Outsourcing Options and Opportunities

A recent article in the ABA Journal proclaimed, “Boom years for law firms were an aberration.” The article quotes information from a 2013 Client Advisory report from Hildebrandt Consulting and Citi Private Bank which predicts that the double-digit rate increases that occurred from 2001 to 2007 are over.

As proof, the article summarized information in the report confirming that “productivity is down among income and equity partners, expenses are up, clients are demanding and getting discounts.” As a result the prediction is that future law firm success will be measured by “profit growth in the single digits.”

To succeed going forward, the article suggests law firms are going to have to do things like develop a growth strategy, practice good leadership, focus on key Clients, practices or industries and seek Client feedback. (I would add, “act on it!” to that one.) These are all radical concepts, I know. The article also suggests that, to stay competitive, firms may want to rethink their business models to focus on efficiency and consider their outsourcing options.

This makes perfect sense. How many tasks are the firm’s key marketing and other professionals currently working on that are keeping them from their most important jobs of crafting and executing the firm’s strategy and helping the attorneys to develop business? Now you have excellent options…

The Evolution of Legal Outsourcing

The goals of outsourcing include improving efficiency, reducing costs and gaining a competitive advantage. As a result, it shouldn’t be too surprising that law firms have been experimenting with outsourcing for decades, according to some sources as early as the 1960s. The most common legal services that law firms have attempted to outsource have been agency work, document review, legal research and writing, drafting of pleadings and briefs and patent services. Firms have been even more open to outsourcing their non-legal work such as IT support, finance and accounting and helpdesk operations.

As a result, companies hoping to capitalize on these trends have established themselves in several countries including India, the Philippines, Israel, China and Latin America, among others. This type of outsourcing to countries outside the US has been termed ‘offshoring.’ The offshoring of legal services has met with mixed success due to obstacles such as language barriers, time differences, quality concerns and ethical issues.

More recently, a new trend has developed. Sometimes termed ‘onshoring,’ a few large law firms with bases of operations in high-cost major metropolitan areas have begun relocating a variety of their back-office or support operations and employees to less expensive US markets with lower costs of living and wages as well as access to communities of potential new hires. Some firms have even created new tiers of lawyers such as ‘career associates’ in these markets. The evolution of legal outsourcing will likely continue because it clearly can provide benefits for firms – when done correctly…

Law Firms in the Outsourcing Business?

Outsourcing is defined as the contracting out of an internal business process to a third party organization and, as such, it has been a common and accepted business practice for a very long time.

By that definition, could it also be suggested that law firms themselves are in the outsourcing business? If you think about it, many companies have plenty of in-house attorneys and/or legal departments that can adequately service most of their corporate legal needs. But in many cases, it makes more sense for them to hire outside firms or attorneys because they have deep knowledge or specialized experience in niche areas or because they can do some types of work more efficiently.

While this may be a radical concept for some, it shouldn’t be such a radical concept for law firms to consider partnering with other providers who are also specialists with niche expertise and/or who can help them to develop business, gain a competitive advantage or provide more efficient and effective services to their corporate Clients.