Tech & Sourcing @ Morgan Lewis

Worldwide IT spending is forecast to total more than $5 trillion in 2024, with 10% year-on-year growth of spending on data center systems, according to recent analysis from Gartner. The increasing adoption of artificial intelligence (AI) solutions is driving demand for technology infrastructure in order to meet greater data storage and network infrastructure requirements and more compute-intensive workloads.

Beginning January 17, 2025, the European Union’s Digital Operational Resilience Act (DORA) will require financial entities to maintain and submit to EU regulators a comprehensive register of their contractual arrangements with third-party information and communication technology (ICT) service providers. Financial entities are being given the opportunity to sign up for a voluntary reporting exercise by May 31, 2024, running between July and August 2024, to help them prepare for one of the most challenging aspects of implementing DORA.

We recently published a report based on our four-part series on Tech & Sourcing @ Morgan Lewis, in which we consider a number of conundrums facing companies looking to leverage artificial intelligence (AI) as part of their outsourcing arrangements. As outsourcing remains a key tool through which companies can streamline operations, cut costs, and access specialized expertise, the explosive advancements in AI and related technologies have introduced new and exciting opportunities and complexities for companies in implementing and maintaining outsourcing relationships.

The UK Competition and Markets Authority (CMA) recently published an update paper outlining its concerns with artificial intelligence (AI) foundation models (FMs). Market players in this space should remain mindful of the CMA’s growing interest as the regulator continues its dedicated program to consider the impact of FMs on markets throughout 2024, with a further update anticipated in August.

The Federal Trade Commission (FTC) approved a Final Rule on April 23, 2024 banning almost all worker noncompetes. Questions abound regarding the authority of the FTC to create such a rule and the potential implications of its implementation. To help create some clarity, Morgan Lewis lawyers have prepared answers to frequently asked questions (FAQs) related to the Final Rule’s applicability and anticipated impact as well as what businesses can do to prepare.

This blog is the finale to our Cracking AI and Outsourcing Conundrums series, a series in which we’ve discussed thought-provoking topics and set the stage for dynamic discussions with outsourcing customers and providers on the opportunities and risks of generative AI (GenAI) solutions in the outsourcing space. In this Part 4, we examine certain top-of-mind issues arising in connection with ownership and use rights when leveraging GenAI.

Welcome to Part 3 of our Cracking AI and Outsourcing Conundrums series. In Part 1, we discussed at a high level the challenges of requiring outsourcing providers to drive innovation through the use of generative AI (GenAI) while at the same time complying with an outsourcing customer’s AI policies. In Part 2, we dove into the conundrum of balancing a company’s need for enhanced quality checks with the desire (by the company and the outsourcing provider) to drive productivity and realize savings.

In Part 1 of our Cracking AI and Outsourcing Conundrums series, we discussed at a high level the challenges of requiring outsourcing providers to drive generative AI (GenAI) innovation while at the same time complying with companies’ AI policies. One of the challenges we identified was that many outsourcing agreements impose aggressive savings commitments, to be realized through the implementation of technology solutions that enable headcount or other cost reductions.

Innovation: all companies want their outsourcing providers to be at the forefront, whether accomplished by proposing ideas, implementing solutions as part of their business-as-usual services, or offering savings based on productivity commitments or other demonstrable business impact. Some outsourcing providers may even use innovation as a key differentiator during the sales cycle, putting real dollars at risk if innovation projects don’t realize promised savings. And what innovation is more top of mind presently than the use of artificial intelligence?

New ICT incident reporting requirements under Circular 24/847 (Circular) of the Commission de Surveillance du Secteur Financier (CSSF), Luxembourg’s financial regulator, will come into effect on April 1. This introduces a new ICT-related incident reporting framework and underscores the critical importance of proactive measures in safeguarding financial institutions against ICT and cyber threats.