Rolling with the Punches 

Providers and Advisors Report on their COVID Experiences and Lessons Learned

Edited by John Beardwood (Fasken LLP, Toronto), with contributions from Andrew Alleyne (Fasken LLP, Toronto), Gabriel Stern (Fasken LLP, Toronto), Andy Sealock (West Monroe), Suzanne Richter-Wills (ABBYY), Audrey Cushing (Vee Technologies) and Paul Sheridan (Eclaro)

On nearly the first anniversary of the COVID pandemic, providers and advisors had the opportunity on Feb. 16 during the Provider/Advisor Session of IAOP’s OWS21 to share their experiences during COVID.  Below are the questions which were canvassed and the responses from the attendees, as recorded by the session chair and each roundtable leader. There was a remarkable commonality of experiences, and overall providers appear to have successfully navigated the perilous shoals of the pandemic much more successfully that might be anticipated.

The Providers/Advisors Report

1. Experiences in Foreign Jurisdictions.  How has COVID affected your use of foreign jurisdictions in the provision of outsourcing services to customers?  For example, has it affected your choice of jurisdiction for your foreign locations?  Which jurisdictions appeared to adapt the fastest?  How did this change your labor arbitrage strategy - in your lower-cost foreign jurisdictions, has the required “work from home” infrastructure been available?” Similarly, how have your customers’ international outsourcing footprints changed as a result of COVID?

Providers indicated that generally the availability of workarounds – for example, the shifting of resources between service silos - meant that the COVID pandemic did not result in a reduced ability to provider services.  With remarkable consistency, providers reported that on average, the percentage of personnel who were remotely working (or adopting “work from home” practices (“WFH”)) increased from 5 to 90 percent, within 45 days. The main challenge was not the implementation of remote working infrastructure but rather, it was the security challenges raised by such a radical increase in remote working.

In terms of offshoring jurisdiction experiences, in India specifically, one provider noted that the transition to remote working was extremely rapid – within 8 days – with the main challenge ensuring that there was sufficient bandwidth available for their remote employees.  However, the provider noted that now that this shift to remote work had happened, he anticipated that it would remain permanent.  On an issue resonating with many providers, the supplier noted that their business continuity plan (“BCP”) had contemplated a single site going down: not the whole country. In their case, at that time southern India was doing better than northern India, so the provider initially fell back to their southern sites.  To address the security challenges of working remotely, the provider had discussions with their client to obtain sign-off on “softer” security requirements.

However, not all providers reported an issue-free transition to alternative work arrangements.  For example, some healthcare customers would not allow WFH arrangements, so the providers arranged for their staff to live onsite.  Many offshore locations were already set up for this contingency due to inclement weather BCP’s.  In one case, the provider had a difficult transition in connection with transporting the computers necessary to implement the WFH strategy in India:  namely, because the government stopped the shipment and destroyed all the computers based on the provider failing to obtain all of the required permits.   

2. Effects on Contracts.  Have you had to call upon particular clauses in your customer contracts as a result of COVID (for example, force majeure clauses, change control, or modification/relaxation of data/privacy clauses)? What was the customer reaction?  Are any of these types of clauses now being subject to additional scrutiny in your customer contracts, and if so, how?

One significant provider reported that they had made extensive use of change orders to address the disruption to services caused by COVID.  He noted that they had implemented a “fast break” process, using each change order to insert new clause(s) in their customer contracts.

There was some discussion of the degree to which providers had had to rely on the force majeure clause, with the question being raised as to after what period does such disruption become the “new normal.” In many cases the provider did not even have to trigger their business continuity plan, nor rely on the force majeure clauses, as customers generally were open to being flexible (for example, on service levels) without the need to “open the contract.”

3. Recourse to Insurance.  Have you been required to access your insurance coverage as a result of COVID – for example, business interruption insurance?  In retrospect, did you have the right/sufficient insurance coverage?  Did you recover as adequately and fairly from the insurance provider as you would have expected?

Similarly, numerous providers indicated that they had not needed to seek recourse against their insurance company because customer flexibility had resulted in no claims/losses requiring coverage, and the availability of governmental financial support programs (for example, in Singapore).

4. Effect on Customer Outsourcing Priorities.  Have you noticed that COVID or the resulting economic uncertainty has had an impact on the willingness of customers to outsource?  For example, has the experience of customers with remote working employees decreased or increased interest in outsourcing?  How is it changing your customers’ outsourcing priorities?  How have you responded?  What new opportunities/challenges for your business have arisen as a result of COVID – for example, is there a greater customer interest in digital transformation?

Regarding the effect of the COVID pandemic on customers’ interest in outsourcing, providers indicated that there was an increased focus on near-shoring. However, there also appeared to be an overall increased interest in outsourcing generally.  For example, one provider highlighted that in the U.S. health care sector, COVID had resulted in the loss of revenue as various medical operations were canceled.   This in turn led to a focus on how to achieve additional cost-savings.

5. Importance of the Customer-Provider Relationship.  Has COVID served to emphasize the importance of the customer-provider relationship in an outsourcing arrangement?  How has that “soft” relationship played a significant role in allowing both the customer and the provider to “flex” their outsourcing arrangement to respond to COVID?

Providers reported that soft relationships had played a large role in ensuring the success of workarounds during the pandemic.  They noted that there were many examples of customers that were not interested in discussing WFH as an option, pre-COVID, but then modified their stance and agreements to allow for WFH during the pandemic.  In addition, most customers had expressed concern for their teams and were in no rush to have them come back to the office until it was completely safe to do so.  As a result, providers largely felt that now the WFH had proven effective (in fact, some providers also reported seeing post-transition continued productivity at or above pre-COVID levels), they expected that customers would be more open to the WFH option post-pandemic.

