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Outsourcing ramps up among top and mid-tier firms

Outsourcing ramps up among top and mid-tier firms

Outsourcing

Top and mid-tier firms are increasingly relying on outsourced processes, with some forecasting that this will make up more than 10 per cent of their work over the next two years.

According to CommBank’s annual Legal Market Pulse, outsourcing is on the rise among both top-tier and mid-tier law firms due to a desire to reduce costs further and achieve greater efficiency, particularly when it comes to “backroom operations” and “lower value legal work”.

The report found that 26 out of 40 survey participants predicted that law firms will increase their use of both legal process outsources (LPOs) and legal services outsourcers (LSOs) over the next 12 months, while 23 said law firm clients will also turn to outsourcing providers more so than ever before.

Furthermore, the report revealed that over the next two years, two out of eight top-tier firms and eight out of 32 mid-tier firms believe that they will outsource more than 10 per cent of their work.

“This rise in outsourcing appears to have been driven both by law firms and their clients, with top-tier firms especially likely to feel pressure from large institutional clients to demonstrate they are exploring every avenue to deliver a more cost-effective service,” CommBank said in the report.

“Five out of eight top-tier firms said the impetus for outsourcing had come equally from firms and clients, while more than a third of the mid-tier firms in our survey (12 out of 32) believed that clients had played an equal or dominant role in the drive to outsource.

“Our 2017 survey also confirmed that, used well, outsourcing can have benefits for everyone. Only one of our survey participants said they expect outsourcing to have a negative effect on their margins, while 12 out of 40 believed the impact would be positive.

“These results suggest that firms have become adept at managing the outsourcing relationship to create additional value, reducing margin pressure by delivering a more flexible service at a lower overall cost.”

Commenting further on the results, Marc Totaro, who is national manager of professionals services business and private banking at Commonwealth Bank of Australia, said:

“The outsourcing and automation of lower value, high-volume work has created attractive opportunities for firms to focus on their areas of greatest expertise, where they can maximise their competitive advantage.”

CommBank’s latest Legal Market Pulse comes after Lawyers Weekly published the results of its Disruption Snap Poll, which heard from a pool of respondents on what they believe will become the next big disruptor to change the legal profession as we know it today.

Respondents were asked: “In the next 12 months, which of the following economic/market disruptors will have the biggest impact on the legal industry?” with respondents able to select more than one option.

Almost 40 per cent of respondents said they believe that corporate counsel handling more work in-house will be the disruptor with the biggest impact on the profession over the next 12 months, while 31.45 per cent said it will be the outsourcing of legal work.

Earlier this year, Law Society of South Australia president Tony Rossi also raised his concerns on this matter, saying that while outsourcing legal work to non-lawyers has become a trend, it’s important to understand the risks that this approach poses to the profession.

“In recent times there has been an increase in work traditionally performed by lawyers being conducted by non-lawyers. There has also been a proliferation of ‘DIY’ kits,” Mr Rossi said in his 2017 message to members.

“A key focus of my presidency will be to promote the value, and often necessity, of [having] suitably qualified lawyers to undertake legal work.

“Outsourcing legal work to non-lawyers, and preparing important legal documents without legal advice, can expose people to serious risk.” 

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