Global Politics and Technology Trends Bring IT Outsourcing Challenges

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By: Jeff Bertolucci|

A barrage of rapidly evolving political and technological developments will cause IT outsourcing customers to rethink their IT service strategies in 2017, according to a recent webinar from global law firm Mayer Brown.

As reported by CIO, the webinar “Data, Digital, Outsourcing and Software — What’s in Store for 2017?” provided insights and predictions from four Mayer Brown partners on the most significant trends transforming IT outsourcing. The participants included members of Mayer Brown’s technology transactions team, including Chicago-based Brad Peterson, Rebecca Eisner and Paul Roy, as well as Daniel Masur in Washington, D.C. Each attorney regularly advises clients on numerous technology issues, including digital services, outsourcing, data rights and systems development.

Outsourcing Uncertainty

Recent U.S. interest in retaining American jobs by implementing major changes in trade agreements, regulations, corporate taxes and visa policies will likely impact outsourcing models based on global labor arbitrage.

“The Brexit vote, together with looming elections in the Netherlands, France and Germany and the uncertain economic state of Italy and other EU countries, just adds to the uncertainty,” says Masur.

As a result, companies in 2017 will seek to add flexibility to their outsourcing arrangements. Examples include adding new termination rights, reserving the right to move locations, insisting on the right to insource and similar protections, adds Masur.

More Challenges in 2017

This year will also bring significant change in cybersecurity and privacy regulations. Some of the developments in 2016 will also continue to have repercussions.

For example, Privacy Shield, a data transfer agreement between the European Union and the United States adopted last July, replaced the Safe Harbor agreement. The previous EU-to-U.S. data-transferring system for companies that was struck down in 2015 by the EU Court of Justice ruled that Safe Harbor didn’t adequately secure the privacy rights of EU citizens.

While multinational companies are determining how to adopt a Privacy Shield framework, the agreement is currently subject to two legal challenges in Europe — a cause for concern, adds Eisner.

Another looming change is the EU General Data Protection Regulation (GDPR), which applies both to multinational companies and firms outside the EU that process the personal data of EU citizens. GDPR may require companies to implement some technical and operational changes, and the time to “assess the impact and to prepare for these changes is now,” Eisner notes.

Big Data and Analytics

Mayer Brown also forecasts a surge in data analytics contracting in 2017.

“Companies have spent an immense amount of energy gathering data, and data volume continues to grow at an exponential rate, doubling every two to three years,” says Peterson. This presents a huge opportunity for data analytics work, which will go not only to specialist firms but also to the companies offering integration technology stacks of Microsoft Azure and other advanced technologies.

The demand for digital solutions will grow rapidly, notes Roy, as technologies such as artificial intelligence, robotics and process automation “dominate the innovation agenda.”

This is expected to transform outsourcing, as digital services have “exhausted, or nearly exhausted, the cost-saving limits of moving work to lower-cost people,” says Roy. As a result, IT outsourcing companies are increasingly focused on moving work to machines to achieve greater cost savings.

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About The Author

Jeff Bertolucci

News Writer

Jeff Bertolucci is a Los Angeles-based journalist specializing in technology, digital media, and education. His work has appeared in Kiplinger's Personal Finance, InformationWeek, PCWorld, Macworld, The Saturday Evening Post, The Los Angeles Times and many other publications.