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Information Technology Outsorcing Transaction - Halvey K.J.

Halvey K.J. Information Technology Outsorcing Transaction - Wiley Publishing, 2005. - 649 p.
ISBN-10 0-471-45949-6
Download (direct link): informationoutsourcingtransactions2005.pdf
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The decision about what will or will not be outsourced has traditionally been one of determining what is strategically so important to the core competency of the business that it cannot be handed over to a third party. However, as the recent boom-bust economic cycle has demonstrated, business strategy is an evolving process, and the line of what is now deemed too critical to a company’s operations to outsource has moved closer to the corporate offices of most organizations. Functions like HR, finance, marketing, project management, customer care, and customer acquisition—once viewed as too core to be handled by an
1. "Lou Dobbs Tonight" Web site, at http://www.cnn.com/CNN/Programs/lou.dobbs.tonight.
2. The list of proposed federal antioutsourcing legislation includes, among other measures, bans on offshoring federal contract work; reporting requirements for companies considering offshoring jobs; consumers' "right to know" measures for offshore call centers; restrictions on outsourcing-related work visas for foreign nationals; and ending the tax deferral for American companies' overseas profits. Global Sourcing Information: Table Tracking State and Federal Global Sourcing Legislation, National Foundation for American Policy Web site, at http://www.nfap.net/researchactivities/ globalsourcing/appendix.aspx.
3. The list of proposed state antioutsourcing legislation includes, among dozens of other measures, bans on offshoring state contract work; restrictions on consumer information being sent offshore; consumers' "right to know" measures for offshore call centers; extending insurance benefits to workers who have been displaced through outsourcing; and advance notice to employees before their jobs can be sent offshore. Global Sourcing Information: Table Tracking State and Federal Global Sourcing Legislation, National Foundation for American Policy Web site, at http://www.nfap.net/researchac-tivities/globalsourcing/appendix.aspx.
4. Patrick Thibodeau, "Forrester adjusts outsourcing numbers upward," ComputerWorld, May 17, 2004, at http://www.computerworld.com/outsourcing/story/0,10801,93217,00.html.
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xx Preface
outside party—are being outsourced with increasing frequency.5 The confluence of this increased corporate outsourcing activity, the current political scrutiny, and the ever-developing sophistication of the outsourced solutions being offered has created a greater need for innovative corporate approaches in the outsourcing arena.
Although the outcome of any of the outsourcing regulatory proposals remains far from certain, outsourcing customers and their deal teams have nonetheless begun structuring (and restructuring) their outsourcing relationships in anticipation of a heightened regulatory environment. One such strategy involves how to control the outsourced solution. The threat of tighter regulations will prompt some companies to tighten the reins on the governance of the outsourced solution, ensuring that in the future the company can control its own compliance in a changing regulatory environment. For other companies, adapting to yet-unknown regulatory obstacles warrants becoming more hands off with the outsourced solution, easing the reins on the day-to-day mechanics of governance, and making the service provider responsible for compliance with changing laws. With either approach, the key to success is open dialogue between the company and service providers.
Current and pending data security and consumer protection laws have prompted some companies to seek firm assurances from their outsourcing vendors that the vendors’ facilities, systems, and human resources policies have adequate security measures in place. In the wake of the Sarbanes-Oxley Act, and with new accounting rules being developed by the Securities and Exchange Commission (SEC) and Public Company Accounting Oversight Board (PCAOB), companies are seeking to bolster their rights to audit their outsourcing vendors’ records, facilities, software, hardware, and security measures. With increased regulatory scrutiny of offshore service locations (not to mention the rise of global terrorism), the legal doctrine traditionally known as force majeure has taken on an added meaning, with companies demanding more robust business continuity and disaster recovery obligations on the part of the vendor. In addition, customers are paying greater attention to the corporate entities that are signatories to their outsourcing contracts so as to ensure that the customers are not simply contracting with local holding companies but, rather, with firms that have assets to stand behind the promises made in the contracts.
As these examples demonstrate, to successfully navigate an outsourcing transaction, and then manage the outsourcing relationship, in such dynamic times requires a combination of both corporate strategy and transaction process. Companies will continue to refine the focus on their core competencies (e.g., the sale of specialized goods or services) and seek to efficiently outsource the noncore elements of their business. As this decade unfolds, the competitive differentiation for most global organizations will be the ability to effectively manage multiple outsourced relationships and the myriad of business and legal issues those
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