In the last decade, outsourcing has witnessed a number of peaks and valleys beginning with a big boom in software outsourcing that was closely followed by an increase in business and legal process outsourcing. Industry experts have predicted the outsourcing industry, which at one point was potentially worth US$2.2 billion, will continue to see rapid growth.
The economic slowdown has, however, posed some challenges to this growth trajectory. As far as intellectual property (IP) is concerned, the focus of outsourcing has returned to easy low-risk IP functions in the whole chain of patenting activity. Demand of offshore functions from jurisdictions other than US and EU has nevertheless increased, suggesting that the industry will bounce back with vigour.
The recession has led to severe cost-cutting measures which create the need for process realignment and re-engineering internally in companies with sizeable IP portfolios. An interesting aspect of process realignment is outsourcing not to a single service provider, but to a consortium of service providers. Typically a consortium is formed by organizations coming together for a common business interest.
The formation can be voluntary to promote a combined service line, or can be necessitated due to a lack in the range and depth of services provided by the partnering vendors when engaged individually. Companies usually prefer working with a vendor who is capable of providing a diverse service band with the best quality at an attractive cost rather than with multiple vendors. However, the industry is yet to acknowledge a single vendor who can claim one-stop-shop status for all, or most IP functions typically required to profitably manage one’s IP assets.
Generally, when a company decides to outsource a bulk of its functions, it often becomes necessary for it to consider inviting tenders from possible collaborators or consortiums to provide the requisite services. The selection process involves a careful review of credentials and the price bid submitted by participating consortiums.
The considerations for selecting the winning consortium include cost, quality, experience of the members of the consortium, geographic location of the members, clientele and references. Other considerations include the company’s internal policies, analysis during process realignment, its IP and business strategies, its IP budget, planning and forecast.
The consortium approach offers numerous advantages. To begin with, the client will have the opportunity to work with the best IP service providers, and at the same time enjoy the luxury of a single vendor (i.e. consortium) providing end-to-end IP services.
The consortium approach promises global reach due to the intense network and diverse geographies created by the collaboration of the consortium’s partners. Moreover, there is a significant reduction in implementation complexity and administration and management overheads. The liability is now focused and a substantial amount of time and cost is saved due to channelized communication and flow of work. Better training and process integration are also guaranteed, along with access to the diverse pool of resources brought in by the consortium’s members.
From the vendor’s perspective, the client is seen to exhibit better risk-taking capacity and there is a partial or complete elimination of pilot phases. In addition, high-end functions are also outsourced along with the usual low-end ones. The industry gains valuable insights in IP portfolio management and could go on to create precedents for others to follow. Academically, the consortium approach ensures a better transfer of knowledge among its members, eventually raising the quality of standards in the industry.
An ideal consortium would include a group of vendors with expertise in different domain/service lines covering almost the whole of the IP spectrum. Service providers’ vast geographies will ensure appropriate representation in different jurisdictions across the globe.
However, it is essential that the client be very careful about the composition and reporting structure of the consortium. The terms and conditions of the service level agreement should be meticulously planned and articulated. Participating vendors should have a clear idea of the expected services and a firm consensus on the memorandum of understanding. The investment in adopting the consortium approach is typically huge as is the risk. However, careful planning and execution of the project can largely mitigate risks.
The client should design a foolproof accountability matrix and performance evaluation system to keep a periodic check on qualitative and quantitative aspects of a project. There will also be a pressing need for programme customization during the term of the agreement. In order to harness the best results, a team of IP experts should design and implement the complete outsourcing programme.
TS Sharat is a senior patent engineer and leads the intellectual property support services unit at Clairvolex Knowledge Processes, a Delhi-based legal outsourcing firm.
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