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Legal outsourcing out in the open

Legal outsourcing out in the open

In the space of a few short years, the word "outsourcing" has gone from being a dirty word to a buzz word within international legal circles, writes Laura MacIntyre The GFC has had one knock-on…

In the space of a few short years, the word "outsourcing" has gone from being a dirty word to a buzz word within international legal circles, writes Laura MacIntyre

The GFC has had one knock-on effect that many business-minded folk don't regret - it has increased transparency and frankness about cost-cutting, and the reduction of head counts.

The changes in attitude, or at least those publicly expressed, can be seen in the British experience of legal process outsourcing (LPO). In January 2007, UK publication The Lawyer reported Pinsent Mason's three-year deal to outsource its bulk typing and transcription serves to South Africa, describing the decision as a push to "change the role of its secretaries".

This relatively benign media coverage had shifted two years later when Simmons & Simmons announced plans to outsource higher level work to agency lawyers in India and South Africa. In April 2009, The Lawyer described the move as one that put "paralegal, trainee and associate jobs at risk in the firm's English-speaking offices"

Made in Australia?

The Australian legal sectors' adoption of outsourcing has been, until now, met with less public scrutiny. International provider Exigent, who lists amongst its UK clients Pinsent Mason, Eversheds and Lovells, has taken a softly, softly approach in the Australian market, but has now built up an impressive client list - not all of whom are ready to go public with their decision to outsource various support services.

Sensitivity about the outsourcing issue is most apparent in the top tier, and one of three directors of Exigent, Nicola Stott, says that a "Big Six" firm in Australia did not want to be named publicly as a client. There is markedly less reticence about the topic from the small-to-mid-sized firms, for whom outsourcing has become a matter of survival in a harsh economic climate.

Stott spotted an opportunity in the Australian market seven years ago, and has since moved quickly to capitalise on the gap in the market for legal process outsourcing. With its primary data centre then based in Capetown, Exigent initially hit a wall when it became apparent that local firms were more sensitive about the issue of "offshoring" local jobs.

"What quickly became obvious was two things, firstly the daytime thing - we needed a data centre in the same time zone - and secondly that Australians were much more sensitive about offshoring than the Brits were," she says.

Exigent opened up a data centre in Rockingham about 40 minutes south of the Perth CBD, so that, combined with the Capetown centre, it could offer a 24-hour service to Australian law firms.

Stott's clients now include Swaab Attorneys, Herbert Geer and Lavan Legal, who each have a different rationale for their decision to outsource legal support services, and all have customised the services available to meet the particular needs of their businesses.

Driving factors

Swaab Attorneys CEO Bronwyn Pott says the firm's foray into outsourcing arose purely out of need, but has since developed into a long-term flexible resourcing strategy.

"While I'd like to take credit for being forward-thinking ... our long-term senior WP operator wanted to take extended leave, and we wanted to keep her role open for her," she says.

"So the partners agreed to a trial period with Exigent, and when our operator decided living on the beach in Queensland was more to her liking than trekking into the city every day, we decided to change the structure of the group.

"We had 1.5 WPOs but the work was very 'lumpy' and it was difficult to resource the function without an awful lot of flexibility on behalf of the operators. If we went to two full-time WPOs we would have dramatically increased our costs, and they would have experienced a lot of downtime - paying for a service on a 'pickup/putdown' basis had a lot of appeal."

For those speculating about the cost breakdown, the hourly cost of Exigent's services is roughly $40 to $50 per hour. Stott says the productivity of its team is often higher than that of a law firms' internal staff.

"It's all about productivity, so, firstly, we keep overheads low, and productivity is higher. Our team members all understand the concept of chargeable time, our staff's targets are around 75 per cent chargeable in a day. For us, that is how we have to run our model.

"There's a second metric for that - to ensure that the work isn't taking too long. The teams are targeted based on output as well, so they have to think about charge-out, but they also have to think about output."

Lavan Legal managing partner Greg Gaunt doesn't see any significant cost benefit in outsourcing legal document production and proofreading, but agrees that the service provided is often of a higher standard than is produced internally.

"In terms of price, we are not doing it to reduce cost, because we could probably run it ourselves at about the same cost. Cost isn't the prime determinant for us. It's that other advantage that you can get it done out of hours and you can get it done with pretty good accuracy," he says.

Lavan also outsources accounts work for high profile tenders to external provider Aderant, a decision Gaunt says is once again based on efficiency and the high quality and rapid turnaround of work rather than cost savings.

"The requirements are getting more onerous and the time that you spend on these things is significant, so in some ways you are driven to it, and in other ways it is considered that back-up that you need," he says.

Growing pains

Herber Geer managing partner Bill Fazio credits the 24-hour capability of external providers as the main driver for his firms' decision to outsource, but admits there are still some kinks to be ironed out.

"In very general terms it's early days. We're excited by the potential to have this kind of as on call available support and also the fact that's it's available 24-7 does make sense for a business of our size that can't justify having those resources at 24-7 ourselves, so we're hopeful that this will be a great idea," he says.

"It is early days - we've had some successes and some glitches but that would be expected."

Pott also admits that Swaab Attorneys' previous attempts at outsourcing didn't run so smoothly.

"Our last Indian experience wasn't a huge success, so we would be a bit wary of working where we didn't have a contact on the ground," she says.

Communication at an internal and external level is also essential to the success of any outsourcing venture, Stott says.

"I just spent three months in the UK on secondment to Eversheds ... I was in the project team working on all elements of the project - from the IT, to HR, to the communication which is a massive part of the whole thing. They've really got to get their internal and external communication right to minimise the backlash," she says.

Pott has found some of the reactions within the firm have come from left of field.

"In the main the reaction was positive - although initially some were concerned about the procedure. It only took a couple of pedantic dictators to give the service a thumbs-up for those attitudes to change," she says.

"There was one unexpected side effect, primarily increased efficiency within the groups - PAs who previously would blithely send everything to WP suddenly became more selective about what they outsourced, and in some instances, it became a matter of pride how little they were sending off.

"The statistics also made for interesting analysis - it's difficult for [a lawyer] to refute that their dictation practices make life difficult for WP when their dictation consistently takes two or three times longer to transcribe than the others."

The next frontier

Rio Tinto made international headlines when it signed a deal to outsource legal work to India in June 2009. For members of the legal profession, the outsourcing of support services is not as controversial as the proposition of actually outsourcing legal brains as well as the brawn.

The United States is leading the way in this regard, with in-house counsel at large corporations outsourcing everything from contract review and drafting to research and e-Discovery functions to offshore providers in India and The Philippines. UK firms, including Clifford Chance, have also cut their cost base by outsourcing IT and paralegal work to India.

A recent quote from The Lawyer attributed to Pinsent Masons' head of dispute resolution litigation, Nigel Kissack, sums up the hardened attitude of the British legal sector following the global financial crisis: "Does it need some of the best brains in Britain to do that work? We wanted to offer an alternative to our clients - the same work and the same quality, but at a lower cost."

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