get the service I need? What if my needs, my systems, my operations or my processes or my business changes?
The implications are large, the risks enormous and the complexity overwhelming—don’t skimp on retaining people with the right expertise, including lawyers. Want to know more? Want to schedule a customized in-house seminar? Contact Joe Rosenbaum in the U.S. at joseph.rosenbaum@rimonlaw.com and let us help you.