In an era defined by economic volatility, supply chain disruptions, rapid technological change, and geopolitical risk, outsourcing remains an attractive strategy for businesses seeking efficiency and scalability. At the same time, uncertainty has fundamentally changed what clients expect from their outsourcing agreements. Rigid, long-term contracts that assume stable market conditions are increasingly misaligned with business reality.
For lawyers advising on outsourcing arrangements, the challenge is no longer just allocating risk—it is building in flexibility without sacrificing certainty. Thoughtful drafting can allow parties to adapt as circumstances change while preserving the commercial value of the deal.
1. Consider Modular Scopes of Work
An effective way to enhance flexibility is to separate the master agreement from detailed scopes of work. Modular SOWs may allow for:
- Services to be added, removed, or modified without reopening the entire contract
- Pilot programs or phased rollouts
- Faster adaptation to changing business needs or budgets
If modularity is a business imperative, the parties will need to consider the hierarchy between the master agreement and SOWs and specify which provisions may be customized at the SOW level versus those that are nonnegotiable.
2. Build in Volume and Demand Adjustments
Uncertain markets often lead to unpredictable demand. Agreements that assume steady volumes can quickly become commercially unworkable for one or both parties. Considerations may include:
- Tiered and elastic pricing structures, such as:
- Volume discounts at higher usage levels
- Blended pricing that smooths fluctuations over time
- Mechanisms for periodic volume reforecasting
- Capacity reservation and ramp-down rights
These provisions help clients avoid paying for unused capacity while giving service providers visibility into potential fluctuations.
3. Use Pricing Adjustment Mechanisms That Can Evolve
Pricing adjustment mechanisms should be treated as core commercial terms, not fallback provisions. When drafted with objective triggers, defined processes, and reasonable guardrails, they allow outsourcing relationships to remain economically viable without undermining deal certainty.
Examples of such provisions include:
- Benchmarking or market-testing rights at defined intervals
- Gainsharing or outcome-based pricing tied to performance metrics
- Cost savings shared between parties
- Performance-based incentives tied to efficiency or quality improvements
- Adjustments based on achievement of defined business outcomes
- Customer pricing review and reset provisions
The key is to clearly define the process for adjustments to avoid disputes while allowing the economics of the deal to remain sustainable.
4. Rethink Change Control Provisions
Change control is often treated as a procedural afterthought, but in uncertain markets it becomes a central risk management tool. Effective change mechanisms should be:
- Streamlined and practical, not overly bureaucratic
- Clear on when changes require mutual agreement versus those that the customer can mandate
- Supported by defined timelines and escalation paths
Including preapproved categories of changes such as regulatory updates or security enhancements can reduce friction and delays.
5. Draft Termination and Exit Rights Strategically
Flexibility also means the ability for the customer to exit or restructure a relationship if circumstances materially change. While broad termination rights may be commercially sensitive, options include:
- Termination for convenience
- Termination triggered by certain events
- Change in economics/savings
- Regulatory changes
- Partial termination or service-by-service exit rights
- Step-in rights
- Transition assistance to facilitate continuity
Exit provisions should recognize that smooth disengagement is often critical to business resilience.
6. Address Force Majeure and Hardship with Precision
Recent global events have exposed the limitations of traditional force majeure clauses. Parties increasingly expect more nuanced approaches.
Consider:
- Whether certain events should be considered “force majeure” at all
- Obligations to mitigate and resume performance
- Rights to renegotiate, suspend, or terminate after extended force majeure events
Careful drafting can prevent force majeure from becoming either a loophole or an all-or-nothing trigger.
7. Preserve Governance and Communication Flexibility
Strong governance frameworks support flexibility by ensuring issues are identified early and addressed collaboratively. Effective governance provisions may include:
- Regular strategic review meetings
- Tiered escalation structures
These mechanisms help parties adapt the relationship over time rather than relying solely on contractual enforcement.
Key Takeaways
In uncertain markets, outsourcing agreements must do more than memorialize a deal—they must function as living frameworks capable of evolving with the business. By focusing on modularity, adaptive pricing, thoughtful change control, and strategic exit rights, lawyers can help clients manage uncertainty while preserving long-term value.
How We Can Help
Morgan Lewis’s technology transactions, outsourcing, and commercial contracts lawyers regularly advise clients on complex technology deals, global sourcing strategies, and evolving regulatory risk. If you have questions about the topics discussed above or would like to learn more, please reach out to any member of our team.