The Estée Lauder Companies
Global leader in cosmetics and beauty. Piloting generative AI for marketing, product innovation, and R&D.
OpenAI / GPT Platform
AI consulting partner engaged to develop a tailored GPT-powered platform for internal use across departments.
SOW Review & Redlining
Complex services contract with vague scope, IP risks, one-sided liability, and inflated costs.
40% Cost Cut + Full IP
Project costs reduced by 40%, full IP ownership secured, zero disputes or overruns.
Background
A global beauty leader enters the generative AI era
The Estée Lauder Companies, a global leader in cosmetics, was piloting generative AI to transform marketing and product innovation. They envisioned GPT-driven solutions to generate product descriptions, personalise customer campaigns, and assist R&D teams by analysing skincare trends. For the broader landscape of how enterprises are navigating AI vendor relationships, see our GenAI negotiation services overview.
To kickstart this initiative, Estée Lauder engaged a prominent AI consulting partner to develop a tailored GPT-powered platform for internal use. The project promised cutting-edge capabilities, but it also came with a complex services contract and Statement of Work (SOW) governing the engagement. As we have documented across our GenAI negotiation case studies, these contracts routinely contain terms that favour the vendor at the client’s expense.
The Challenges
Four critical risks in the proposed AI consulting contract
Vague Scope & Deliverables
The scope was extensive yet ambiguous, leaving room for scope creep and cost overruns with no clear milestones or accountability. Tasks were described in broad terms without specific deliverables, deadlines, or acceptance criteria, making it impossible to hold the consulting partner accountable for defined outcomes.
IP Ownership at Risk
Clauses suggested the consulting firm could retain rights to AI techniques or reuse solution components for other clients, threatening Estée Lauder’s proprietary content. Brand-specific training data, custom model configurations, and marketing outputs could potentially be leveraged by the consulting partner for competing engagements.
One-Sided Liability
If AI outputs failed or costs increased due to changes, Estée Lauder would bear almost all the risk under the proposed terms. No penalties for delays, no quality warranties, and no cap on potential cost overruns. The consulting partner had structured the contract to insulate itself from virtually all delivery risk.
No In-House GenAI Expertise
Lacking internal experience with GenAI contracts, Estée Lauder’s procurement and legal teams needed expert assistance to identify the risks and protect the company’s interests before signing. Standard software procurement frameworks do not adequately address AI-specific risks around data usage, model ownership, and output rights. This is a challenge we see across virtually every industry, as explored in our GenAI knowledge hub.
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GenAI Negotiation Services →How Redress Compliance Helped
Five-step SOW review and contract restructuring
SOW & Contract Dissection
Analysed every clause for ambiguity and risk, working closely with Estée Lauder’s stakeholders to redefine the project’s scope and financials. Identified all areas where vague language created exposure for scope creep, cost overruns, or IP leakage. Mapped each risk against standard GenAI contract best practices developed across our engagement models.
Milestone-Based Restructuring
Converted ambiguous tasks into concrete milestones with specific deliverables and deadlines. Each milestone was tied to clear acceptance criteria, ensuring vendor accountability and preventing scope creep. Payment was restructured to align with milestone completion rather than time-and-materials billing.
IP & Data Protections
Negotiated that all models, code, and content would belong exclusively to Estée Lauder. The consulting partner was barred from reusing any data or deliverables, with strict confidentiality clauses added. Brand-specific training data, custom model architectures, and all generated outputs were explicitly assigned to Estée Lauder with no residual rights for the vendor.
Free GenAI Contract Review
Share your proposed AI consulting agreement and we will identify the key risks, IP gaps, and cost optimisation opportunities before you sign.
Request Your Free Review →Cost Optimisation
Trimmed unnecessary services and excessive hours bundled in the proposal. Using industry benchmarks from our 500+ deal benchmark database, eliminated bloated fees across consulting rates, platform licensing, and change management components. Ultimately cut the project cost by 40%, saving several hundred thousand dollars without reducing scope or capability.
