Avoidance of Legal Process Outsourcing Is "Lost Opportunity for Law Firms" --Hildebrandt

In a post yesterday on the blog of Hildebrandt International consultants, law firm strategy expert Kristin Stark notes that the resistance of some law firms to legal process outsourcing (LPO) represents "a lost opportunity," when their frustrated clients resort to contracting with LPOs directly.  Stark points out that, by contrast, progressive law firms that are "forming active and complementary partnerships with LPOs" are "market leaders" that are "enhancing the range of services offered, securing the closeness of their client relationships, and providing clients more cost effective services." Here's an excerpt from Stark's post:

"Despite client encouragement to pursue and pass along cost savings opportunities by partnering with LPOs, many law firms have avoided developing such relationships. Other law firms have sought to build this capability internally, developing a law firm centric approach to offering discovery, litigation support, and other high volume legal services. 

However, as observed in a number of our client interviews with GCs of major corporations, law firms’ unwillingness or inability to successfully partner with LPOs and pass along the associated cost savings has driven increasing levels of client frustration. In the American Lawyer’s March 2010 edition, Irene Plagianos discusses the growing trend of clients taking matters into their own hands - developing direct relationships with outsourcing firms and cutting out the law firm ‘middleman’.

This substitution of outsourcing firms for law firms represents a lost opportunity for law firms. By resisting clients’ interest in pursuing such partnerships, law firms jeopardize client relationships and fail to provide clients with the superior value and service they seek.  

By contrast, particularly progressive law firms view outsourcing firms as a complementary service offering and a means for proactively addressing client service needs. By forming active and complementary partnerships with LPOs, these market leaders enhance the range of services offered, secure the closeness of their client relationships, and provide clients more cost effective services."

This dovetails with our own legal outsourcing / LPO experience.  But we should add that we've seen law firms not only maintain clients, but get many new ones, by partnering with LPOs. These forward-looking law firms increase rather than decrease their revenue, by positioning themselves in the all-important market for enhanced value in the delivery of legal services.

Comments

[Prashant]

Law firms should understand that working with LPOs will help them keep their clients happy and also help them to realize lesser spends on litigation processes.

[Daniela Herrera]

The economic recession (the Great Recession) of 2008 and 2009 resulted in a sharp drop in international trade, impacting the entire global economy. Recent studies by BTI Consulting Group and Hildebrandt-Citi Private Bank reported that 2008 and 2009 were among the worst years for the legal market in the United States during the last 50 years with billable rates and realised rates dropping by almost 10% (after including inflation). On the other side of the Atlantic Ocean too, the Great Recession took its toll; the Clementi proposals in the United Kingdom are further expected to change the way the law firms operate, forcing them to become more efficient and competitive.
In January 2006, Evalueserve, a global research and analytics firm, conducted a study on the state of the Legal Process Offshore outsourcing (LPO) industry, forecasting the industry’s revenue and growth potential in its whitepaper titled “Legal Process Outsourcing – Hype vs. Reality”. The present article builds on this study and analyses the current landscape and the potential of the LPO industry, especially in light of the recent developments mentioned above. The key findings of the present study are as follows:
 The LPO industry is growing fast, and it is already the fastest growing sub-sector in the Knowledge Process Outsourcing (KPO) domain. Even during the Great Recession, the LPO sector grew by 40% each year. Revenue growth between 2010 and 2015 is expected to be approximately 26%. Currently, there are over 5,200 professionals in the LPO industry in India and the Philippines, contributing an annual revenue of USD 300 million, and this is expected to reach 18,000 professionals with an annual revenue of USD 960 million by December 2015.
 Almost all of the offshore outsourcing work is being sent from the U.S. and the U.K. More than 90% of the LPO work is either being directly outsourced by Corporate Counsels or on behalf of Corporate Counsels (by their preferred law firms). So far, law firms have been hesitant to offshore outsourcing.
 Due to the impact of the Great Recession, there will be pressure on law firms to reduce their overheads related to marketing and sales, general administration, Information Technology, accounting, clerical, paralegal, and knowledge management. These overhead expenses account for about 17% of the total overhead expenses (of approximately 41%) that a typical law firm with 20 or more lawyers incurs in the U.S. By moving most of this work, which is non billable, offshore, these firms can reduce this cost to approximately 7%. Currently, almost no law firm in the U.S. is considering this option.
 The implementation of Clementi proposals in the UK is expected to boost the LPO industry because law firms are likely to be more efficient. In fact, many law firms have started implementing new models for pricing, designing, and managing better legal work processes; modifying and re-using existing work products and templates; partnering with other legal service providers to provide the entire array of services; and beginning to outsource functions (offshore) that include creating marketing and sales brochures, accounting, Information Technology, clerical, paralegal, knowledge management, secondary research, and legal and library information research.
 Knowledge management (KM) will be a growth area for the LPO industry through which LPO firms can help their clients grow better and faster. In particular, LPO firms can help the in-house KM teams of law firms—especially those with dispersed offices—to consolidate and manage all the available resources into an electronic repository to save cost and increase efficiency.

[virtual assistants]

Great post.
LPO is next phase of KPO and is very useful for outsourcing.
I appreciate work done by author.
Thanks for sharing this post.
Keep posting your updates....