The Rise of Legal Services Outsourcing
LPO Thought Leadership Series
In this series we will focus on outsourcing as a strategy to overcome the challenges faced by Legal Professionals today.
What has happened to the profession?
Lawyers have been cast out from their ivory towers, and pushed into the cut and thrust of the market place. The corridors of magic circle law firms are no longer exclusive. In-house General Counsel are no longer protected from the exigencies of their business.
Is it possible that law has become a business?
Of course law is a business, ask any General Counsel (GC) struggling to meet business targets, or any managing partner of a law firm struggling to maintain profits.
Legal practitioners have been forced to accommodate global corporate clients in financial distress; in addition, the corporate client has become far more aggressive and intelligent in managing their legal spend and interrogating their legal costs. Furthermore, law firms also face the corporate cost pressures their clients are battling and must themselves find ways to operate efficiently while reducing costs.
These adverse market conditions which have affected business globally are compounded for lawyers in that their very profession is threatened. In all jurisdictions to varying degrees, work that has historically been reserved for practicing lawyers has been ‘released’. Non-lawyers are now able to charge for work usually reserved for lawyers, and in most jurisdictions non-lawyers may hold an interest in law firms. The United Kingdom has for some time (since 2012) sanctioned Alternative Business Structures (ABS) which allow non-lawyers to charge fees for work usually reserved for lawyers, the US has also relaxed work reservation and most jurisdictions globally have followed suit.
Coupled to this shrinkage in scope of work, is a global pushback against the perceived exorbitant cost of legal services. The UK has seen the implementation of cost ‘reforms’ (the Jackson Reforms, 2013) which seek to contain legal costs and prevent the exponential spiralling of legal fees. Similar measures are in place in Europe and the USA.
The Burning Question – ‘How’
The burning question facing law executives is ‘How’. How to manage efficiency and profitability? How to grow their business? How to produce quality service in the face of ever increasing cost pressure?
Strategies for the ‘How’
The pressure to reduce costs and increase profitability is critical and has pushed business to look for innovative delivery in legal services. Firms have applied creative billing strategies including ‘capped rates’ ‘secondment’ etc., but by far the biggest innovation has been the commoditising of legal processes. Aligning with other business services, this has led to a new approach to legal services, i.e. “The provisions of affordable innovative legal deliverables enabled by technology and best-fit resources”
Innovative Legal Deliverables
Technology provides business with the ability to access these resources globally – and like any other business, these (legal) processes can be outsourced to more economical cost centres. Businesses are considering locations, sites or destinations where the most cost savings are achieved. ICT advancements and globalisation have provided firms with a variety of low cost locations – including offshore. Typically these locations are in developing countries where resources – particularly human resources, are more cost-effective.
The motivation to outsource is almost exclusively related to cost, but must always be weighed against risk. Risk is never more apparent in a profession where liability stalks each and every process. It is for this reason that outsourcing legal processes presents a unique and more complex challenge than the typical services outsourced today.
Strategies for the ‘Where’
Outsourcing locations include on-shore options such as Manchester, near-shore e.g. Scotland, Wales and far-shore including India, the Philippines and South Africa.
South Africa has a unique advantage in this market and can rely on the already compelling and persuasive benefits that attract BPS (Business Process Services) which include:
- Time zone
- Corporate cultural affinity
- Robust infrastructure
- Languages
- Niche expertise
- Location
- Environment
In addition, South Africa offers a common jurisprudential history, a similar regulatory and legislative framework and a mirrored legal structure to the UK. This is demonstrated in the recent alliances created between multi-national law firms and high profile South African law firms. In short, South Africa presents a convincing solution for those firms (legal or corporate) looking to outsource safely. Look out for the next article in this series, where we take a closer look at the Legal Process Outsourcing landscape in South Africa.
If you are interested in knowing more about LPO and the benefits of offshoring to South Africa, join us for an LPO Business Breakfast this October in London: LPO Business Breakfast Details
Co-Author: Charnell Hebrand (BA.LLB)
About Charnell
Charnell Hebrard is a lawyer with specialist skills in economic development (ICT, BPO, skills development), regulation and policy, and commercial. She has exposure across industry segments including financial services, ICT and the public sector. Charnell consults in the BPO sector with a focus in LPO and advises in complex regulatory issues, corporate contracting and public / private alliances.
