Legal Outsourcing

The future benefits of the cross-company value chain

“Time has ceased, space has vanished. We now live in a global village”

Automation of manufacturing has been on a steady upward path since Henry Ford applied the conveyor belt principle to his factory, yet the application of technology to basic office functions such as typing and general clerical work still seems new and unwelcome to many legal firms. The ‘global village’, coined by Marshall McLuhan in the 1960’s as his vision of a world unified by electronic communication, is open for business but still shunned by many. This resistance to change within the legal profession occurs for a variety of reasons such as:

• Logistical IT issues and associated costs
• Perceived de-humanisation and loss of individual control
• Simple unwillingness to adopt new working practices in line with the ‘if ain’t broke, why fix it’ mentality.

In the last five years, technology has developed to the point where legal firms must re-structure themselves to ensure their long-term survival. Focus should be directed to ‘core competencies’ and ancillary functions outsourced. A competitive edge can be maintained by reducing costs and ensuring all parts of the value chain continue to be financially viable in a global market-place. The ability to access a global database of services has until recently remained the preserve of the large multi-national firms where huge economies of scale have applied. IT developments such as the internet and broadband now make contracting out easier, cheaper and faster than ever before. Anyone with a PC can now outsource and take advantage of the internet.

It is the role of management to:

• Identify both the opportunities and threats that new technology brings
• Ensure that there exists within the organisation an effective internal infrastructure which is robust enough to accommodate rapid change and able to take advantage of the latest IT developments.

This requires a degree of ‘joined-up’ thinking, where programs and systems can all ‘talk’ to each other, both inside and outside the firm. No point buying that expensive bespoke case management program if the propriety software inside it does not allow the information to be used by either other parts of the business or future outsourcing partners.

Open architecture software that can be accessed and operated without licence will have a much greater appeal as outsourcing becomes more widespread. The essential interoperability of systems will lead to international standards being determined for the way data is created, stored, transmitted, and transferred between differing systems. This should keep many legal firms busy for years, simplifying their internal processes to a point where they can plug in to the web at any point for additional support. The VHS-Betamax question will be applied to all aspects of company hardware and software. Generic internal software systems will become a thing of the past as organisations reach out into the cyberworld for support services.

“Today each of us lives several hundred years in a decade”
Loss of control and lack of trust are reasons often cited by those not taking the road less travelled. Younger residents of the World Wide Web are keener to embrace IT as the solution to business problems. They are comfortable with the restless, seemingly anarchic way organisations constantly need to adapt and change in the 21st Century. This lack of prejudice will assist their business survival. Edge-of-chaos management will be the norm, rather than the exception, and only those firms with the ability to respond rapidly to change will survive.

The successful legal firms in the future will be:

• Those that learn the benefits of new technology and apply them fastest
• Those with core competencies that will become a solid base onto which can be grafted the support services needed for delivery
• Those with Intellectual Capital, which will be at a premium.

Firms will have to work hard at retaining key personnel that represent the greatest value to them. More will be spent on ensuring staff are comfortable and happy in their surroundings. Other basic office functions will be outsourced to finance this development. These off-site functions can be nomadic in that they can located technically anywhere in the world.

The historic model for legal firms is condemned to oblivion as the web now allows the optimal reconfiguration of a business entity almost instantly, subject to basic statutory requirements being fulfilled. When the internal systems have been determined and personnel fears allayed, the key management role is to locate and engage the most suitable business partners for the outsourced production process. In an increasingly volatile marketplace, it makes good business sense to go with a supplier who has a proven track record, a strong underlying systems infrastructure and good understanding of customer requirements.

Branding, with the associated customer awareness and enhanced level of comfort that comes from a ‘name’, will become more valuable: legal firm to office cleaning concern and outsourced secretarial company to printing and fulfilment service will all have a much higher profile in their own sphere of influence. Branding will enable businesses to survive and compete in a global environment. It will ensure they are found by the most appropriate business partners, which will in turn allow fully interdependent network supply chains to develop.

Cost is not necessarily the pre-eminent consideration when selecting an outsourcing company. Other key ingredients in the business mix are:

• Reliability of service
• Quality of product or service
• Geographical location
• Legal jurisdiction
• Moral, ethical and environmental stance

Internal staff support is essential in making a success of the moving of vital office functions to an off-site resource. Personal visits may be necessary to allay concerns and re-assure personnel that the outsourcing process will be of benefit to all parties. The outsourcing partner becomes a crucial element in the mix, working with rather than for the client.

Cross-company interdependence is fast becoming the norm in the legal world. The network-based value-chain will be a direct result of more organisations working closely with suppliers of support services. Full integration of internal and external operating systems is now a practical option for the forward-thinking legal firm. Whilst the concept of outsourcing attracts both loving and loathing in equal measure, it is an indisputable matter of fact that the practical application of it is now an essential means of attaining future corporate success in the legal field.

(This article appeared in Solicitors Journal in March 2006.)

“We look at the present through a rear-view mirror. We march backwards into the future.”