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Dealing with risk: clear or block?

The recent UK High Court decision in the BSkyB case with EDS will leave many outsource service providers with a great deal to think about. Whatever happens at the appeal, the case is bound to drive a fundamental rethink about the risks for both sides in an outsourcing arrangement and how to fairly, anticipate, apportion and pay for things that go wrong.

Inevitably, there are two pretty valid sides to this argument with outsourcers concerned that their businesses’ efficiency and reputation could be at stake for the errors or imperfections in somebody else’s system. On the other side, outsource service providers fear a contract that, after they have taken it on, starts to grow as more and more demands are heaped on, each preceded with the words, ‘could we just…?’

It seems that in outsourcing as in life, the real winners will be the lawyers who will be called upon to define and quantify risk before arguing over its allocation between the parties to an arrangement. It’s going to add cost to outsourcing and, when the UK public sector starts to outsource increasing amounts of its work, the cost will multiply.

When you add into the mix the likelihood that many arrangements will cross the boundaries of at least two judicial systems, it is clear that the management of risk must be a priority for the outsourcing sector if it is not to be a block on progress.
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