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Outsourcing: Law and Business

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Jason D. Krieser, Shawn C. Helms


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Written for both lawyers and business people, Outsourcing: Law and Business is the first complete guide to all aspects of these complex, strategic arrangements. It offers in-depth practical guidance to both legal and business issues — fee structures, service levels and governance models — to help outsourcing customers and service providers structure and implement transactions effectively.

Topics covered include: types of outsourcing transactions; choosing an outsourcing team; choosing an outsourcing provider; defining services provided, responsibilities, and procedures; knowledge sharing and intellectual property rights; service level standards and metrics; fee and pricing models; human resources issues, including U.S. and international law and regulation; business continuity issues; grounds for termination; confidentiality; customers' privacy and data; compliance with state, federal and international security regulations; risk management and liability; documenting and implementing a governance structure; dispute resolution; and new approaches to outsourcing transactions.

For lawyers and business people who want authoritative, forward-looking guidance to outsourcing law and strategy, this new book is the ultimate resource.

Book #00713; looseleaf, one volume, approximately 822 pages; published in 2011, updated as needed, no additional charge for updates during your subscription. Looseleaf print subscribers receive supplements. The online edition is updated automatically. ISBN: 978-1-58852-175-0

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  • Availability: Available
  • Brand: Law Journal Press
  • Product Type: Books
  • Edition: 0
  • Page Count: 822
  • ISBN: 978-1-58852-175-0
  • Pub#/SKU#: 713
  • Volume(s): 1

Author Image
  • Jason D. Krieser
Jason D. Krieser is a partner at McDermott Will & Emery in Dallas, Texas. He is an internationally recognized advisor on business process and information technology outsourcing matters ,including offshore outsourcing. Mr. Krieser is cited by the Chambers USA and Chambers Global guides as a leader in outsourcing in the United States and by Chambers USA as a leader in technology and IT outsourcing in Texas. He is also recognized in The Legal 500 and listed among those named as Texas Super Lawyers. He received a Bachelor of Science degree (summa cum laude) from the University of Nebraska in 1993. He received his J.D. from the University of Minnesota in 1996.


Author Image
  • Shawn C. Helms
Shawn C. Helms is a partner at McDermott Will & Emery in Dallas, Texas.  He has broad experience in outsourcing, information technology and telecommunications and has written widely on these subjects. Named a 'Client Service All-Star' by BTI Consulting Group, Mr. Helms is recognized by Chambers USA as a leader in technology and outsourcing and has been selected as a Texas Super Lawyer. He previously served as in-house counsel at Sprint Corporation, director of information technology at Williams & Connolly, and an adjunct professor at the University of Virginia in the technology department.  Mr. Helms received three Bachelor of Science degrees (Computer Information Systems, Economics and Business Administration) from William Jewell College (magna cum laude). He received his J.D. from Georgetown University Law Center (cum laude) in 2000.

CHAPTER 1
Overview of Outsourcing

§ 1.01 Outsourcing Defined
§ 1.02 Reasons Customers Elect to Outsource
§ 1.03 Types of Outsourcing Transactions
[1]Information Technology
[2]Business Process Outsourcing
[3]Knowledge Process Outsourcing
[4]Legal Process Outsourcing
[5]Other Transactions Sometimes Described as Outsourcing
§ 1.04 Getting Started
[1]Objectives for the Arrangement
[2]Outsourcing Strategy

CHAPTER 2
Outsourcing Team and Process

§ 2.01 Deal Team Roles and Objectives
[1]Customer’s Internal Team
[2]External Technical Advisers
[3]Outside Counsel
§ 2.02 Proper Scope
[1]Identification of Scope
[2]Identification of Proper Retained Scope
§ 2.03 Sole Source or Competitive Bid
§ 2.04 Request for Proposal and Selection Process
[1]Preparation of Request for Proposal Materials
[2]Initial Price Proposals
[3]Oral Presentations and Account Team Introduction
[4]References
[5]Scoring and Down-Selection
[6]Due Diligence

