On January 8, 2025, partners Doneld Shelkey, Mike Pierides, and Marina Aronchik presented an Outsourcing and Technology 2025 webinar as part of the Morgan Lewis Tech & Sourcing Webinar Series: Data 2025.
The webinar provided an update on the latest trends in outsourcing, technology, and AI transactions and related issues arising from the collection, use, and processing of data.
For those that missed the webinar or who would like a brief recap, we set out some key takeaways from the webinar below:
Key Trends for 2025
- Digital Transformation:
- Digital transformation is now a strategic initiative for the majority of businesses and is no longer a discretionary investment. An estimated 90% of all organizations are currently undergoing some kind of digital transformation (McKinsey)
- Most digital transformation deals try to achieve outcome-based contracting models; however, in practice, there is a mix of outcome-based through to pure time and materials-based delivery (which seems to be the majority of deals).
- Artificial Intelligence (AI):
- Nearly three out of five businesses have started using AI for at least one business function (McKinsey).
- Healthcare and automotive industries are expected to see the most impact from AI use (PwC).
- Cloud Services:
- Global spend on cloud infrastructure continues to grow rapidly.
- AI is playing a big part in Cloud Services: All three cloud hyperscalers reported positive returns on their AI investments, which have begun to contribute to their overall cloud business performance (Canalys 204 Q3 Survey).
- Key challenges for public cloud migrations include understanding app dependencies, assessing on premises vs. cloud costs, and assessing technical feasibility (Flexera).
- Cybersecurity and Resiliency:
- Nine in 10 organizations report they’ve experienced multiple major disruptions (this excludes Covid-19 pandemic disruptions), with the top-reported disruptions being employee retention and recruitment, supply chain, technology disruption or failure, and cyberattacks (PwC).
- Remains a key focus for regulators across the globe.
- Global Capability Centers (GCCs):
- There is a growing trend of setting up GCCs: Between 2018–2019 and 2023–2024, GCCs created more than 600,000 new jobs in India, bringing the total to more than 1.6 million jobs (The Economic Times).
- GCCs are favored by businesses with strong corporate cultures and those that want to “dip their toe” in the India and offshore markers but perhaps don’t want to make material initial commitments.
- There remains some immaturity in the GCC-specific vendor community—their models and track record have not yet been clearly tested and understood.
- Data Centers:
- Data center demand is on the rise. To keep pace with the current rate of adoption, the power needs of data centers are expected to grow to about three times higher than current capacity by the end of the decade, going from between 3% and 4% of total US power demand today to between 11% and 12% in 2030 (McKinsey).
- Data Use and Management:
- Access to and security of data is an increasingly critical consideration for corporations.
Contracting for AI and AI Use Policies
Two key aspects of contracting for AI are (1) notification and (2) testing.
- Notification: Providers may be contractually obliged to keep its customers informed about AI use as part of the services and customers may have rights to request specific information about AI use. It is key to clearly define what the parties mean by AI in order to ensure these provisions work effectively.
- Testing: Customer will likely demand that vendors implement processes and procedures that test their AI solutions, including for compliance with law, bias, and general defects. Vendors will likely have their own policies and procedures; consideration will be required as to how they align with customer demands.
An increasing number of businesses are creating AI use policies to denote how AI can be used by the business. Some key topics to include in AI use policies are:
- Use of bespoke vs. public AI tools
- Personnel training
- Related company policies
- Avoiding bias issues
- Confidentiality issues
- Intellectual property infringement
- Suitable input data
- Accuracy of outputs
- Human oversight
- Usage approval levels
Cloud Services Agreements in 2025
Market trends are driving changes to cloud contract terms and pricing.
Renewals almost always involve renegotiation and/or restructuring of the agreement.
Thoughtful analysis of renewal dimensions may drive the outcome of the renewals. Some key issues to consider for renewals are:
- Changes to contract structure
- Issues under existing contract
- Changes to terms for core services
- Terms for new services
- Changes based on new laws
Tech & Sourcing Webinar Series: Data in 2025
We invite you to join us for more of our Tech & Sourcing Webinar Series: Data in 2025, which runs through May 2025.