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

As we described in our first post on the increasing use of software robots in outsourcing, software robots are becoming more widespread because of their growing capabilities to execute business processes, such as customer service and IT service management. Highlighted below are some of the business drivers and potential benefits of using software robots.

  • Labor Cost Mitigation. One of the primary drivers of offshore outsourcing has been labor arbitrage—leveraging the lower costs of offshore vendor personnel to achieve savings. However, the difference in expense has been gradually shrinking. Wages in India (long popular because of its English-speaking population and highly educated workforce) and other offshore locations are rising—both because of inflation, which has been consistently and significantly higher than in the United States in recent years, as well as other reasons, such as employee retention (salary increases to reduce the incentive to leave for a competitor). As a result, customers are seeking alternative strategies to keep costs down. Software robots offer a potential mitigation strategy against rising labor costs for the following reasons:

California legislators recently signed Senate Bill 962 into law, which requires manufacturers to install kill-switches on smartphones sold in California that are made on or after July 1, 2015. A kill-switch allows a smartphone owner to remotely disable the device via a wireless command, which renders the device inoperable to unauthorized users. This new law was passed on August 25 to deter smartphone theft in California.

Although manufacturers must include the kill-switch on smartphones, consumers will have the option to disable it as long as the consumer is informed that the function is designed to protect him or her from unauthorized use of the phone.

In signing Delaware House Bill 295 into law on July 1, Delaware became the latest in a series of states to address the safe destruction of documents that contain consumers’ personal identifying information. Under the law, a commercial entity—i.e., a corporation, business trust, estate, trust, partnership, limited partnership, limited liability partnership, limited liability company, association, organization, joint venture, or other legal entity, whether or not for profit—must take reasonable steps to destroy or arrange for the destruction of personal identifying information in its custody and control that the commercial entity will no longer retain. This consumer information must be shredded, erased, or otherwise destroyed or modified so that the information is entirely unreadable or indecipherable.

As part of its simplification initiative, the Financial Accounting Standards Board (FASB) issued a proposed Accounting Standards Update on August 20 that addresses accounting principles related to cloud computing arrangements. The proposed update is intended to provide customers in such arrangements with guidance about the financial reporting of fees paid for cloud computing services.

A growing trend in the fitness industry is the use of wearable electronic devices to track personal health and training information, such as sleeping patterns, heart rate, running speed, calories burned, current location, and distance and route traveled. These wearable devices are aimed at consumers who want to live healthier lifestyles by letting them track their daily activities to help monitor their fitness progress. Although perhaps helpful for such purposes, using these devices may come at the expense of one’s privacy.

Outsourcing stakeholders should check out Deloitte's 2014 Global Outsourcing and Insourcing Survey. The survey results highlight what the future may hold for companies across several business functions and provide “insight into client executives' plans and perceptions related to the outsourcing industry.”

As outsourcing service providers and customers become more mature, a larger number of customers are relying on multiple service providers for services that were traditionally provided by one provider as part of a larger outsourcing transaction. Although multi-sourced environments are on the rise, they are not without issues or concerns. Before implementing a multi-sourcing strategy, customers should be careful to address certain key issues during the negotiation of each new outsourcing relationship.

The National Institute of Standards and Technology (NIST), the government agency charged with promoting U.S. innovation and industrial competitiveness by advancing technology, recently published a list of 65 forensic challenges associated with cloud-based environments. These challenges range from standard business practices to technological architecture and include the following:

The UK’s Financial Conduct Authority (FCA) recently published a nonexhaustive checklist of questions for regulated firms to consider when outsourcing critical information technology (IT) services. This comprehensive approach of good vendor procurement and risk management practices is similar to the guidance provided by the U.S. Office of the Comptroller of the Currency.

With privacy and security obligations consuming more and more attention during contract negotiations, open-source issues seem almost an afterthought. Once the darling of doomsayers and CLE workshops, open source is not at the top of everyone’s deal-breaker list anymore. But what open-source issues should customers think about in today’s environment?

Back in the good ol’ days, a customer could reasonably add a representation to a software or development agreement that promised “no open-source materials will be provided in the work product/software.” Those days are long gone because nearly every product incorporates open source. It seems that every vendor has a list of open-source software that is incorporated into its products and is more than eager to share the list with customers.