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As AI becomes integral to service delivery, whether central to outsourcing services or merely used for incidental back-office operations, traditional outsourcing agreements often fall short of addressing today’s AI-driven realities. Now is the time to review both legacy outsourcing contracts and template agreements to address AI’s evolving role. Four critical areas demand immediate attention:
Business Outcomes: AI can make the “holy grail” of outcome-based service delivery achievable, but this requires rethinking commercial terms. Pricing models should reflect business results rather than labor hours, and service levels should measure outcomes as well as traditional efficiency metrics.
IP Ownership: Generative AI inputs and outputs, along with agentic AI methodologies, do not always fit neatly into traditional IP frameworks. Legacy MSAs may fail to address these nuances, risking costly disputes over IP ownership and post-contract IP use rights. If creation of new AI models is in scope for outsourcing services, legacy MSAs may similarly not address the nuances of such development.
Compliance with Laws: The patchwork of emerging AI regulations can create compliance nightmares, especially given their jurisdictional variations. When the use of AI impacts where and how services are performed or data is processed, the allocation of compliance responsibilities between customer and service provider may shift significantly.
Third-Party Components: AI solutions that are used by outsourcing service providers are typically bundled with some combination of third-party services, including cloud hosting, foundational AI models and external data sources. While traditional outsourcing agreements address responsibility for subcontractors and third-party software, these terms may need to be revisited to avoid unintended consequences or otherwise clarify a service provider’s responsibility for AI-specific components.
The irony? AI itself might help solve some of these issues. Consider using AI tools (in non-public environments) to analyze legacy contracts and template MSAs to identify potential gaps in terminology, commercial terms and risk allocation. Since AI is reshaping outsourcing relationships, perhaps AI can also assist in addressing the changes required for outsourcing arrangements to properly address AI.
