Simon White – Managing the Challenges of Cross-Border Outsourcings | Morgan Lewis – Tech & Sourcing

As part of our Spotlight series, we speak to Simon White, one of the longest-serving and most experienced technology lawyers in the UK market, who has held positions including Deputy Legal Counsel, Chief Privacy Officer and GC EMEA LATAM at Cognizant, one of the largest multinational IT services companies around the world with over 300,000 employees on five continents. Before joining Cognizant nearly 15 years ago, Simon White was a Corporate Associate at Morgan Lewis.

What problems do country barriers pose in the context of cross-border outsourcing, as the technology is often country-agnostic?

Geographical country barriers have the potential to kill a business case. Not only in terms of the added complexity of outsourcing itself from a contractual and operational perspective, but there are concerns about the profitability and success of a cross-border deal. Furthermore, while the technology’s often transnational nature presents itself as a global business solution, it is not necessarily a panacea for a disparate and dispersed organization (which itself may not operate as a fully interconnected cross-border enterprise).

One of the main problems is that legal and regulatory requirements differ from country to country (not to mention that they sometimes differ from region to region or state to state), which increases the complexity and the need to localize the appropriate technology solution elevated. Not only does this increase the potential overall cost of outsourcing, but it often results in extensive additional governance requirements that need to be approved by various departments within the organization. Even supposedly cross-border regulations such as the GDPR or Insolvency II are only superficially cross-border, since there are often country-specific requirements for implementation or enforcement, which must be contractually and/or technically reflected in the solution. Legal and regulatory requirements can also determine the basic financial and contractual structure of a cross-border transaction. For example, the tax treatment of a supplier’s invoices can vary widely depending on the geographic locations of the companies contracting, billing, or paying and receiving revenue under the outsourcing arrangement.

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However, legal and regulatory requirements are not the only obstacles created by country barriers to cross-border technology outsourcing.

When we think of technology, we often immediately think of the virtual; It is all too easy to forget that there is always a physical element to any technology deployment. For example, we need to consider the physical security requirements and what are the risks from a logical and cyber security perspective when there is a logical connection to the IT infrastructure in certain countries or regions.

Another crucial physical consideration is the human factor: do we need to bring humans into the country (and if so, into each affected country)? Can we get the necessary visas for everyone? Do people actually want to go where there is a business need? Whether by design or by default, outsourcing usually results in a change in corporate culture, both for better and for worse. While a top-down culture shift can define the face of an international organization, creating a true “monoculture” is almost impossible. This cultural impact is felt much more when outsourcing across borders and as such we need to consider any cultural differences and difficulties we may encounter and how we can operationally (and possibly contractually) prepare for them.

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How do you deal with these obstacles and risks (a) in the business and (b) in the contract?

Without proper thought and attention, the need to accommodate both global and local requirements can lead to overly complex negotiations and drafts, resulting in unenforceable or undeliverable contracts.

To mitigate these risks, the first question must always be: what is the company trying to achieve? While cost optimization and quality improvement are drivers for many, broader strategic considerations may need to be addressed. The broader purpose must be considered against the unexpected or passive consequences of entering into the outsourcing agreement and any gaps or risks appropriately accounted for in the agreement. And while the above applies to any outsourcing, multi-country outsourcing multiplies the risk many times over, meaning the scale of potential success (or failure) is enormous.

Once we understand that context, we can look more closely at how this business is run, how the end users are organized and managed, what the existing governance looks like, and what should drive it so we can appropriately reflect that in the contract.

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In addition, it is important to ensure that all appropriate stakeholders from all parties are involved in the negotiations. The broader the geographical scope of the agreement, the more people may be needed, but equally the risk analyzes need to be more comprehensive, with more problems arising. Try to understand in advance who these stakeholders are and make sure they are informed and involved throughout the process.

How do you manage the post-go-live challenges of multi-jurisdictional outsourcing?

Some of the key considerations are:

  1. Start negotiations with a win-win attitude and a blueprint for success, and carry that mindset into the execution and ongoing management of the outsourcing.
  2. Monitoring (including clear reporting requirements) how the contract is being performed and any internal or external factors affecting performance;
  3. Ensuring service boundaries are clearly defined and managing the development of the project or scope creep, depending on your perspective, through the change control process;
  4. enforcing discipline in the processing, accuracy and timing of invoices;
  5. Consistent approach to the preparation and agreement of bills of quantities, delivery schedules, change control notes and any other documentation prepared as part of the contract;
  6. balance between collaborative governance and more aggressive dispute resolution processes; and
  7. Striving for honest and open communication between all relevant parties at all levels of the company.

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