Legal Process Outsourcing
17
Cutting Costs, Saving Time & Delivering Better Value to Clients Key Strategies for Law Firms during a Downturn Park Inn, London - 16 June 2009 1 www.Op2i.com No unauthorised reproduction without express written permission – All rights reserved – Copyright Op2i Ltd and the NOA Managing Risk – Delivering Value ™ www.noa.co.uk Park Inn, London - 16 June 2009 Bharat Vagadia Board Director - National Outsourcing Association (www.noa.co.uk) CEO – Op2i (www.op2i.com)
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Presentation given on LPO at a Netlawmedia conference in London during June 2009.
Transcript of Legal Process Outsourcing
Cutting Costs, Saving Time & Delivering Better Value to Clients
Key Strategies for Law Firms during a Downturn
Park Inn, London - 16 June 2009
1
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Park Inn, London - 16 June 2009
Bharat Vagadia
Board Director - National Outsourcing Association (www.noa.co.uk)
CEO – Op2i (www.op2i.com)
Agenda
1. What will outsourcing by Law firms deliver in the short & long term
2. What can and can not be outsourced
2
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3. Onshore / Offshore - options and challenges
4. What works and what doesn't
The challenges law firms face
• Challenges faced by law firms:
– Escalating costs - secretaries costs between £25k-£35k pa
– Lack of office space - may not be a problem given the current economic climate
– Low morale and motivation issues – primarily due to the repetitive and/or mundane
nature of the process
3
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nature of the process
– Backlogs in letter production and documentation - due to staff shortages
– Necessity of using temporary staff to alleviate short-term staff shortages
– Lack of quality and consistency – temporary staff can be of variable quality and at a
premium cost
Outsourcing within the legal sector
• Law firms are well aware of what outsourcing can deliver - most provide advice
to companies on their outsourcing deals….
• Despite this, very few law firms have considered outsourcing for themselves
and even fewer have an outsourcing strategy.
• However, the legal sector is showing signs that it is now adopting outsourcing
as a business strategy - partly driven by the economic turmoil..
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as a business strategy - partly driven by the economic turmoil..
• Clifford Chance has led the field by moving back office and secretarial support
to its own office in India, in order to carry out much of the company’s
administrative work. The outsourcing programme is expected to yield more than
£9.5m in annual savings.
• Similarly, Pinsent Masons announced a deal to offshore its bulk typing and
transcription services as part of a move to change the role of its secretaries.
Outsourcing scope within law firms
• Outsourcing non-core activities
– Business support functions which lend themselves to outsourcing – e.g. IT and
telecommunications.
– Why not turn to suppliers whose core business is to provide such facilities on a more
cost-effective basis.
• Outsourcing less peripheral activities
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• Outsourcing less peripheral activities
– Law firms are beginning to outsource some activities directly connected with their
core business of giving legal advice.
– Scanning documents, word processing, legal transcription, coding, conversion, digital
dictation, reviewing transactional and litigation documents, drafting contracts,
research memoranda and due diligence reports, patents, surveying laws of various
jurisdictions etc….
Typical drivers for outsourcing
Management Focus:
• Reduces effort required to manage peripheral activities
Cost management:
• Economies of scale/ productivity (people / technology)
• Committed cost structure
• Capital investment avoidance – balance sheet restructuring
Access to external expertise / investment or innovation:
6
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• Access to specialists, management expertise, products, efficient services
• Accelerate benefits
• Manage attrition and depth and breadth of resource requirements
Flexibility:
• Adopt best practices, manage complexity & stabilise environment
• Respond to changes in business environment, leverage technology advances
• Improve systems, strengthen control and enhance services
• Improve scalability
Time to market
Some drivers are particularly important for law firms
• Core cost reduction
– Most expensive costs to a law firm are legal and paralegal staff - reduction of these
means its possible to provide competitively priced legal advice without reducing
profitability.
• Getting access to capability/resources
– Legal instructions often received ad hoc and at short notice and In-house resources /
7
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specialists may already be committed to other clients - possible to utilise external
resources at short notice to enable the new instructions to be delivered, extending the
ability of law firms to take on work.
• Better utilisation of in-house resources by outsourcing low-value services
– Many instructions are for low-value services which need to be undertaken to retain a
client’s goodwill - better to outsource such matters and allow lawyers to concentrate
on providing premium rate services.
What can, and is, being outsourced?
