Outsourcing in Legal: Everything you need to know

Outsourcing in Legal: Everything you need to know

 

What benefits can be provided by Legal Process Outsourcing (LPO) or Business Process Outsourcing (BPO)? How do you make outsourcing successful?

From the heady days of the 1990s when secretarial and administrative tasks were first offshored, and law firms scrambled to set up offshore offices in India and South Africa, to the latest disruptors such as Axiom and Lawyers on Demand, outsourcing has come a long way. Yet many firms remain ‘change allergic’, with outsourcing in the legal world lagging behind other industries. There are potential perils of outsourcing, and whilst The Law Society’s practice note clearly sets out the risks, there are also opportunities for small to medium firms to save costs and realise tangible benefits.

More than ever, the legal market is competitive, general counsels are reducing spend on legal services and the provision of legal advice is no longer considered to be impenetrable magic that cannot be commoditised. Companies require their law firms to be more efficient, more innovative and to deliver a better client experience. All for less.

 

What is outsourcing?

 

Outsourcing for the legal market can be categorised as business process outsourcing (BPO) and legal process outsourcing (LPO). Offshoring, where work or functions are relocated to another jurisdiction or geography primarily to take advantage of lower labour costs, can form part of BPO and LPO. There is also insourcing where law firms bring in non-legally qualified specialists perhaps to collaborate on new products and services. Let’s take a look at outsourcing first.

 

Business process outsourcing

 

BPO typically relates to middle and back office functions such as IT, facilities, mailroom, document processing, marketing, HR, administration, finance and accounting. But ‘the really interesting story is the breakdown of the old model and the delivery of the new model, and how law firms fit into that,’ says Richard Susskind. ‘The old delivery model is under siege and LPOs are very credible alternatives, among a few others, for the delivery of a more cost-effective service.’

 

Legal process outsourcing

 

Current LPO market estimates vary from $2 to $4.5 billion and forecasted growth, fuelled by developments in AI, is expected to be double digit in the next five years. Models include firms setting up captive offices where third parties in other jurisdictions work exclusively for the firm, the use of third party providers such as Lawyers on Demand, setting up regional offices or offshore offices or using an LPO firm based in the UK. Some of the advantages include the opportunity for in-house legal staff to focus on higher-value work, and for the firm to deliver a faster service overall, and one that’s more scaleable. Firms can also take advantages of different time frames to deliver a ‘follow the sun’ workflow.  Typical LPO activities include:

  • Preparation and drafting of contracts
  • Due diligence
  • IT function
  • E-discovery
  • Patent applications
  • Litigation support
  • Legal research

 

How to make outsourcing successful

 

If you are considering outsourcing, either BPO or LPO, here are a few elements to consider.

1.  Define your objective

In strategic terms, what is the firm trying to achieve? Is it purely cost saving or can it be a wider programme to improve quality and response times?  LPO is best delivered when it forms part of a larger transformation of legal services at the firm.

2.  Consider the impact on the firm

Will there be sufficient buy in? What is the impact on headcount? How will it fit with culture and values of the firm? Think about onboarding of new legal team members – how things are done, might there be cultural challenges? Some firms choose to use lawyers trained in their host jurisdiction, with a common law grounding, as a starting point.

3.  Do your due diligence

Outsourcing requires a full risk management approach, considering confidentiality, potential conflicts of interest, data protection, and regulators’ requirements. And of course, assess the potential LPO providers on their capabilities and proven experience rather than just price. Clients may need to be informed about outsourcing as it is a change to the terms and conditions. Do bear in mind that your clients may do their own checks on your new supplier.

4.  Put a contract in place

As a minimum, an outsourcing contract needs to cover liability, termination rights, key personnel, client management framework, business continuity, service level provision and quality and governance. Ensure post-contract management is also in place to cover quality auditing and performance management.  

 

Outsourcing, when done right, can deliver not just cost advantages but increased flexibility and scaleability for firms, useful in these uncertain times. LPO in particular is an opportunity to deliver the innovation and outcomes that clients are increasingly focused on. 

 

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About the author:

Amy is an established writer and researcher, having contributed to publications, such as The Law Society, LPM, City A.M. and Financial IT. Her role at LexisNexis UK involved leading content and thought leadership, as well as writing research reports, including "The Bellwether Report 2020, Covid-19: The next chapter" and "Are medium-sized firms the change-makers in legal?"