By Daniel Hunter
Demand for legal advice has increased as organisations look to reduce risk and change their contractual obligations, in the wake of the economic downturn.
According to data, published by KPMG, companies are also expanding the range of services they outsource, but this growth in demand for outsourced services is being matched only by a need for legal support as contractual wrangling becomes increasingly complex.
KPMG’s Legal Pulse Survey, which is based on the views of legal partners within the world’s top 30 international law firms, reveals that 45 percent suggest their clients are showing an increase in demand for outsourcing services. Only 7 percent report a decline - down from 11 percent, 12 months ago.
Asked to identify the top functions where outsourcing demand is high, the lawyers questioned focused on areas ranging from traditional ‘back office’ support to the more visible.
Development of Apps (62 percent) topped the list, followed by Helpdesk support (50 percent), finance/accounting (26 percent) and HR (24 percent). Other areas where demand is high included customer care support and assessing the viability of cloud-based services, for organisations.
“Traditional, mature, outsourcing propositions are known quantities with established contracting principles," Bill Thomas, partner in KPMG’s Shared Services and Outsourcing advisory team, said.
"However, the outsourcing industry is going through another evolution with new forms of technology and the transformation of operating models. With that comes new stresses on the contracting phase.”
Despite the growth, indications are that outsourcing deals are taking longer to contract as the number of services outsourced expands. 41 percent of the lawyers questioned claimed the reason is the growing complexity in developing contracts for outsourced services (a figure that is up from 36 percent last year).
Many lawyers argued that delays are being caused by complexities surrounding the outsourcing marketplace, with 27 percent saying there is “little, to no, standardisation” of contracts - another consequence of the outsourcing industry going through evolution.
The survey goes on to suggest that the slow progress made with contracts is compounded by continued fears over financial uncertainty. When questioned about the most challenging areas in contract negotiations, most answers revolved around limitations of liability and indemnities.
A high proportion also suggested that ‘re-opening contracts to renegotiate pricing’ and ‘renegotiating scope’ are major concerns. Intellectual property rights and licensing were amongst the issues causing least distress.
“Although the signs are good, it is important for businesses to recognise that there are differences in the way contracts are negotiated, depending on the maturity and nature of services being purchased coupled with the maturity of the service provider," Thomas added.
"A one-size fits all approach is wholly inadequate and businesses need to take note that thoughtful, appropriate contracts are a foundation stone for a successful outcome."
Join us on