The concept of outsourcing is not new. The outsourcing market has evolved – its growth was once relatively slow but it has accelerated and the market is maturing. It has become of major commercial importance. That fact that has not been ignored by practitioners and most now seek to participate in that market. However, practitioners have not been well served with suitable or comprehensive texts. All too often practitioners have found themselves learning on the job without reference to texts to guide them.
This book, edited by John Angel, seeks to address this deficiency by providing an easily accessible reference text. The book assumes a degree of comprehension of the subject and aims to provide further understanding and guidance. The book is divided into 11 chapters, with an introduction by John Angel, and draws upon the knowledge and experience of some of the leading outsourcing practitioners As John Angel correctly identifies, research shows that the lawyer’s role in drafting an appropriate contract is a key factor in a successful outsourcing relationship. It is with this in mind that the book introduces the reader to the logical steps of the outsourcing process and its differing forms in the technology industry.
The first step discussed is the procurement and bidding process (Chapter 1), in which Andrew Foster of ITNET provides a useful and practical insight into the key phases of the process. He reviews in some depth the respective customer and supplier procurement processes (including the preparation of the ITT/RFP and subsequent evaluation), the need for management to commit time to any proposed project, assessment models, and the role of due diligence and methodology. The chapter’s underlying theme is the need for the various parties to consider their business objectives in the outsourcing contract and thereby to ensure that the contract fully reflects the meeting of minds between the parties and the essence of the outsourcing. This theme continues in Chapter 2, The Outsourcing Contract. Combined, the first two chapters are the single largest area of discussion contributed to the book. No doubt this is a true reflection of the importance that must be attached to the required preparation for outsourcing and the need to understand the contract mechanism. Chapter 2, written by Rory graham of Baker & McKenzie, comprehensively reviews and examines the varying forms of outsourcing arrangements, including user group structures, virtual user, multiple provider structures and joint ventures and consortia, and leads the reader to examine the contract structure. As one would expect, the contract is discussed in terms of the transfer of assets (real property, tangible asset, intellectual property and third-party contracts) and services (defining, implementing, dependencies and qualification, exclusivity, change, types of disputes and remedies, and, most importantly the re-tender and exit process).
Chapters 1 and 2 provide the reader with a suitable base from which to delve further into specialised reviews of outsourcing, as they have developed within the technology industry. Information System Outsourcing, Telecommunications Outsourcing, Web Hosting, Business Process Outsourcing and Public Sector Outsourcing (Chapters 3 to 7) are all discussed. Each is reviewed by an eminent specialist with an examination of relevant contract clauses and issues.
In the rush and enthusiasm to conclude most outsourcing contracts, a subject that is often tersely reviewed is exit management (along with change and contract management, dispute resolution and termination). Such neglect is mirrored in many of the practitioner texts on this area – a reflection one would suspect of the limited experience or understanding of those writing about it. Throughout this book, exit management is discussed, and it is dealt with in detail in Chapter 5 (Web Hosting); despite that emphasis, it is still a subject of such importance that it warrants considerably more attention than it receives. That said, the book does seek to provide a useful insight into an area that no doubt will grow as many of the pioneering outsourcing relationships mature and are up for renewal.
One of the most informative Chapters (Chapter 8) is Benching by Robert Morgan. This is a subject that is frequently referred to but all too often inappropriately or ineffectively applied or understood. This chapter provides the reader with a high level overview of the different approaches to benchmarking, the importance of its timing and ongoing use, what it facilitates and the key benefits it brings to the management and running of outsourcing contracts.
As most outsourcing transactions will involve a transfer of employees from one entity to another, the book turns to the human element – the employee dimension (Chapter 9) and the fact that such employees will most likely have pensions (Chapter 10). The European Union’s social policy has resulted in the introduction of a number of measures and legislation to protect employees, simply put, TUPE. Chapter 9 guides the reader through this potential quagmire with a clear and simple examination of the Directive, its English embodiment and applicable case law. This is supplemented and interspersed with legal summaries, and most usefully practical steps to deal with who and what is transferred, reorganisations and consultations. Although related to the general employment law position, the structure of occupational pension schemes, their unsettled relationship with the contract of employment and the exemption applicable to occupational pensions under TUPE means that they require separate consideration. Chapter 10 guides the reader through the sources of pension provision, their regulatory and legal structure, their relationship to contracts of employment and TUPE and the pension aspects of an outsourcing transaction, including transfer calculations. By its discussion on pensions as they relate to the public sector, this chapter again demonstrates the book’s ability to interlink different authors’ contributions.
The final chapter of the book, Chapter 11, introduces the reader to the complex and specialist area of tax. Whatever the form of the contract and whoever the parties, it should be recognised that the Inland Revenue will be an interested party. Accordingly, research and development, VAT, transfer of assets and the structure of any arrangement will invariably be involved somewhere within an outsourcing arrangement and will attract the interest of the taxing authorities. It is with this in mind that Chapter 11 does not delve too deeply, to do so would be over ambitious for the purposes of this book, rather it provides a high level review of areas for consideration.
This book provides a thorough examination of the issues surrounding the outsourcing industry as it applies to technology. John Angel has obviously sought to ensure that each author address issues raised by others, ensuring that, whilst many have contributed to the book, no one chapter stands alone or should be read independently from the others. John Angel has successfully integrated contributions from all, avoiding undue repetition. For example, service levels, service credits, their measurement and performance, first raised as an issue in Chapter 2, is discussed and further applied in Chapters 3 and 5, neatly linking back to earlier chapters and remaining applicable for later chapters. No one subject is cursorily discussed, each is addressed and reviewed with suitable detail, advice and insight and solutions are suggested that are drawn on the experience of those contributing. Technology Outsourcing A Practitioner’s Guide is a comprehensive work addressing all aspects of outsourcing and will serve both as a quality reference work for practitioners and as a source of understanding for students.
James Catchpole is a Solicitor lecturing in e-commerce and business law and practice at the Inns of Court School of Law. He can be contacted on j.catchpole@city.ac.uk.
