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Value sourcing goes without saying

Outsourcing is a divisive issue within the legal profession. Behind closed doors, it’s changing law firms in every segment of the industry. In public, however, it’s all too often something “other law firms do”.

This doublethink is a symptom of how far many firms have to go to convince clients they are delivering real value for money. Worse, outsourcing companies are now looking to sell their services direct to clients. Some clients have even set up their own offshoring arrangements – mining company Rio Tinto is a high-profile example.

But not all outsourcing is equal. While there is almost a culture of omerta about outsourcing legal work, this is not the case for non-legal work – many firms have now woken up to the benefits of business process outsourcing (BPO). Law firms have long outsourced work such as cleaning and catering. IT has also been a target for outsourcing for years. But some firms have now gone further, farming out areas as diverse as finance, HR, post room, facilities and reception. CMS Cameron McKenna has famously (in legal circles) gone all-in with BPO and outsourced almost everyone in business services to Integreon, for example.

Top-100 firm Farrer & Co is an example of a law firm that has exploited the benefits of BPO, growing its use organically. Sue Shale, Farrers’ chief financial officer, has helped lead the firm’s outsourcing initiative with two of the biggest players in UK law firm outsourcing - Intelligent Office and Integreon. Farrers estimates it has saved hundreds of thousands of pounds a year after expanding outsourcing to encompass security, records/archive, post room, printing/copying, facilities, switchboard, cleaning and reception.

Outsourcing is deeply affecting the legal sector just when it is under most pressure

Ms Shale says that the firm has not done this just to save money, though this is an obvious upside. For her, it is about efficiency and quality, whence savings will naturally flow. “We’re very good at recruiting quality fee-earners and secretaries; we’re just not in the field of supporting a vast range of back-office services,” she says.

Another top-100 firm, Nabarro, has outsourced its out-of-hours switchboard to ComXo. Head of facilities, Russell Stevens, explains that this will save the firm up to £50,000 a year in staff costs.

But outsourcing is not a popular move with those whose jobs are at risk, which is one of the reasons law firms do not like talking about it. Susan Alcock, information services manager for Ashfords in Exeter, has been compiling the views of information and library services workers on outsourcing their department. “Staff wish to remain within their firms, but are faced with redundancy or relocation if their service is outsourced,” she says. “Firms seldom appreciate what is involved with outsourcing and don’t consult with their staff before deciding.” Retaining in-house services has many value-added benefits that firms may not recognise when viewing the world through the lens of efficiency and cost-effectiveness, she adds.

Law firms like BPO because it is comparatively uncontentious, but it is not where the big savings are. To really slash legal costs, legal process outsourcing (LPO) is the way forward. Big LPO companies, such as CPA Global and Pangea3, are in the industry news regularly, but few law firms boast of their own offshoring efforts, possibly because clients might start asking pointed questions about lowering fees.

But some have made strong inroads into LPO. Baker & McKenzie, the world’s biggest firm by revenue, outsourced its intellectual property work to the Philippines. And Clifford Chance runs an “offshore captive” LPO it calls Knowledge Centre in Delhi, providing support to the firm’s lawyers globally. Mark Ford, Clifford Chance’s head of knowledge management and the man with responsibility for Knowledge Centre, seems to think LPO will only continue to grow; “the toothpaste is out of the tube”, he says.

Moving legal work to cheaper regions does not necessarily mean Delhi or Manila, it can just as easily be Manchester or Belfast, when it is called onshoring or nearshoring. But even this relatively parochial behaviour may benefit only the biggest firms. According to Tim Salmon, chief operating officer at McGrigors, London firms engaging in major outsourcing efforts are cutting a cost base around 30-40 per cent higher than firms outside the capital.They therefore have a healthy margin for outsourcing companies to grab, while still making significant cost savings; firms outside London may not.

But outsourcing is here to stay and is deeply affecting the legal sector just when it is under most pressure. The Solicitors Regulation Authority has even built specific provision into the industry’s new regulations, introduced last October, demanding that law firms closely manage any outsourcing arrangements. If the traditionally snails-pace legal regulator has deemed this necessary, many would say the toothpaste really is out of the tube.

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