Ian Cooper looks at outsourcing models in the legal services space.
Should we or should we not outsource? If we do, should we outsource our legal processes and our back-office functions?
These are some of the key questions facing professional firms driven by fee pressures and concerns that a strategy needs to be formulated in advance of a surge in new market entrants. While each outsourcing model may have particular characteristics, a number of common models have emerged covering both legal processes and back-office functions.
Legal processes
The 'best friend' relationship
This is often seen as a two-way relationship between a larger and smaller UK firm. Bigger, more risky or technical work is passed to the larger firm while secondary, more cost-conscious work is given to the smaller firm. Similarly, a niche firm will look to offer specific specialist services not provided by its 'best friend'.
These relationships are not without their issues, for example, will this be a formal, exclusive, contractual relationship or will it operate on a more informal basis? And how will the benefits be monitored?
National partners
Professional firms in London, in particular, and the South East may partner with regional firms and pass on work that can be carried out at a lower cost.
As well as selecting the partner firm, the arrangement will need to be structured for the benefit of both firms.
Overseas opportunities
Outsourcing overseas is arguably an option only when it comes to more basic legal processes. Countries worth considering include Africa (the same time zone but significantly cheaper), Australia (the 12-hour time difference makes overnight response and working possible), Argentina, China, India, the Philippines and South Korea.
Key issues for the UK firm will inevitably be maintenance and control of the client relationship to the extent that the client sees no change to service quality or key relationships. More complex issues may arise, such as breach of client confidentiality, ethical standards, data security, liability of service providers and client privilege when looking at different overseas jurisdictions.
Business processes
Few firms have been immune to the unrelenting pressure on profitability and the desire to maintain, even improve, profitability. There is growing recognition that internal cost cutting alone is unlikely to provide the efficiencies and cost savings demanded and that other options will need to be considered.
Support services
The legal press shows evidence of firms transferring their support staff to outsourcing companies. This offers cost savings and, more importantly, allows these firms to focus on their core legal services while releasing them from managing support services.
New income streams
Similarly, there has been an emergence of service companies, predominantly for transfer pricing benefits. But this raises the question of income lines that might be generated by supporting other smaller local firms, for instance, with training, template documentation, printing and bulk purchasing.
Teaming up
This search for efficiencies continues with a number of firms joining forces to purchase non-legal services. Each firm takes responsibility for negotiating the purchase of one service for all firms in the buying group. Inevitably, we are also likely to see non-competing firms seeking to share one office to create a 'one-stop' service referral centre, not restricted to legal services.
This suggests that interesting times are ahead, with the only certainty being change.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