• Intellectual property rights & Asset management• Patent search & application drafting• Trade-Mark and copyright registration• Legal research• Document review and analysis• Intelligence services• Contracting, administration and standardisation• Audit and compliance• Contract abstraction and summarisation
<< High-end Work
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• Paralegal services & legal coding• Corporate secretarial services• Legal memo development• Transcription• Document management• Data entry• Litigation support (electronic or paper document
discovery, legal research, document review
• Paralegal services & legal coding• Corporate secretarial services• Legal memo development• Transcription• Document management• Data entry• Litigation support (electronic or paper document
discovery, legal research, document review
Low-end Work >>
Where should a UK law firm outsource to?
Local Near-shore Off-shore
Specialist skills √√√ √√ √√√
Economies of scale √√ √√ √√√
Availability of large relevantly educated workforce
√ √ √√√
Labour arbitrage √ √√ √√√
Offshoring
offers the
greatest
rewards from
outsourcing,
but the risk
9
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Favourable regulations ? ? ?
Experience and maturity of outsourcing suppliers
√√ √ √√
Infrastructure √√√ √√ variable
Cultural alignment √√√ √√ √
Perception of risk Low Med High
but the risk
perception is
also High
Tick means high,
medium or low
opportunity
Going offshore – the Indian LPO market
– India has attracted much attention for its provision of offshoring IT services and call
centres
– Less well known is the fact that US and UK law firms, corporations and legal
publishers are outsourcing legal services to Indian lawyers and paralegals.
– Indian lawyers have a similar common law background and are recognized overall as
having good academic legal training.
10
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having good academic legal training.
– Indian lawyers earn about half of what doctors and engineers do their.
– A newly qualified lawyer from a top 10 school in India can expect to earn about
£4,000 to £6,000 a year.
– Compare with the £30,000 per year earned by some of their British counterparts.
Illustrative benefits
• A London law firm employing four secretaries - cost of about £150,000 p.a.
– Including all ancillary benefits, bonuses, sickness and national insurance, etc
– Typically, but dependent upon the individual department, around half of this work will
be copy / transcription – basic secretarial support
• If work performed offshore, law firm can expect to save approx £50,000 p.a.
11
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– Additionally, financial savings are accrued from using this variable cost model -
offshore support staff not directly employed by the UK law firm and therefore the UK
firm only pays for work completed
– The overhead savings go beyond the salary differential. By moving the workload to
another location, a firm can realise additional benefits in terms of office
accommodation, either by closing offices (or downsizing), or by fitting more fee
earners into office-space previously occupied by secretaries
However, there are a number of risks
Strategic risks
– Not achieving the originally planned benefits
– The loss of core activities and competencies
– Loss of skills and corporate memory
– Loss of strategic business flexibility
Operational risks
– Dependency on the supplier
– Cost increases
– Transition and switching costs
– Diminished quality of service
– Loss of management control
12
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– Loss of strategic business flexibility and innovation capacity
HR / Communication risks
– Loss of internal coherence
– Communication mismatches
– Loss of management control
Commercial risks
– Security breaches
– Customer lock-in
Offshoring introduces additional risks
• Culture
• Language
• Time-zone and distance differences
• Management styles
13
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• Specific institutional features of offshore countries
– Law, infrastructure, security, political conditions, intellectual property regulations
within the offshore country…..
• In addition, amplification of the existing risks within domestic outsourcing, such
as security breaches, loss of management control and loss of quality etc…
Successful outsourcing works for
• Less complex tasks
• More repetitive tasks
14
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• Where monitoring is both possible and not cost prohibitive
• Efficiency can be gained from automation, standardisation etc
What not to outsource
• Complex, uniquely fact-driven cases - the amount of time required to bring
outside lawyers up to speed require a greater amount of time than would be
supported by the reduction in costs
• Fact-driven one-off cases - fairly complex, fact-driven subject matter can be
reasonably outsourced only if the case is ongoing or recurring
15
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• Complex work without local supervision - outsourcing efficiencies are
undermined without proper supervision
• Unfamiliar subject matter - counsel limits their ability to provide proper
supervision when, due to lack of familiarity with the area of law, they are unable
to judge the quality or accuracy of the work
Conclusion
• Outsourcing and in particular offshoring, has the potential for delivering
significant benefits.
• But there are also significant risks, if the wrong activity is outsourced or if not
managed properly.
• Law firms need to have an outsourcing strategy, even if this results in a decision
16
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• Law firms need to have an outsourcing strategy, even if this results in a decision
not to outsource - consider both tangible and intangible benefits and risks of
outsourcing.
• Need to be reviewed on a periodic basis as the environment in which law firms
operate continually changes.
Contact details
Bharat Vagadia
Board Director UK National Outsourcing Association
CEO Op2i
17
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CEO Op2i
Author: Outsourcing to India – a Legal Handbook
T: +44 207 193 4339
M: +44 7711 898089
