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The Kiplinger Washington Editors
July 3, 2008
 

Big-Bank Woes
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The largest U.S. banks are hurting badly, and the pain is starting to spread. Most small and midsize banks are still ready to lend to businesses, but they're getting nervous. This week's Kiplinger Letter examines the outlook.
 
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Outsourcing -- Not Just a Way to Cut Costs Anymore

Companies are increasingly considering outsourcing for quality and expertise. Here's a look at other outsourcing trends and tips for dealing with the changing environment.
 
 
Jon Edgell
Morrison & Foerster










Jon Edgell is a partner in the London office and a member of Morrison & Foerster's Technology Transactions Group and Global Sourcing Group. He is a leading outsourcing lawyer in the U.K. and advises clients on complex IT outsourcing transactions and business process outsourcing involving human resources, facilities, payroll, accounting and other systems and processes.
Gabriel E. Meister
Morrison & Foerster
Gabriel E. Meister is a partner in the Technology Transactions Group in the New York office and a member of the firm's Global Sourcing Group. Meister has substantial experience in a wide variety of high technology and intellectual property-related transactions. His practice is focused on large-scale outsourcing deals, including IT and business process outsourcing (both offshore and onshore).
Nigel Stamp
Morrison & Foerster
Nigel Stamp is a partner in Morrison & Foerster's Hong Kong office. He specializes in providing advice on information technology, outsourcing, e-business, communications and digital media law and practice. Mr. Stamp has advised some of the world's leading financial institutions, technology suppliers and telecommunications companies on major projects, including the leading telecommunications company, some of the leading banks and a leading film company in Hong Kong. Mr. Stamp provides advice on all types of technology contracts, B2B and B2C e-business ventures on the Internet and digital media projects such as digital interactive television.

When American companies began turning to India, Uganda, China, Poland and elsewhere to staff call centers, handle paperwork, write software and manufacture products, there was one goal – to save money. But outsourcing firms have grown so good at the diverse services they offer that American companies are turning to them even if little money is being saved -- and sometimes even if they cost a little extra.

"Customer organizations realized that the service providers really were experts in their chosen fields and that outsourcing offered a range of additional benefits such as access to new skill sets, best-of-breed services, greater innovation and transformation, and better speed-to-market for new products and services," the law firm of Morrison & Foerster writes in a report on outsourcing trends for 2008.

The firm warns American companies that the falling dollar could make outsourcing even more costly, but to not act precipitously. Providers that rely heavily on U.S. clients and those with contracts that put much of the currency risk on them may push for price increases, even if they hold long-term contracts. Clients should think twice before turning them down. "Some of the more mature customers may realize that it is in their best interests to ensure that their provider is not in a loss-making situation," the report says. "…However, such price increases will come at a cost, and providers will be pushed even harder to innovate and provide more added value."

Morrison & Foerster says contract disputes and misunderstandings are still common, despite the fact that agreements are much more carefully worked out than they were in the early years of the outsourcing explosion. The report says customers themselves are often to blame. "It is clear that many of the contract management mechanisms in place … either are not being used or are being implemented poorly." It urges companies to recognize that outsourcing firms need the same type of supervision and oversight as their own operations. More time and staff should be dedicated to making sure quality, service and contractual terms are being met. Or, of course, that function can be outsourced.

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