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

Just when we finally figured out how to contract for “cloud” services and SaaS, here comes blockchain—the next disruptor for IT, businesses and, yes, us lawyers.

So what is blockchain? This is one of the best definitions that we have found from the Wall Street Journal, CIO Explainer: What Is Blockchain?

A blockchain is a data structure that makes it possible to create a digital ledger of transactions and share it among a distributed network of computers. It uses cryptography to allow each participant on the network to manipulate the ledger in a secure way without the need for a central authority. Once a block of data is recorded on the blockchain ledger, it’s extremely difficult to change or remove. When someone wants to add to it, participants in the network—all of which have copies of the existing blockchain—run algorithms to evaluate and verify the proposed transaction. If a majority of nodes agree that the transaction looks valid…then the new transaction will be approved and a new block added to the chain.

Whether due to an upcoming contract expiration, change in leadership, decline in service quality, regulatory issues, or any of the other many events that occur during an outsourcing engagement, invariably, the original agreement with the service provider must be modified.  In a recent post, Garry Stanis of ISG highlighted issues that need to be considered before entering into any such renegotiations, including:

  • Outsourcing Objectives.  The first question is whether or not the outsourcing should continue.  Clients should build a strategic consensus around the outsourcing objectives and determine whether certain services continue to be necessary, should continue to be outsourced or brought back in-house.
  • Align Services with Current Needs.  Market changes will impact the renegotiation. Developments in automation, SaaS solutions and other emerging technology have greatly changed how services are provided. Often services that required teams of personnel or large datacenters can be handled in a more efficient and effective manner by different providers offering new solutions.  All options available in the market should be considered before beginning a renegotiation.   
  • Evaluate the Relationship.  Clients should review the relationship that exists with the service provider to develop an understanding of what is going well and what needs improvement.  Complacencies can develop with long term relationships that need to be addressed. Use the renegotiation as an opportunity to improve (and even transform) the relationship.
  • Plan Ahead.  It is important to calendar upcoming expiration and potential termination dates to avoid surprises and provide for adequate time to properly prepare.  A timeline should be established for internal discussions on renewal options, renegotiation, risks of letting the agreement expire, or engaging a new service provider. 

Any renegotiation of an outsourcing deal must be looked at as an opportunity to improve the services that are being provided and the service provider relationship.  Addressing the issues cited above and proper advanced planning increases the chances for a successful renegotiation.

April showers bring…Morgan Lewis’s Annual Technology May-rathon. Our annual series of presentations and webcasts, known as the Technology May-rathon, runs the entire month of May. Industry leaders from a variety of technology-focused practices will present on certain technologies, providing lawyers with critical understanding of the technologies that impact our work. The presentations and webcasts will also focus on legal developments and key topics resulting from innovative technologies.

Below are just a few examples of the presentations that are part of the 2018 Technology May-rathon. Be sure to check back for the most up-to-date information as more events are added.

For more information or to register, visit the full listing of events here.

One of the keys to building a strong long-term commercial relationship with a supplier is the establishment of a robust governance structure that will help manage daily practices and future business goals. A recent post by advisory firm ISG highlights 10 tips for developing a governance structure that will help customers develop and maintain successful working relationships with their suppliers.

KPMG reported in a recent survey that the top trend for 2018 is the adoption of intelligent automation (IA) as a business strategy. The survey, which KPMG publishes on a quarterly basis, reviews global business services, IA, and related service delivery market trends.

KPMG found that 62% of respondents believe that IA and digital labor are the trends that will have the largest positive impact on the respondents’ organizations in 2018. One of the business concerns driving the adoption of IA is the challenge that organizations have in finding, training, and keeping talent, which was the largest negative trend that respondents predict when looking ahead to 2019.