CHAPTER 3
Services

§ 3.01 Services Scope and Service Description
[1]Identifying the In-Scope Services
[2]Drafting the Service Description
§ 3.02 Service Recipients
§ 3.03 Transition
§ 3.04Customer Responsibilities
[1]Description of Customer Responsibilities
[2]Remedies for Failure to Meet Customer Responsibilities
[3]Customer Equipment and Facilities
§ 3.05 Interface Manual and Policies and Procedures Manual
§ 3.06 Service Locations
[1]Customer Service Locations
[2]Service Provider’s Service Locations
§ 3.07 Changes and Additionsto Services
[1]Changes to In-Scope Services
[2]Projects
[3]New Services
§ 3.08 Knowledge Sharing
§ 3.09 Third-Party Consents
[1]Consent for Contract Assignments
[2]Consent for Service Provider’s Use in Performing Services
[3]Consent Costs
§ 3.10 Disaster Recovery and Business Continuity
§ 3.11 Subcontracting
§ 3.12 Transformation
§ 3.13 Transfers of Customer Assets and Personnel
§ 3.14 Managed Contracts
§ 3.15 Step-In Rights
§ 3.16 Termination Assistance Services

CHAPTER 4
Fees

§ 4.01 Introduction
§ 4.02 Establishing the Business Case
[1]Base Case
[2]Cost of Outsourcing
§ 4.03 Ongoing Fees
[1]Choosing a Fee Methodology
[2]Evaluating Proposed Fees
[3]Minimum Commitment
§ 4.04 Billing and Payment
[1]Timing of Invoice and Payment Terms
[2]Disputes and Right to Withhold Payment
[3]Financial Engineering
§ 4.05 Adjustments for Changed Economic Conditions
[1]Inflation Adjustment/COLA
[2]Currency Exchange Rate Fluctuations
§ 4.06 Customer Price Protection
[1]Benchmarking
[2]Most Favored Customer
§ 4.07 Expenses
§ 4.08 Taxes
[1]Transaction Taxes
[2]Withholding Taxes
[3]Asset Transfer Taxes
[4]Permanent Establishment
[5]Transfer Pricing Issues

CHAPTER 5
Service Levels

§ 5.01 Overview
§ 5.02 Service Level Metrics and Reporting
[1]Selecting SLA Metrics
[2]Types of SLA Metrics
[3]Example SLA Metrics
[4]SLA Metric Measurability
[5]Setting SLA Metric Performance Levels
[6]Number of SLA Metrics
[7]Monitoring and Reporting
[8]When SLA Metrics Are Effective
[9]SLA Metrics with and Without Credits
§ 5.03 Performance Credits, Termination and Other Remedies
[1]Types of Remedies
[2]Earnbacks and Performance Bonuses
[3]Limitations on Remedies
§ 5.04 Changes and Improvement to Service Levels

CHAPTER 6
Personnel and Human Resource Matters

§ 6.01 Overview
§ 6.02 Service Provider Staff
[1]Co-Employment/Joint Employment Issues
[2]Warranties: Qualified and Reasonably Skilled
[3]Pre-Employment Screening: Background Checks, Drug Screening, and Authorization to Work
[4]Retention Goals
[5]Customer’s Right to Request Replacement of Service Provider Staff
[6]Provider Staff Hired Through Employment Visas
§ 6.03 Key Personnel
[1]Requirements of Key Personnel
[2]Relationship Manager
§ 6.04 Human Resource Transition Issues
[1]Human Resource Due Diligence
[2]Typical Personnel and Human Resource Terms
[3]The Transition
§ 6.05 U.S. Transfer and Dismissal Laws
[1]Federal Worker Adjustment and Retraining Notification Act (“WARN”) Notification
[2]State Mini-WARN Acts
[3]Employment Retirement Income Security Act (“ERISA”)
[4]Health Care Continuation (“COBRA”) Notice
[5]Employees on Leave of Absence
§ 6.06 U.S. Unions and Collective Bargaining Agreements
§ 6.07 European Union Transfer and Dismissal Laws
[1]Acquired Rights Directive: Employees Go with the Work
[2]European Works Council Directive
[3]Redundancy Obligations