Risk Rebalancing
Added penalties for delays, capped liability, and secured warranties for quality of work. The consulting partner ultimately agreed to the revamped terms, including specific remedies for non-performance, a cap on Estée Lauder’s total financial exposure, and explicit quality standards for AI model outputs. For enterprises considering similar vendor engagements, our renewal events programme provides ongoing contract support throughout the vendor lifecycle.
Outcome and Impact
40% cost reduction with full IP protection and zero disputes
| Metric | Result |
|---|---|
| Project Cost Reduction | 40% (several hundred thousand dollars saved) |
| IP Ownership | 100% retained by Estée Lauder |
| Disputes or Overruns | $0 |
| Scope Clarity | Milestone-based with clear deliverables and deadlines |
| Data Protection | Full confidentiality; vendor barred from reuse |
| Liability | Capped, with penalties for delays and quality warranties |
| Platform Delivery | AI marketing and R&D platform delivered on schedule |
| Team Productivity | Boosted across marketing, product innovation, and R&D |
Before Redress
- Vague SOW with no milestones or accountability
- Consulting partner retained IP and data reuse rights
- One-sided liability favouring the vendor
- Inflated fees with bundled unnecessary services
- No penalties for delays or non-performance
- No internal GenAI contract expertise
After Redress
- Milestone-based SOW with clear deliverables and deadlines
- 100% IP ownership secured for Estée Lauder
- Balanced liability with vendor penalties and quality warranties
- 40% cost reduction through benchmarking and optimisation
- Delay penalties and capped financial exposure
- AI platform delivered on time with zero disputes
Our AI project could have easily run away from us cost-wise or, worse, compromised our brand IP. Redress Compliance turned the contract into a blueprint for success. They locked down our rights, cut out bloated costs, and held our vendor to clear, accountable deliverables. We ended up with a great AI solution and complete peace of mind, without overspending. Redress’s strategic guidance made all the difference.— Chief Information Officer, The Estée Lauder Companies
GenAI consulting agreements are the new frontier of enterprise vendor risk. The contracts are complex, the pricing is opaque, and the IP implications are significant. Every enterprise signing its first AI consulting engagement needs independent review. The cost of getting it wrong is measured in millions and in competitive advantage surrendered.— Fredrik Filipsson, Co-Founder, Redress Compliance
Key Takeaways
Lessons for enterprises entering GenAI consulting engagements
GenAI SOWs must be milestone-based, not time-and-materials.
Vague, time-based billing structures are the primary driver of cost overruns in AI consulting. Converting to milestone-based delivery with clear acceptance criteria creates accountability and aligns vendor incentives with outcomes. Estée Lauder’s restructured SOW ensured every dollar was tied to a defined deliverable.
IP ownership must be explicitly assigned in the contract.
AI consulting agreements routinely contain clauses that allow vendors to retain rights to models, techniques, and outputs. For enterprises with valuable brand data, this creates competitive risk. Every AI contract should explicitly assign all IP, including models, training data derivatives, and outputs, to the client with no residual vendor rights.
Industry benchmarks expose inflated AI consulting fees.
AI consulting is a new category with limited pricing transparency. Vendors bundle unnecessary services and charge premium rates for commodity capabilities. Access to benchmark data from comparable GenAI engagements is the only way to identify and eliminate inflated costs. Estée Lauder saved 40% through benchmarking alone.
Liability and risk must be balanced before signing.
Default AI consulting contracts place virtually all risk on the client: no performance warranties, no delay penalties, unlimited change order exposure. Rebalancing these terms is essential. Vendors will agree to reasonable accountability provisions when presented with well-structured counter-proposals.
Independent GenAI contract expertise is essential for first engagements.
Traditional IT procurement frameworks do not adequately address AI-specific risks. Data usage rights, model ownership, output liability, and performance measurement all require specialist knowledge. Engaging independent advisory for the first GenAI contract establishes templates and principles that apply to all subsequent AI engagements.