Tuesday, October 20, 2009

An Academic Perspective and Knowledge Decomposition

Mari Sako at the University of Oxford, Saïd Business School has done some accomplished research on the legal outsourcing industry. She is one of the very few academics that I am aware of who is diving deeply into the legal outsourcing and offshoring industry.

I had the pleasure of speaking with Sako recently. Our conversations and the basis of her work are summarized well by her article in July issue of Communications of the ACM.

The article provides a very grounded perspective on the drivers and challenges of outsourced legal services. One of the most interesting topics touched on by Sako includes knowledge decomposition, which means breaking legal work into constituent components. While desirable, it is often challenging to do so effectively in practice. In particular, I enjoyed her reference to the parallels of Frederick Taylor’s scientific management since many function areas of professional services are standardized and can be broken down into the basic process and knowledge components.

We agree that managing the knowledge breakdown is a challenging component of all types of outsourcing engagements, particularly complex knowledge-driven processes such as legal services. These challenges can be overcome through planning, foresight and appropriate time and resource investment to ensure the best transitions when outsourcing.

Friday, October 16, 2009

Legal Rebels

This week featured two days of publication postings and interactive web meetings between some of the legal profession’s vanguard thinkers - legal rebels, if you will.

Following are the most interesting excerpts from some interesting pieces written by very prolific thinkers on the legal industry as well as personal contributors to our most recent book. First, is a quote from Larry Ribstein followed by some provocative thoughts by Bruce MacEwwn. In addition, an excerpt by Richard Susskinds, mainstay of change happening in the legal industry.

Larry Ribstein: Ethics Rules Are Spinning BigLaw Into ‘Death Spiral’

“Ethical rules governing lawyers are designed to maintain the illusion that law practice is something other than a business…. The forces dispelling this illusion include increased market pressures on clients to hold down costs, increased media attention on the law business enabling clients to peer into the formerly black box of law firms, heightened global competition in legal services, a robust outsourcing market, and the expanded role of in-house counsel.”

Bruce MacEwen: It’s Time to Abolish the Role of the State Bar

“As a card-carrying capitalist, I believe in the virtues of states competing amongst themselves to provide favorable business environments for purposes of their choosing. Delaware has famously done it for incorporating the Fortune 500, South Dakota for credit card processors, and Nevada for gaming companies (and, time was, divorcees).”

“Why not incite competition among states for law firm LLC/LLP incorporations? Let firms—and their individual practitioners—choose what jurisdiction they wish to be subject to. Perhaps New York or California, or Wyoming, would decide to grant its lawyers US-wide practice rights. Full faith and credit clause, anyone?”

“Does this call for abolishing the role of state bar associations? Precisely. Beyond the role of attempting to perpetuate outmoded notions of territorial guild societies, what is their role? (I told you this harked back to feudalism.)”

“Isn’t it time, in our BlackBerry/iPhone/WiFi/time zone-irrelevant world, to be able to choose where our firms are ‘incorporated’ and where we are ‘admitted to practice?’”

Richard Susskind: Disaster Ahead for Lawyers Unwilling to Change

“Invariably, general counsel tell me they are now under three pressures: to reduce the size of their in-house teams; to spend less on external law firms; and to find ways of coping with more and riskier legal and compliance work than in the past.”

“To achieve the efficiencies needed, I say that legal services will evolve from bespoke service at one end of a spectrum along a path, passing through the following stages: standardization, systematization, packaging, and commoditization. Many new ways of sourcing will emerge (outsourcing, off-shoring, sub-contracting, co-sourcing, and more) and these will often be combined in the conduct of individual pieces of legal work. I call this multi-sourcing.”

These ideas confirm the importance of being aware of how changes in the legal landscape impact your law firm or business and making appropriate adaptations to strengthen your position.

More background on the ABA series is available at Legal Rebels.

Thursday, October 15, 2009

Outside Counsel Spending Projected to Drop by 4.3 Percent Next Year

An article featured on Law.com states “A new study projects a 4.3 percent slide in corporate spending on outside counsel next year, on top of this year's 10.8 percent drop.” The study was performed by BTI and exposes the problem with high levels of over-capacity facing the domestic legal industry (and many other industries, as well) in the global economic downturn (hopefully, now the rekindling of a sustainable recovery).

Fortunately, economic indicators are starting to show a greater balance between supply and demand for legal services. As BTI President Michael Rynowecer said in the article, “The fact that we're seeing a couple of practices showing a pickup would suggest that we may be nearing equilibrium, at least for the moment.”

The study suggests “modest growth” in several legal sectors such as, “3.4 percent growth in regulatory work; 2.3 percent (growth) in litigation; and 1.4 percent (growth) in intellectual property litigation.”

These demand dynamics impact the overall legal outsourcing industry. If there is less work to go around, despite the cost saving functions of outsourcing/offshoring, outside vendors domestically and abroad are often those most affected in diminished demand. As the demand for legal services shifts toward equilibrium and beyond, we expect to s an increase is work for legal services vendors as well.

As noted previously on our blog, what is good for law firms is also good for legal outsourcing.

Monday, October 12, 2009

Legal Globalized

To say that legal outsourcing is inextricably linked to international business would be an understatement.