CHAPTER 7
Term and Termination

§ 7.01Term
[1]Initial Term
[2]Renewal Term
§ 7.02Termination and Expiration
[1]Termination and Expiration Overview
[2]Termination for Convenience
[3]Termination for Cause
[4]Other Common Termination Rights
[5]Scope of Termination
[6]Termination as Renegotiation Leverage
[7]Insourcing
§ 7.03Termination and Expiration: Unwinding the Outsourcing Arrangement
[1]Termination Assistance
[2]Exit Activities


CHAPTER 8
Risk Management Issues

§ 8.01Generally
§ 8.02Audit
[1]Identifying the Scope of the Audit
[2]Fees Audit Right
[3]Audit of General Compliance with Agreement
[4]SAS-70 Audits
[5]ISAE 3402 and SSAE 16 Audits
[6]Differences Between SSAE 16 and ISAE 3402 Standards
[7]SOC Reports
[8]Service Provider Internal Reports
§ 8.03Insurance
§ 8.04Security
[1]General Security Requirements
[2]Physical and Other Non-Technical Security Measures
[3]Security Assessments
[4]Comprehensive Information Security Program
[5]Offshore Security Concerns
[6]Incident Plans
[7]Additional Security Measures
§ 8.05Guarantee

CHAPTER 9
Intellectual Property

§ 9.01Introduction
§ 9.02Overview of Intellectual Property Law
[1]Copyrights
[2]Trade Secrets
[3]Patents
[4]Trademarks
[5]Information Rights Under Contracts
§ 9.03Allocation of Intellectual Property Rights in the Outsourcing Relationship
[1]Intellectual Property Inventory
[2]New Intellectual Property Arising from the Outsourcing
[3]Intellectual Property Owned by the Parties
[4]Intellectual Property Owned by Third Parties
[5]Licenses to Be Granted by the Parties
[6]Warranties About Rights in Intellectual Property
[7]Customer’s Control of IP Used to Provide the Services
§ 9.04Allocation of Liability for Third-Party Infringement Claims
[1]Principles for Allocating Liability
[2]Warranties and Indemnification
[3]Remedies for Enjoined Use
§ 9.05Special Issues Relating to Source Code
[1]Significance of Source Code
[2]Source Code Escrows
[3]Open Source Software
§ 9.06Offshore Intellectual Property Considerations
[1]Offshore Intellectual Property Protection
[2]Precautions
§ 9.07Confidentiality Terms
[1]Parity of Terms
[2]Definition of Confidential Information
[3]Limits on Use and Disclosure
[4]Customary Exceptions to Confidentiality Obligations
[5]Effect of Termination
[6]Residual Rights

CHAPTER 10
Privacy and Data Security

§ 10.01Overview
§ 10.02Key Privacy and Data Security Regulations
[1]E.U. Data Directive
[2]Gramm-Leach-Bliley Financial Services Modernization Act (1999)
[3]Health Insurance Portability and Accountability Act (1996)
[4]Data Breach Laws
[5]Data Security Laws and Standards
§ 10.03Other Privacy and Data Security Regulations
[1]Children’s Online Privacy Protection Act (1998)
[2]Controlling the Assault of Non-Solicited Pornography and Marketing (“CAN-SPAM”) Act (2003)
[3]Electronic Communications Privacy Act (1986) and Wiretap Act
[4]Electronic Funds Transfer Act (1978)
[5]Fair Credit Reporting Act (1970) and Fair and Accurate Credit Transactions Act (2003)
[6]Fair Debt Collection Practices Act
[7]Family Educational Rights and Privacy Act (1974)
[8]Foreign Intelligence Surveillance Act (1978) and FISA Amendments Act (2008)
[9]Freedom of Information Act (1974)

