Law Firms Look to Off-Shore Legal Outsourcing, as Competition Increases "at a Frightening Pace"

The UK's Managing Partner magazine, in an article titled "Uncorking the Genie," reports that there is a "clamour around legal process outsourcing (LPO)," as law firms "are finding the intensity of competition in the marketplace increasing at a frightening pace," causing management teams to look at offshore legal outsourcing, as they "search hard for competitive advantage":

At the forefront of most managing partners’ minds are the effects of the recession, which has undoubtedly put significant pressure on their firms’ margins. Clients are seeking price concessions and different methods of billing at rates not experienced before. The consensus among firms is that it will now be very difficult to return to pre-2008 rates and billing practices.

In recent years, commoditisation and globalisation have been pushing the price of legal work downwards. On top of this, with the next stage of the UK implementation of the Legal Services Act 2007 approaching, significant deregulation will sweep away some of the final barriers to entry that have protected the legal profession for many years.

All of these factors together have created the ‘perfect storm’. Firms are finding the intensity of competition in the marketplace increasing at a frightening pace. Management teams are searching hard for competitive advantage, which has caused much of the clamour around legal process outsourcing (LPO).

The authors of the article further report that the benefits of off-shore legal outsourcing / LPO are "far greater than simple cost savings":

LPO can deliver law firms benefits far greater than simple cost savings. When compared to mature blue-chip businesses, law firms can seem inefficient. Traditional hourly rate billing practices coupled with healthy profit margins have not encouraged lawyers to work as efficiently as they could in the past. Combine this with a professional’s desire for autonomy in his or her working life, and as a result a firm will often have many different ways of carrying out the same task, some of which will be suboptimal.

Experience suggests that whether looking at a business support function, or the delivery of a core legal service, most law firms do not have clearly defined processes. Without these clearly defined processes, it is more difficult to measure and improve performance. Legal process outsourcing offers the ability to define, document and measure process and, as a result, to create best practice, improve efficiency, consistency and ultimately quality.

The article concludes with a prophecy. Law firms that are able to master legal process outsourcing "undoubtedly" will have a competitive edge:

The British legal marketplace has experienced phenomenal change over the past 20 years. Many law firms are virtually unrecognisable when stood next to the organisations they were in the early 1980s. That pace of change is accelerating, and many firms are looking at re-engineering their business models to adapt to and profit from this change.

The possibilities for process outsourcing as part of this response to market changes are significant. The nature and extent of the outsourcing will vary from firm to firm but, to be successful, must be appropriate to the firm’s internal and external environment. As proven in so many other business sectors, for those firms that get it right, it can undoubtedly provide a competitive edge.

Comments

[Sreebalakumar]

There will be a change!