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Necessary Considerations for Implementing a Multi-Sourced Environment

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.

Identified below are a few of the key issues that customers should consider in their outsourcing agreements when contemplating a multi-sourced environment.

  1. Can customers share information across service providers? The outsourcing agreement should clearly articulate each party’s confidentiality obligations. In a multi-sourced environment, a customer must be able to share certain confidential information from a service provider with other service providers. Customers should be concerned if confidentiality obligations are too restrictive because they may prohibit the sharing of information necessary to make a multi-sourced environment a success.

  2. Who’s responsible for what? The responsibilities and the role of each service provider involved in a multi-sourced environment must be clearly delineated. This includes responsibility for completion of services as well as clearly defined service levels for each service to be performed. If the lines begin to blur, customers may not have anyone to look to for resolutions.

  3. Play nice in the sandbox! Customers need to be sure that all service providers in a multi-sourced environment are committed to working collaboratively. Consider adding obligations in an outsourcing agreement that require service providers to cooperate with other service providers in a timely manner.

  4. Cross-provider governance. Customers should consider requiring periodic meetings among all service providers involved in the multi-sourced environment. Such meetings should be useful to ensure that all players involved are communicating and working collaboratively to support the customer.

  5. Who is in charge? In many cases, customers may hire one service provider to manage and supervise the multi-sourced environment; therefore, customers should consider including provisions in outsourcing agreements that expressly state that the outsourcing arrangement may be managed by another provider.

Copyright © 2020 by Morgan, Lewis & Bockius LLP. All Rights Reserved.National Law Review, Volume IV, Number 226

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About this Author

Vito Petretti, Morgan Lewis, Technology Lawyer
Partner

Vito Petretti’s practice focus is technology and outsourcing matters. Clients regularly turn to him to draft and negotiate domestic and international outsourcing service agreements for a variety of business processes, such as information technology, finance and accounting, human resources, and procurement. Within the realm of information technology, Vito drafts and negotiates agreements for software licensing, hardware purchases and leases, data licensing and subscriptions, website hosting and development, and other technology-related agreements, including system...

215-963-5001
James Sherwood, Morgan Lewis, Corporate lawyer
Associate

James R. Sherwood brings a background in auditing to his legal work on business matters such as mergers and acquisitions, joint ventures, spin-offs, and strategic alliances. He is part of a team that also handles matters involving finance and restructuring, tax, and securities, including public and private equity and debt offerings. Their clients range from Fortune 500 companies to investment banks to emerging market companies. Prior to attending law school, James was a senior audit assistant in the audit and enterprise risk services group at Deloitte & Touche.

215-963-5669