Blockchain–powered contract management and outsourcing

By Susan P. Altman

Add outsourcing services to the long list of industries that face disruption directly attributable to blockchain, which list already includes financial services, supply chains, IoT, risk management, digital rights management and healthcare. It is well-known that blockchain technology, that is, technology enabling distributed ledgers with continuously maintained and verified blocks of records, promises huge savings and disruption in the financial services industry. IBM has now partnered with the Bank of Tokyo-Mitsubishi UFJ (BTMU) to apply blockchain technology to the design, management and execution of contracts between businesses. IBM and BTMU are piloting a blockchain project to test its usefulness in automating business transactions for which one party has contracted with the other to provide goods or services. Initially, the technology will be used to monitor delivery and usage of equipment with a sensor that embeds information into the blockchain. The information will then automate invoicing and payment processes between the two companies.

Of especial interest to outsourcing lawyers is the announcement that IBM and BTMU will develop smart contracts on a blockchain to improve the efficiency and accountability of service level agreements in multi-party business interactions. It appears the technology is intended to be used in the increasingly common and complex environment of multi-party, multi-vendor services. Lawyers can expect to see more robust service level agreements with service providers within that complex environment, certainly in terms of accountability. However, it remains true that service levels are only as valuable as the relevancy of what is being measured. And that is still a decision that, for now, requires human input.

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