Offshore Opt-Out

The E-Loan pilot program, which allows customers to choose whether processing work is performed in the U.S. or abroad, may signal a change in how offshore outsourcing agreements are made. But, whether other companies decide to follow suit is yet to be seen. The ramifications of creating similar "opt-out" offshore contracts are many, including creating more flexible termination clauses and minimal-volume guarantees, forecasting labor levels based on what consumers choose, setting up redundant operations overseas, and enticing consumers to choose to use services in one location over another.

Kirkland partner Gregg Kirchhoefer was interviewed for this story and said that for companies to follow the E-Loan model, current deals would have to be reworked to manage risk and ensure that businesses could outsource and insource as needed. He suggested that current deals would have to be altered to include more exit ramps, perhaps a review every quarter. Additionally, these "opt-out" outsourcing arrangements may ultimately not save as much money because companies that need to change volume guarantees may no longer receive discount pricing.

This article was published in its entirety in the April 1, 2004 issue of eWeek. To access the entire article, please visit www.eweek.com.