To enable the necessary and massive WFH shift with little notice, customers had to – and often did – relax their contract requirements. For example, SLAs were relaxed, but in most cases only temporarily – between a few weeks and three months – as providers adopted to the “new normal.”  And again, data protection became the key concern and discussion point, as WFH put a different perspective on this issue.

In most cases the parties did not wait to execute a change order as that was perceived as too slow a tool in the context, with a resulting risk of service disruption. Instead, the parties made the required decisions and operated on a good faith belief that contract and cost issues would be worked out in the future in an equitable manner.  In short, customers suspended existing contract rules, and providers suspended risk management practices, to get the job done and keep delivering services.  Agreements were made between business leaders without worrying about the contract or cost implications in the near term (e.g., relaxing of extremely sensitive security practices, cost to rent hotel rooms to keep staff in a “bubble” so they could be on-site together, etc.).

The principle above between customers and providers was also extended to provider-provider/multi-sourcing relationships where multiple providers were involved in delivering end-to-end processes/value.  The providers had to work directly with each other (without forcing the customer to constantly have to act as the systems integrator) to keep the customer’s processes working effectively. 

One provider noted that this ability to both work with their customer, and with their co-providers, quickly showed who wanted to be a “business partner” as opposed to just a “provider.”

The pandemic also changed the cadence of meetings.  Instead of traveling for more formal weekly, monthly, or quarterly in-person meetings, provider representatives took advantage of WFH to schedule much more frequent/ daily one-on-one meetings with each customer over the week.  This enhanced the customer-provider relationship, and supported quicker decision making. 

Given the importance of this “soft” relationship, the providers then discussed the challenges of continuing to maintain these relationships, and develop new relationships, in the current virtual environment.  Suggestions discussed included being more targeted in messages for new clients, and being creative with existing relationships, through sending gifts, hosting virtual gatherings, etc.

Overall, providers spoke of a fair and balanced approach to changes to the customer relationship.  Providers reported that trust was a key element in customers allowing WFH.   It was noted that many customers had existing WFH arrangements with their employees, so given that familiarity did not have concerns around productivity.    Further, it was reported that there was not only less attrition with WFH, but these WFH teams continued to meet service levels.  In total, providers felt that their common reaction to the pandemic with their respective customers had made these outsourcing relationships stronger.

6. Initiatives implemented before and during the Pandemic.  How well prepared for COVID was your business?  What would you have done differently at the beginning now that we have experienced the duration and materiality of this pandemic?  In contrast, what initiatives did you undertake before COVID which paid off? What about changes that you undertook as a result of COVID - are you planning to keep them post-pandemic?

In some cases the timing of the pandemic was fortuitous in how it aligned with the technological changes made by customers.  For example, one customer had already made an enterprise-wide transition to Microsoft Teams as its chosen/standard supported collaboration platform fortuitously just a month before the outbreak.  As a result, by the time the pandemic landed everyone was already trained and infrastructure had already been upgraded to support the capacity.  This in turn made the mass WFH transition relatively seamless.

The providers also indicated that there was some interest in preserving many elements of the WFH model.  One of the providers located in Europe pointed out that in certain jurisdictions there are legal requirements that an organization make the option of working remotely available to its employees.    For example, an insurance company may have 55 percent of its employees work at home.  In terms of which employees better suited working at home, an advisor noted that one study of 5000 people (see:  https://www.abbyy.com/company/news/abbyy-survey-shows-young-executives-have-higher-expectations-for-process-insight-and-smart-technology/) had indicated that employees older than 55 adopted best to remote working but there were major issues for those employees in their 20’s and 30’s.  Another advisor indicated that her sense of that generation was that while younger employees had an interest in returning to work to benefit from collaboration and senior mentoring, they also wanted the flexibility to do so as and when required – rather than such full-time return to office work being mandated by the employer.

Some providers indicated that they planned to adopt a hybrid working model as the standard going forward post-pandemic.  “Hoteling” results in more limited floorspace requirements, assuming - for example - that each person will only be physically in the office one to three days per week instead of five.  Similarly, one provider predicted that business travel will more likely be monthly as opposed to weekly going forward.  Another hired ergonomics specialists as an internal consulting group to help people set up their WFH offices – for example, helping with design decisions and ordering specific products to implement those designs – this was extremely popular and has helped increase productivity.  However, another provider estimated that 75 percent of staff would eventually return to the office.  

Internationally, providers commented that just as we have seen a migration from major U.S. cities to less populated and less expensive areas of the country due to WFH policies, the same phenomenon has been occurring in India.  Thus, in India rents are going down in Tier 1 and Tier 2 cities, but rents are going up in Tier 3 and 4 cities as more companies embrace remote work – i.e., allowing their workforce to move out of the Tier 1 cities and move back to the smaller cities as long as sufficient internet service availability exists.  This in turn has increased some impact sourcing opportunities.

Finally, in addition to the WFH trend, other providers commented that another consequence of the pandemic was that digital transformation initiatives had continued to pick up, and as a result, once these processes became digital, they expected that would lead to increased process re-engineering and process automation (e.g., adding robotic procession automation (“RPA”) or “machine learning” (“ML”) or artificial intelligence (“AI”)) to the process.

Looking Ahead to the New Normal

While other non-pandemic questions were presented to the providers and advisors during this IAOP session, there was little take-up.  Rather, there was almost a therapeutic sense to the meeting as providers shared their various experiences, and largely successes, in adapting to the provision of services under COVID.  As hopefully the world begins to return to normal, the next question will be which of the pandemic-related initiatives (e.g., WFH) will continue into being normal course, therefore re-shaping the next generation of outsourcing arrangements.