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Tech & Sourcing @ Morgan Lewis


As outsourcing service providers and customers become more mature, a larger number of customers are relying on multiple service providers for services that were traditionally provided by one provider as part of a larger outsourcing transaction. Although multi-sourced environments are on the rise, they are not without issues or concerns. Before implementing a multi-sourcing strategy, customers should be careful to address certain key issues during the negotiation of each new outsourcing relationship.

Identified below are a few of the key issues that customers should consider in their outsourcing agreements when contemplating a multi-sourced environment.

  • Can customers share information across service providers? The outsourcing agreement should clearly articulate each party’s confidentiality obligations. In a multi-sourced environment, a customer must be able to share certain confidential information from a service provider with other service providers. Customers should be concerned if confidentiality obligations are too restrictive because they may prohibit the sharing of information necessary to make a multi-sourced environment a success.
  • Who's responsible for what? The responsibilities and the role of each service provider involved in a multi-sourced environment must be clearly delineated. This includes responsibility for completion of services as well as clearly defined service levels for each service to be performed. If the lines begin to blur, customers may not have anyone to look to for resolutions.
  • Play nice in the sandbox! Customers need to be sure that all service providers in a multi-sourced environment are committed to working collaboratively. Consider adding obligations in an outsourcing agreement that require service providers to cooperate with other service providers in a timely manner.
  • Cross-provider governance. Customers should consider requiring periodic meetings among all service providers involved in the multi-sourced environment. Such meetings should be useful to ensure that all players involved are communicating and working collaboratively to support the customer.
  • Who is in charge? In many cases, customers may hire one service provider to manage and supervise the multi-sourced environment; therefore, customers should consider including provisions in outsourcing agreements that expressly state that the outsourcing arrangement may be managed by another provider.