Four Reasons Why Outsourcing Contracts can be Smart Contracts

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Ankur Bansal

Smarter Contracts Will Serve Your Objectives Better

Contracts are having an impact on how organizations source their support services. In the age of digitalization and automation, old fashioned contract thinking is fast becoming outdated. There are four reasons that support moving to Smart Contracts, says Ankur Bansal – even though the market is not quite there yet.

In a previous column, he asks whether the outsourcing industry is ready to adopt smart contracts, explaining:

"Smart contracts are computer programs that can automate the clause and ramifications part of the outsourcing contracts. In smart contracts, the nitty gritties aren’t ambiguous; hence, smart contracts run by computers allow for a greater level of trustworthiness compared to humans."

Here are four reasons customers and providers should persevere.

1. Autonomy

Smart contracts cannot be manipulated or misunderstood by anyone. Managing provider’s adherence to contract obligations in outsourcing contracts has always been a challenge. It is cumbersome and open to interpretation. Smart contracts allow you to manage these obligations automatically. You will not need lawyers to manage smart contracts. As an example once the SLA review process is firmly established, a smart contract can execute SLA’s automatically every month.

2. Trust

Since the smart outsourcing, contracts can be encrypted, stored and shared in one place, there is no risk of losing data. Clients can trust smart outsourcing contracts and do not have to worry about losing the content. It also establishes a trust between client and service provider since none of the parties can tamper with the contract.

3. Safety

Smart outsourcing contracts will be safe due to its cryptograhphic features. It will be near impossible to hack or change the contract. Generally, in the outsourcing world lawyers, procurement, VMO etc. expend a lot of effort to maintain the confidentiality of the contracts. Smart contracts take away the effort and risk of losing contract and critical information.

4. Efficiency

Smart contracts will save money as the client’s reliance on consultants, lawyers and other third party players will reduce. Because smart contracts are fast to construct they save time and money. they also have the potential to save money due to less governance required. In addition, the accuracy of smart outsourcing contracts is high. They will follow the rules and execute them; hence, chances of mistakes are near low.


However, smart contracts in outsourcing is still in their infancy stage and one of the challenge is that the industry has several exceptions that demand human interventions and interpretations. Frequent updates to rules are required. But there is no doubt that smart contracts will gradually creep into the sourcing process and governance as we see increased maturity across solutions.

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