On Monday, March 5, Morgan Lewis partners Barbara Murphy Melby and Anastasia Dergacheva and associates Ksenia Andreeva and Valentina Semenikhina will present on the webinar “Spotlight Russia: A Briefing for Russian Companies on Key Contracting Issues in Software and IT Services Transactions,” where they will discuss key issues that companies in Russia should consider when contracting for software and technology services. Topics will include the following:

  • A review of the top 20 issues to consider when licensing commercially available software
  • Tips on drafting performance and ownership provisions consistent with business requirements that also protect the company’s interests
  • A primer for the company considering outsourcing as a business strategy

Learn more and register >

If you’re tired of deal fatigue, and if worrying about its signs and root causes has you feeling sapped, the best thing to do is to return to fundamentals. In this third and final installment, we explore how you can employ the deal process to mitigate and even avoid the drudgery and fallout of deal fatigue.

The Deal Process

If you’re trying to speed along the deal process, the Emperor Augustus would advise you to festina lente, or make haste slowly. It’s important to remember that each stage of the deal process serves at least one important function. Knowing how to assess the need for each function, and the best way to accomplish it, is the key. So it’s acceptable to hasten, but only thoughtfully and deliberately—otherwise your deal will get ahead of the process, which could lead to some of the deal roadblocks we explored in our prior posts.

Take, for example, establishing a base case. A thorough assessment of the current environment is critical to understanding many things, including what you are trying to address by doing the deal, pressure points and organizational change issues, and financials. In other words, a good base case is required in order to competently recommend a path forward, and the interesting things you learn in developing the base case will inform down-selection and contract negotiations.

Thinking about monetizing your website with targeted ads? If so, you should have a basic understanding of the potential issues and associated risks when making online advertisement media buys. Although the Interactive Advertising Bureau’s Standard Terms and Conditions for Internet Advertising for Media Buys One Year or Less (the IAB Terms) are considered “industry standard” by advertising and media companies, and are used either entirely or as the basis for ad-buying agreements, the following points should be taken into consideration by website operators in order to avoid or minimize unexpected results.

Industry Standard

Sometimes “industry standard” can be a good thing. The IAB Terms are generally industry standard and are designed to balance the risk of each party. This can cut down on negotiation time, and give the parties comfort that the agreement is in line with recognized industry norms.

Potential Issues and Associated Risks

Notwithstanding the general acceptability of “industry standard” terms, the following potential issues should be noted if you host a website on which ads will be placed, since they may have unexpected results.

Not that long ago, companies were concerned about the ramifications of putting all their data in a cloud, including how they would get that data out, so only certain discrete aspects of systems and storage infrastructure were being moved to the cloud. Fast forward a few years and, for cost and other reasons, the current trend is for companies to make wholesale replacements of services and move those services to the cloud. With more software and services being offered in the cloud, it’s important to understand the responsibilities of each party and the risk allocation between them.

Shared Responsibility

Cloud services agreements generally employ a “shared responsibility model,” which is an allocation of responsibilities between the cloud provider and the customer. Issues arise when either cloud services agreements are used for multiple business units and services without a clear understanding of the responsibilities of the customer with respect to the data they’re moving to the cloud, or the customer does not understand that it has its own distinct responsibilities with respect to its data.

Among the many ways in which artificial intelligence (AI) technologies are enhancing business functions, the inefficiencies and labor-intensive organizational aspects of the contracting process present many fertile opportunities for improvement through the application of AI. A recent article in the Harvard Business Review discusses the contracting challenges current AI technology can help to alleviate and the contracting process changes required to adapt to AI contracting tools, as well as understanding the limits of AI.

Dealing with Contract Volume Using AI

As the article notes, one of the most significant contracting challenges facing organizations is managing a high volume of agreements. Even with a centralized database for contract documents, organizations often have no efficient way to extract data from those contracts or see, for example, how a warranty clause is worded across a number of different customer agreements. AI software tools can extract that data from contract documents and clarify and organize content, which can help organizations contract more efficiently and manage existing contracts more effectively.

Tracking and Enforcing Contracting Language Standards

Another significant challenge in the contracting process, especially for high-volume customer or vendor contracts based on standard templates, is ensuring conformity to template language and efficiently tracking deviations from form language. For instance, if an organization is seeking to impose uniform contract terms around the use of company trademarks and trade names, AI software tools can help track that language across divisions and could be configured to recognize keywords that indicate the trademark usage language is needed in a contract.