USA Law and Practice Contributed by: Jeffrey Harvey, Randall Parks, Andrew Geyer and Cecilia Oh, Hunton Andrews Kurth LLP
aware of the legal risks and transaction costs associ - ated with the adoption of this model upfront. Build-Operate-Transfer (BOT) Deals After peaking nearly two decades ago, BOT trans - actions made a fairly strong comeback over the last year. In a BOT transaction, the customer engages a provider to build a global capability centre (GCC) in a desired area of expansion; the provider builds the GCC and operates the GCC on behalf of and for the sole benefit of the customer for an agreed period of time. Once that period of time expires, the provider transfers the now fully functioning operations centre to the customer. This approach allows customers to save capital costs and transition headaches on the front-end, while establishing and later receiving a fully functional GCC. Other Approaches Unique situations are sometimes addressed with alternative structures, such as joint ventures (often in the form of contractual joint ventures but sometimes involving equity investments). These are highly negoti - ated responses to special commercial circumstances and are much less common in the market. 3.3 Digital Transformation In response to the COVID-19 pandemic, companies around the world increased overall investments in remote work technologies and have undergone – or are in the process of undergoing – a complete digital transformation. In the process, many have adopted several of the models discussed in 3.2 Alternative Contract Models , using each to complement the other. There has been an increase across the board (albeit less so with captives) in companies returning to outsourced service models complemented by a shared services centre (often using third-party pro - viders) or a GBS model, where on-site employees are no longer necessary or desirable, and where remote delivery is preferred. As a result, providers are restructuring their commod - itised outsourcing offerings to be delivered “as a ser - vice”. In such cases, the delivery and pricing models assume that there is little variation in the services, service levels, and the related risk allocations and contract terms. Accordingly, the service agreements
are standardised and the providers are reluctant to negotiate terms. Customers will often hear that the services will be delivered using a “one-to-many” deliv - ery model, which is the provider’s way of indicating that it is unwilling to make certain concessions that may be specific to that particular customer.
4. Contract Terms 4.1 Customer Protections
Protections for customers in outsourcing agreements come in many forms. The main protections for cus -
tomers come in the form of: • indemnification obligations;
• representations and warranties (eg, performance, malware/disabling code, and services not to be withheld (“no abandonment”)); • confidentiality and data security obligations; • service levels; • market currency provisions; • disputed charges provisions; • additional services provisions; • cover services provisions; and • detailed service definitions and gap-filler or “sweeps” clauses. Indemnification Obligations The claims covered by a party’s indemnification obli - gations are often the subject of intense negotiations. Typical indemnification obligations requested by the customer include: • IP infringement/misappropriation (covering not only the supplier’s services and the customer’s use thereof but also all items and materials used by the supplier in the delivery of the services, including AI and the output created by AI); • personal injury and property damages; • violation of law; • gross negligence and wilful misconduct; • breach of confidentiality and data security; • claims by the provider’s personnel; and • tax liabilities of the provider. Outsourcing providers may request reciprocal indem - nities, although not every indemnity should be recipro -
98 CHAMBERS.COM
Powered by FlippingBook