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Situation in Ukraine Puts Outsourcing Customers at Risk

According to the Everest Group, Ukraine’s IT outsourcing industry has been growing by more than 10% annually, and now has more than 25,000 full-time employees. This growth is at risk, however, due to the situation in Ukraine, which is putting outsourcing customers’ services and data in danger of disruption and loss.

The United States and the European Union have taken actions to forge closer economic ties with and support Ukraine. However, outsourcing customers should remain vigilant regarding risks in Ukraine and keep this situation in mind when structuring or amending outsourcing agreements.

The primary risk facing outsourcing customers is delivery risk, but an outbreak of violence could lead to destruction of data centers and theft of servers. Christine Ferrusi Ross at Forrester recommends that customers with IT outsourced to Ukraine should promptly put a risk plan in place. Such a plan would include discussions with existing providers about shifting work to other countries and discussions with alternative providers, if necessary.

When negotiating outsourcing agreements, customers should consider accounting for geopolitical risk by including data center redundancy and relocation provisions. Customers should also consider termination and cooperation rights that would allow them to move data to alternative service providers without disruption or penalties.

Copyright © 2020 by Morgan, Lewis & Bockius LLP. All Rights Reserved.National Law Review, Volume IV, Number 162



About this Author

Barbara Melby, Morgan Lewis, data privacy and cybersecurity lawyer

Barbara Melby has been active in the outsourcing and technology transaction legal market for the last 25 years. As leader of the firm’s technology, outsourcing & commercial transactions practice, she represents clients in such complex transactions as outsourcing, strategic alliances, technology and data-related agreements, and other services transactions. She also advises businesses on privacy and security issues that arise in transactions involving sensitive data and technologies.

A. Benjamin Klaber, Intellectual property attorney, Morgan Lewis

A. Benjamin Klaber practices on a Morgan Lewis team that counsels clients on technology, outsourcing, and commercial transactions, intellectual property matters, mergers and acquisitions, private equity, venture capital, and general corporate matters. Before law school, Benjamin was a quantitative analyst in the investment management industry after earning a B.S.E. in operations research and financial engineering. He is a member of the Emerging Leadership Board of the Pittsburgh Venture Capital Association.​​