CHAPTER 11
Risk, Liability, and Selected Legal Protections

§ 11.01Risk in Outsourcing Transactions
§ 11.02Indemnification
[1]Generally
[2]Coverage of Indemnity: Direct Claims vs. Third-Party Claims
[3]Typical Indemnities
[4]Indemnification Scope, Limitations and Procedures
[5]Advantages of Indemnity Rather Than a Warranty
§ 11.03Limitation of Liability
[1]Generally
[2]Disclaimer of Consequential Damages
[3]Cap on Direct Damages
[4]Exemptions (Carve-Outs)
§ 11.04Representations, Warranties and Covenants
[1]Generally
[2]Typical Warranties from the Customer
[3]Typical Warranties from the Service Provider
[4]Warranty Disclaimers
[5]Difference Between a Representation, a Warranty and a Covenant
[6]Reasons Service Providers Limit Warranties
[7]Cumulative Remedies vs. Sole and Exclusive Remedies
§ 11.05Miscellaneous Legal Provisions
[1]Force Majeure
[2]Governing Law and Venue
[3]Assignment and Delegation
[4]Independent Contractors
[5]Cumulative Remedies

CHAPTER 12
Transition

§ 12.01Preparing for Transfer of Responsibility
[1]Critical Handoff
[2]Steep Learning Curve
[3]Most Transitions Succeed, Eventually
[4]Focus on Transition Early
[5]Draft Transition Plan
§ 12.02Transition Team
[1]Preliminary Team Members
[2]Key Traits of a Transition Manager
§ 12.03Types of Transitions
[1]Lift and Shift
[2]Transformation
[3]Acquisition
[4]Simultaneous
[5]Staggered
[6]Transitions to a Multi-Sourced Environment
§ 12.04Transition Plan
[1]Generally
[2]Topics Covered in the Transition Plan
[3]Milestones
[4]Planning for Transition of Personnel
§ 12.05Transition Finance Issues
[1]Transition Costs
[2]Financing Transition Costs

CHAPTER 13
Governance

§ 13.01Documenting and Effectively Implementing a Governance Structure
§ 13.02Governance Organization
[1]Customer Enterprise Level Governance
[2]Deal-Specific Governance
§ 13.03Reporting, Performance Dashboards and Document Repositories
[1]Reporting and Performance Dashboards
[2]Document Repositories
§ 13.04Customer Satisfaction Surveys
§ 13.05Change Control Management

CHAPTER 14
Disputes

§ 14.01Disputes Generally
§ 14.02Common Disputes and Causes
[1]Disputes Originating Pre-Contract
[2]Disputes Arising During Service Performance
§ 14.03Resolving Disputes
[1]Governance
[2]Contractual Informal Dispute Resolution
[3]Mediation
[4]Arbitration
[5]Litigation
§ 14.04Survey of Selected Outsourcing Litigation Matters
[1]Metavante Corp. v. Emigrant Savings Bank
[2]Sourcecorp BPS, Inc. v. Kenwood Records Management, Inc.
[3]Penncro Associates, Inc. v. Sprint Spectrum, L.P.
[4]Former Employees of International Business Machines Corp. v. U.S. Secretary of Labor
[5]Technical Support Services v. International Business Machines Corp.
[6] Sprint/United Management Co. v. International Business Machines Corp.
[7]Vertex Data Science Ltd. v. Powergen Retail Ltd.
[8]Detroit Medical Center v. Provider Healthnet Services, Inc.
[9]Cable & Wireless PLC v. IBM United Kingdom Ltd.
[10] California State Automobile Association Inter-Insurance Bureau v. Policy Management Systems Corp.
[11]GB Gas Holdings Limited v. Accenture
[12]BSkyB Limited v. HP Enterprise Services UK Limited
[13]Bank of Louisiana v. Sunguard Recovery Services, Inc.
[14]Other Disputes
§ 14.05Special Considerations for India
[1]Dispute Resolution Mechanism Through Court Adjudication
[2]Dispute Resolution Mechanism Through Arbitration
[3]Dispute Resolution Mechanism Through Mediation

