More globals bring outsourcing in from the cold
As globals embrace the trend for internal outsourcing, Australian firms may lose out on bulk work.
Herbert Smith Freehills global CEO Sonya Leydecker told Lawyers Weekly that this model – where firms send process work to centralised offices in low-cost locations – may give global firms an edge compared to those using external providers.
HSF was one of the first firms to adopt the model, setting up an office in Belfast in 2011 solely to complete document review for its disputes practice.
Since then, the 20-person operation has grown to more than 200 people, handling bulk processes for the full range of transactional work in HSF offices worldwide.
Recently, the firm launched a pilot program in Perth with 30 lawyers to test the viability of a similar hub in the southern hemisphere.
Ms Leydecker said the initiative had been partly driven by a growing cost-consciousness among clients, triggered by the GFC.
“I think the GFC was a big wake-up call,” she said.
“That, plus some of the changes that have happened with technology and new entrants, have meant the market has changed permanently. I don't think we're going to go back to the pre-GFC days.”
As part of this shift, she suggested clients were no longer prepared to pay for bulk work to be done in expensive locations.
“We wanted to offer a service to clients which was competitive by sitting it in a location where you have a lot of lawyers coming out of university but no international jobs; where the cost of living was much cheaper; and where we could ensure we use technology to join that part of the business with the rest,” she said.
However, she emphasised the need to maintain quality and consistency by keeping the work under the Herbert Smith Freehills brand.
Patrick St John, the HSF managing partner for strategic implementation, said that while other global firms had also begun to set up similar internal centres, national firms in Australia were unlikely to have the necessary volume.
As a result, many of them have resorted to using external providers.
“They all do it now in the UK – but I don't know of any Australian firms that have that capability,” he said. “You need a big operation to feed enough work to make it worth doing.
“But also some of the Australian firms have seceded the ground to the LPOs.”
However, he suggested firms with internal providers could maintain greater control over the quality and consistency of the work produced than those using LPOs.
In the long term, he suggested clients may begin to stratify as those with large-scale or transnational needs seek out exclusively global firms and national firms struggle to accommodate such work.
Prior to launching the Belfast office, Ms Leydecker admitted some lawyers expressed concern that the firm would downsize as a result. However, she confirmed that has not been the case.
“It has created, in effect, more work overall because it is attractive to clients,” she said.
At the same time, she suggested lawyers in the Belfast office were given opportunities akin to lawyers in the larger HSF network, though their careers took a different path.