Legal firms warn on “next generation” outsourcing

by Gill Montia

Story link: Legal firms warn on “next generation” outsourcing

Two legal firms have raised concerns about so called “next generation” outsourcing.

The phrase refers to changes in the way in which outsourcing decisions are planned and implemented that will fundamentally alter the way outsourcing relationships are managed and measured.

Marsh and Hunton & Williams, the global law firm, are warning that the changes raise complex risk and legal issues.

In a paper entitled, Risk Management in Next Generation Outsourcing, Marsh and Hunton & Williams examine new outsourcing models that involve a closer alignment between the service provider and the customer’s business.

“Next generation” also entails a fundamental shift towards outsourcing core and intellectually-based service functions.

The report states: “Multi-sourcing strategies, for example, are becoming increasingly common but also face significant challenges including greater vendor management time, increased contractual complexity and difficulties on termination.”

According to Matthew Elkington, vice president in Marsh’s Risk Consulting Practice: “Outsourcing offers considerable value under new model arrangements, but remains a complex process that exposes organisations to diverse and significant risks.”

Mr Elkington adds: “Failed outsourcing can be extremely costly to rectify and seriously damage a company’s brand. A lack of understanding of the potential pitfalls and risks at the outset of an outsourcing agreement will likely impair a company’s ability to resolve problems when they inevitably occur.”