Many opponents of any kind of offshoring – from manufacturing to large-scale document review – seek to highlight the number of jobs “lost” to outsourcing. What is also overlooked is the number of jobs created by outsourcing and other forms of international trade. A recent article in the Chicago Tribune, A Rebalancing Act, states, “With American consumers cutting back in response to the recession, many U.S. companies increasingly are looking outward, toward fast-developing countries like China, India and Brazil. But instead of seeing those countries primarily as cheap producers of goods, both American manufacturing firms and giant multinational corporations see them as potential customers for U.S. products and services.”

I’m always amazed by the number of domestic US and UK products I see used at legal outsourcing vendors during my on-site assessments. Offshore lawyers work on Dell computers and run Microsoft windows while sitting on IKEA office furniture. And during lunch at their offices, I am routinely offered refreshments of Coca-Colas and Pizza Hut pizza.

By definition, trade is beneficial to both parties involved and legal outsourcing is no exception. As noted by the article, perhaps the next biggest market for domestic law firms are markets located in offshore locations such as India, Philippines and South Africa. Opening up the Indian legal system to outside law firms has been on the table for the past several years. Lord Bach has one of the more informative dialogues on this topic.

One thing that we have seen time and time again in our increasingly global world is to never say never.

Thursday, October 8, 2009

UK Legal Outsourcing

In a recent article by Richard Brent of Managing Partner entitled, Out of sight?, Brent writes about a number of the high-profile legal outsourcing deals that have taken place over the last several months.

The article touches on several of the case studies that we included in our recent publication Implementing a Successful Legal Outsourcing Engagement such as Pinsent Masons and Osborne Clarke. These case studies are highly fascinating and hit on a number of very common challenges that need to be overcome to ensure a successful legal outsourcing initiative.

During a recent trip to London, I also had the pleasure of meeting Brent, as well as several other people profiled in the article.

Definitely an interesting read on dynamics in the UK legal market.

Wednesday, October 7, 2009

Slaughter and May

The banner announcement this week of Slaughter and May’s decision to consider outsourcing legal and legal support services is just one more example of UK firms becoming more public about their involvement in outsourcing.

Several articles on the topic include another from The Lawyer and LegalWeek.

It appears that increasing client pressure and the upcoming enactment of the Legal Services Act in the UK are requiring firms of all sizes and practice focuses to explore alternative service delivery strategies, including but not limited to outsourcing to offshore vendors.

Monday, October 5, 2009

Fronterion Groundbreaking Publication Release

We have long felt that there is a noted dearth of information out there regarding the nuts and bolts of outsourced legal services. This was the prime motivation for this blog – to serve as a pragmatic source of reference for legal professionals facing legal outsourcing decisions. While we strive to make this blog valuable to our readers, there is only so much that you can say in a blog.

This week we have released a nearly 200-page book on the legal outsourcing industry published by the international legal publisher Managing Partner and the Ark Group. We are very excited about the publication as one of the seminal pieces on the industry. A link to the book can be found at: Implementing a Successful Legal Outsourcing Engagement

Whether you are currently outsourcing, considering outsourcing or your clients are inquiring if you do so, this informative report serves as a highly pragmatic and comprehensive reference guide for legal professionals making decisions regarding a legal outsourcing engagement. Major subject areas include, but are not limited to:

+ The profound changes occurring at law firms that set the stage for the emergence of legal outsourced services;
+ The recent economic events that are shaping the industry;
+ An analysis of the outsourcing service opportunities and operating models currently available;
+ The potential benefits of outsourcing and how to recognize and measure these benefits;
+ Ways to define, design and ensure quality for an outsourcing engagement;
+ How to select a vendor, navigate the negotiation process and manage the vendor relationship;
+ Risk management techniques and a guide to ethical compliance;
+ Contracting considerations and important terms and conditions; and
+ How to overcome specific outsourcing challenges and avoid common pitfalls.

The book also includes valuable insight from a number of the leading experts in the US and UK legal outsourcing arena. We are all very excited with the book as unique and influential publication.

Further information about the book is available through the Managing Partner or from the Fronterion press release today.

Thursday, October 1, 2009


In the much-publicized deal of the summer (2009), the Rio Tinto legal outsourcing engagement continues to pick up steam. With what has been noted as a successful endeavor with an Indian legal outsourcing vendor is now potentially being expanded to another vendor located in South Africa. This strategy is called a multi-sourcing outsourcing engagement.

Firms seek the benefits of a multi-sourcing engagement when looking to access niche vendor expertise (known as “best-of-breed” sourcing), leverage around the clock service delivery (known as “follow-the-sun” sourcing) and secure great business continuity through multiple vendors.

A multi-sourcing strategy presents challenges to legal professionals such as greater management and governance costs, increased complexity when forming tight vendor relationships and in work flow difficulties when service deliverables are co-dependent on a more than one vendor. While all of these challenges can be overcome, they must be appraised and planned for appropriately.

Without delving too much into detail here, you can read in greater depth the benefits and challenges associated with single versus multi-sourcing in our upcoming publication Implementing a Successful Legal Outsourcing Engagement.

Another important point made by the unnamed source in the article is that firms use their offshore vendor to better support, not replace, their domestic legal team. “This is not about taking quality legal work away from the UK. It’s about cost efficiency and outsourcing clerical work that can be done elsewhere,” stated the source in The Lawyer article.

At Fronterion, we have always been firm believers that slashing headcount for short-term financial gain is neither advantageous to the long-term competitiveness of the firm nor financial viability of such a legal outsourcing engagement.