CHAPTER 15
A Modern Approach to Outsourcing

§ 15.01Characteristics of the Legacy Outsourcing Market and Transactions
[1]Limited to Information Technology Outsourcing
[2]Single U.S.-Based Provider
[3]Long-Term Contracts
[4]Complicated Agreements
[5]Asset and Human Resource Transfers
[6]Exclusivity and Minimum Commitments
[7]Long Negotiations
[8]High Transaction Costs for Customers
[9]Terminations Are Expensive and Risky
[10]Rigid and Adversarial Process
§ 15.02Characteristics of the Modern Outsourcing Market
[1]Customers Are Outsourcing Many Areas of Their Businesses
[2]Non-U.S. and Niche Providers Increase Competition
[3]Multi-Provider Environments Are Common
[4]Shorter Terms
[5]Fewer Personnel and Asset Transfers, and Captives
[6]No Exclusivity and Lower Minimum Commitments
[7]Termination is Less Expensive and Less Risky
[8]Modern Characteristics Allow for More Companies to Outsource
§ 15.03A Modern Approach: New Processes, Contracts and Governance
[1]Expedited and Flexible RFP Process
[2]Collaborative, Focused and Managed Negotiations
[3]Condensed and Modernized Outsourcing Contract Terms
[4]Targeted and Integrated Multi-Provider Governance

CHAPTER 16
Regulatory Environment

§ 16.01Regulation of Outsourcing Generally
[1]Increasing Number of Legislative Prohibitions in the United States
[2]United States and European Union Taking Different Approaches
§ 16.02Federal Regulation
[1]Indirect Regulation of Outsourcing
[2]Visa Regulations
[3]Regulations on Exports
[4]Worker Adjustment and Retraining Notification Act
[5]Sarbanes-Oxley Act of 2002 (“SOX”)
[6]Hart-Scott-Rodino Antitrust Improvements Act (“HSR Act”)
[7]Foreign Corrupt Practices Act (“FCPA”)
[8]Occupational Safety and Health Act (“OSHA”)
[9]Fair Debt Collections Practices Act (“FDCPA”)
§ 16.03State Regulation
[1]Generally
[2]Constitutionality
[3]Preferential Laws
[4]Other State Statutes and Regulations
[5]Executive Orders
§ 16.04International Regulation
[1]North American Free Trade Agreement (“NAFTA”)
[2]World Trade Organization Agreement on Government Procurement (“WTO AGP”)
[3]World Trade Organization General Agreement on Trade in Services (“WTO GATS”)
§ 16.05Regulated Industries
[1]Overview
[2]Financial Services
[3]Health Care
[4]Energy
[5]Telecommunications
[6]Law Firms

CHAPTER 17
Governmental Outsourcing

§ 17.01Outsourcing by Governmental Entities
§ 17.02Restrictions on Outsourcing by the Federal Government
[1]Office of Management and Budget Circular A-76
[2]Thomas-Voinovich Amendment
§ 17.03Restrictions on Outsourcing by State Government
[1]Sample Preferential Laws
[2]Government Outsourcing/Procurement
§ 17.04Special Considerations in Governmental Outsourcing
[1]Longer Procurement Cycles
[2]Political Climate and Political Realities
[3]Use of Tax Dollars Requires Focus on Value for Money
[4]Frequent Leadership Change
[5]Public Disclosure Laws

CHAPTER 18
Form of Outsourcing Agreement

§ 18.01Forms Historically
§ 18.02Shorter Forms Fit Current Market and Clients
§ 18.03Features of the Modern Form Master Outsourcing Services Agreement
§ 18.04Menu of Supplemental Provisions to the Modern Form
§ 18.05Service Delivery Contract
§ 18.06Form: Master Outsourcing Services Agreement (the Modern Form)
§ 18.07Form: Form of Service Delivery Contract
§ 18.08Form: Menu of Supplemental Provisions to the Modern Form

Index