Our technology transactions, outsourcing, and commercial contracts team on October 30, 2024 held its annual industry summit in New York. The theme this year was Unleashing the Potential of Technology, with a focus on artificial intelligence (AI). Attendees included in-house counsel and sourcing professionals across a number of industries, including representatives from the client and vendor side. The diverse audience led to highly interactive discussions among some of the leading voices in the tech and sourcing fields.
The day began with an ethics hour focusing on ethics and AI and featuring our firm’s global head of eData Scott Milner. The ethics was followed by five hours of substantive sessions, which included the following:
- Market Trends, Contracting for AI, Outsourcing and Technology – Resiliency and Security
- The Impact of Cloud and AI, an
- An interactive session titled AI and Your Business
- A Privacy Law update by Greg Parks
We ended the day with a thought-provoking keynote by Dr. Daniel Susskind and a networking reception.
Key Highlights
Ethics and AI
- Ethical obligations serve as a compass as we explore and capitalize on the many opportunities presented by AI to fundamentally change the way legal services are staffed, priced, and delivered
- Tools and processes that promote explainability and validation, such as linking to source content, (1) foster compliance with ethical requirements (e.g., confidentiality and supervision) and (2) help build trust with clients and other participants
- Many use cases are already catching on, such as semi-automated compliance monitoring and reporting and AI-driven contract review; some uses focus on generating revenue or managing costs rather than cutting costs or mitigating risks, such as mining contract data for price escalation rights and automatic term extensions
- With any use of AI, in-house lawyers must remain vigilant about the associated capabilities, benefits, and risks
Market Trends: The Year Ahead
- This session focused on digital transformation, AI, cloud services, cybersecurity and resiliency, outsourcing, global capability centers, data center explosion, and data
- Digital transformation investments continue to grow, with a prioritization on generative AI (gen AI) strategies and use cases
- Gen AI is becoming a cornerstone of modern business as companies shift focus to generating positive return on investment
- The accelerated growth of AI innovation is resulting in significant growth in cloud infrastructure spending; companies are continuing to migrate workloads to the cloud to take advantage of AI models and scale AI use across the enterprise
- As organizations balance the desire for cloud-first infrastructure and enterprise AI deployment, the technology function will need to be reshaped to ensure integration and successful data management
- The outsourcing market is looking strong, with continued growth forecasted for 2025
- Companies across industries are showing a strong interest in establishing global capability centers (GCCs), which are fully owned offshore hubs responsible for providing various support services and centers for strategic innovation and operational excellence;
- Build-operate-transfer models and provided-supported GCC setups are driving growth in the GCC market, particularly in India
- The surging adoption of AI technologies is creating an increased need for the computing and storage infrastructure at data centers, which, in turn, is driving substantial demand for the energy needed to power an increasing number of large data centers
- Different power sources (e.g., nuclear) will be needed to meet this exploding demand for energy; it will be important for companies to align their AI and computing power usage with promises regarding carbon neutrality and emissions reductions
- In anticipation of the explosive growth of data centers, our firm recently launched a Data Centers initiative to provide end-to-end legal support and solutions for clients across the data center ecosystem
- A key overarching theme for 2025 is the challenge of managing huge volumes of data (e.g., collection, storage, and integration) and generating business value from that data
Contracting for AI
- When addressing AI in contract drafting and negotiations, the first consideration is what counts as “AI” and why; machine learning and gen AI have different risk profiles
- One risk mitigation approach is to outline the primary concerns based on the use case and then tailor the definitions, procedures, and restrictions based on how the inputs would be used (e.g., whether used for further training of the model) and how the outputs would be generated and used
- As the underlying technology becomes more complex and opaque—and as human tasks are displaced—thoughtful and thorough testing becomes a key contract consideration; specifications and acceptance criteria could account for more than just functional capability, as vulnerabilities such as prompt injection attacks could undermine any otherwise carefully crafted AI tool, and customers could inquire about the model’s flexibility in adjusting for issues like discovered bias prior to testing
Data Protection and Resiliency
- In the privacy and cybersecurity space, the mega breach is on the rise, with multiple breaches resulting in costs exceeding billions of dollars
- In this environment, many organizations are understandably focused on resiliency, including cyber resiliency and operational resiliency
- Cyber resiliency involves cybersecurity and related risk management, business continuity, incident response, and disaster recovery; a cyber vault—an isolated copy of production data that is available for rapid recovery when needed (e.g., a ransomware attack that infects primary backup systems)—is one way to increase cyber resiliency
- A clean room can be used to test the backup data to determine which copy was made prior to infection and can be used in production
- Although cyber vaults can be expensive, the market is growing
- Global disruption arising from the CrowdStrike IT update provided a stark warning of the criticality of businesses’ resilience, including operational resiliency, which encompasses an organization’s ability to identify and prevent disruptive events, not just how to respond and recover from them
- Our firm has mobilized a team of lawyers as part of a CrowdStrike initiative to help clients address and overcome acute technological business disruptions
- Third-party risk management strategies, including contract terms, are key for addressing resiliency challenges
- It is also important to understand how solutions and services are integrated within operations and to anticipate and plan for supply chain disruptions (e.g., the explosion of demand for GPUs to power AI technologies could lead to supply chain disruptions for other critical computing chips)
The annual summit is always a fantastic event, and this year was more interactive than ever. For more information, check out our upcoming webinar series Tech & Sourcing: Data 2025. This series will feature monthly webinars that will cover key contract issues and negotiating best practices impacting data management in a rapidly evolving AI landscape.
Special thanks to our presenters:
- Barbara Murphy Melby
- Mike Peirides
- Mike Pierides
- Doneld G. Shelkey
- Scott A. Milner
- Christopher C. Archer
- Katherine B. O'Keefe
- Gregory T. Parks
- Emily R. Lowe
- Vito Petretti
- Benjamin Klaber
- Eric J. Pennesi
- Colleen F. Nihill