TECHNOLOGY, OUTSOURCING, AND COMMERCIAL TRANSACTIONS
NEWS FOR LAWYERS AND SOURCING PROFESSIONALS

When we represent customers in outsourcing and managed services transactions, we spend a significant amount of time drafting the exhibits for transition, which is typically a major project in and of itself. In order to help clients think about the major components of transition, we often provide the following checklist of common workstreams to facilitate our discussion.

  1. Governance – Governance is an overarching workstream that spans all phases of transition. A key component is the formation of a transition management office that is responsible for managing the overall transition (including performance and risk management) and coordinating with the company’s governance organization.
  2. Planning – Detailed design and implementation planning is critical to ensuring timelines are integrated and met, with all dependencies considered. Plans typically include the responsibilities of each party, anticipated completion dates, and acceptance criteria.

As a follow-up to our recent post on third-party contract due diligence in outsourcing deals, this post focuses on how customers in outsourcing deals handle the disposition of legacy third-party contracts—one of the thorniest and most work-intensive work streams—once diligence has concluded.

The due diligence review of existing third-party contracts is a critical component of any outsourcing deal. For the company that is outsourcing part of its business functions to a third party, reviewing existing third-party contracts for certain key terms is an important part of the outsourcing process. Organization, attention to detail, and diligence are keys to a successful third-party contract review process.

The terms that need to be reviewed will be based on the scope of the outsourcing agreement, e.g., will contracts be assigned, terminated, or made available for the outsourcing provider to use. Once the deal constructs are established, Excel can be a useful tool to guide the review of the third-party contracts, by allowing the reviewer to insert the applicable language from each contract into the appropriate row or column. The Excel chart will become a reference guide for the key provisions and provide an overview and comparison between the third-party contracts.

When an inventor of technology who is also a university employee wants to commercialize university-developed technology, it is customary for the university and the inventor to “spin out” the technology via a license agreement to a newly created company (a licensee company) that sets forth the terms of the license, including any necessary milestones for advancing the technology, restrictions on the use of the technology, and the royalties and other financial terms applicable to the licensing and commercialization of the technology.

In Part 1, we discussed how, despite widespread usage, termination in the event of bankruptcy clauses (“ipso facto” clauses) are generally unenforceable pursuant to the bankruptcy code. In this second part, we discuss why these clauses are still prevalent in commercial transactions and the exceptions that allow for enforceability in certain situations.

Why Do Ipso Facto Clauses Remain in Most Contracts?

Practically all commercial transactions, including licenses, services agreements, and supply agreements, contain a provision that triggers termination rights, without notice, to a party whenever the other party files for bankruptcy or experiences other insolvency-related event. In Part 1 of a two-part series, we discuss how the commonly used termination-on-insolvency clauses are generally unenforceable despite their widespread use.

The audit section in a services agreement contains the provisions that specify a party’s right to access and review another party’s information in order to determine such party’s compliance with the agreement. Depending on the scope of audit rights, the audit section can range from a single paragraph to an entire exhibit to the contract.

Many considerations go into drafting appropriate audit rights, including the types of services that the customer is receiving, and the industry in which the customer’s business operates. In many cases, the customer is the auditing party and the service provider is the audited party, but there are situations where the roles will be reversed. Below is an overview of several key issues to consider when drafting audit rights for services agreements.

In business process outsourcing (BPO) transactions, some of the toughest negotiation points often involve responsibility for compliance with applicable laws and regulations. If you have negotiated BPO transactions, you know that there is not an industry position that can be applied across the board on all deals. We find key determiners as to how responsibility is allocated to include the type and size of the transaction, whether the service is a “utility” or one to many model, the intended scope of the service offering, impact to fees (if any), vendor capabilities, and negotiating leverage.

Customers in outsourcing arrangements are coming to expect (or starting to demand) that their providers have the resources, technology, and know-how to leverage automation software—whether robotics desktop automation (RDA) or robotics process automation (RPA) software—to enhance the capabilities and efficiencies of IT and business processes. While the software promises big benefits, such as higher levels of accuracy, scalability, and cost-savings, as with the implementation of any new technology, there are new challenges to consider.

In this post we take a look at the top five issues to consider when contemplating the use of automation software in your outsourcing transaction.

When polling fellow tech lawyers about blockchain, most of them seemed to be waiting out getting up to speed on the technology to see if the hype would stick and whether clients would actually implement blockchain solutions at an enterprise level. Would blockchain for business applications, such as supply chain and data transfer, explode like the “cloud” and “automation” or fall by the wayside as other technologies outpaced it?

While the staying power of public cryptocurrency platforms is still in question, the use of blockchain technology to enable business solutions seems to be increasing, with blockchain use cases moving from the innovation lab into implementation.