Morgan Lewis’s technology, outsourcing, and commercial contract team, along with Boston Consulting Group, recently hosted a roundtable dinner in London, during which senior stakeholders from technology suppliers and large businesses discussed how the rapid evolution of artificial intelligence (AI) is impacting offshoring and outsourcing.
This blog post highlights some key takeaways from the discussion, which brought perspective from both supplier and customer points of view, as well as their business and legal advisors.
Key Takeaways
- Accountability in the age of agentic AI: As AI systems become increasingly autonomous—including the move from generative AI (GenAI) to agentic AI—traditional contracting and liability frameworks are under pressure. Questions of accountability, control, and foreseeability are now central to how businesses assess and allocate risk in AI-enabled delivery models.
- Outsourcing is moving up the value chain: Service providers are no longer measured by the number of people deployed but by the expertise, innovation, and automation they deliver. Customers are now buying outcomes, not headcount, and expect their suppliers to demonstrate genuine AI capabilities and readiness.
- Operational change outpaces legal frameworks:
- Technology is advancing faster than most governance and contracting structures can accommodate. Generally, contractual frameworks for “off-the-shelf” AI solutions shield the AI provider through provider-friendly exclusions and limitations of liability, whereas the more customized the AI solution for a customer, the more leverage a customer may have to impose liability on the provider if something goes wrong with the solution.
- In addition to standard legal concerns such as liability allocation, key contractual focus areas now mirror operational concerns such as training and testing of systems, provision of input data and explainability, and oversight of decisions.
- Businesses are starting to become accustomed to GenAI contract provisions; however, such provisions are not necessarily fit for new AI technology such as agentic AI—when negotiating contracts for AI solutions, it is key to understand exactly what the solution is doing, whose systems it interacts with, and what the relevant parties are bringing to the table in relation to the solution. Contract terms should then be built as necessary to address the specific nuances of the AI solution.
- Turning on AI does not always lead to productivity gains: Suppliers often predict 40–70% productivity gains from the use of their AI solutions, which, taken at face value, attracts investment by businesses in AI solutions; however, the reality is often more challenging. To achieve such ambitious productivity gains, there is sometimes the requirement for material redesigns of operating models and reskilling workforces to be able to embed AI at the required scale.
- Governance must balance risk and innovation: Legal and regulatory initiatives such as the EU AI Act are prompting organizations to tighten oversight. However, heavy-handed contractual guardrails can limit innovation and erode the value that AI can deliver. Achieving the right balance will be a defining challenge for the next phase of AI adoption.
- AI is reshaping the economics of offshoring: While AI can reduce reliance on traditional offshore delivery, access to skilled talent remains critical. For regulated or security-sensitive sectors, outsourcing continues to play a vital role in scaling capability and managing compliance risk. However, complex and/or esoteric workflows, in particular within regulated services, present challenges to the scalability of AI adoption.
- Cost, control, and agility are the new value drivers: In next-generation operating models, location matters less. Agility, latency, and control are emerging as the key determinants of value and competitiveness.
- Engagement with AI is becoming a business imperative: A recurring theme was that failing to engage with AI could soon be viewed as a failure of diligence. The consensus was adaptation and experimentation are no longer optional—organizations must learn to engage with AI responsibly or risk being left behind.
As organizations reevaluate their sourcing strategies in light of these shifts, understanding the legal and commercial implications of AI adoption is essential.
How We Can Help
Our technology, outsourcing, and commercial contract team advises on structuring, negotiating, and governing complex technology and sourcing arrangements to help businesses harness AI responsibly and effectively.