For many, the new year means a new start. But that is not the case for some major law firms who are still slogging through flagging legal markets. As noted in a recent article featured in The Lawyer, many lawyers still seem to be holding their breath watching uncertain markets in the coming year. The article does point to the impact on outsourced legal services, particularly in the UK legal segment, which is expected to change fairly significantly in the coming year in anticipation of the implementation of the Legal Services Act.
Developments likely to have an impact on the market over the next 12 months include the expansion of the legal process outsourcing (LPO) market, changes in fee models and the impact of the Legal Services Act.
Efficiency has quickly become the watchword for those with their hands on the purse strings at major firms. Whether this means changes to outsourcing policy, client charging or further rounds of redundancies remains to be seen.
Despite the concerns expressed in this piece, many of the firms that we have talked with remain positive on the new year.
Showing posts with label Economy. Show all posts
Showing posts with label Economy. Show all posts
Monday, January 4, 2010
Wednesday, December 23, 2009
Temerity in the Face of Turbulence
In a recent newsletter Andrew Hedley, founder of the UK legal strategy consultancy Hedley Consulting, discusses changes set to impact the legal market in the UK (US legal firms are also facing similar pressures). One of the core changes, emanating from the cost pressure on law firms, will be in the law firm structure with the most apposite change being the “significant acceleration in the use of legal process outsourcing for increasingly complex work.”
Hedley’ piece is posted in full below.
"The greatest danger in times of turbulence is not the turbulence; it is to act with yesterday’s logic."
-Peter Drucker
The legal sector faces a number of unprecedented challenges in the year ahead. The one with potential to disrupt most widely and deeply is a wholesale move to fixed-fee pricing. Surveys of in-house counsel show that they are resolute in demanding fundamental change over the next twelve months.
Delivering profit from fixed-fee work requires wholesale changes to historic operating models and has far reaching implications.
One inevitable consequence will be the demise of associate lockstep, the process by which salary (and hourly rate) increases are pegged to years of qualification rather than any objective measure of increased ability to add value for the client. Another will be a significant acceleration in the use of legal process outsourcing for increasingly complex work.
An emphasis on better management skills will also be necessary as firms disaggregate the legal process, undertake individual work components at the lowest price point and then reassemble the “legal product” at its point of delivery to the client.
The effect on firm culture, talent management and the psychological contract between partner and associate will be hugely significant. However, these are nettles which must be grasped to emerge from the recession with businesses that are viable in the longer term.
Simply hoping that one can hold out long enough for better times to return is not a strategy. Temerity in the face of turbulence is unlikely to deliver the desired result!
Hedley’ piece is posted in full below.
"The greatest danger in times of turbulence is not the turbulence; it is to act with yesterday’s logic."
-Peter Drucker
The legal sector faces a number of unprecedented challenges in the year ahead. The one with potential to disrupt most widely and deeply is a wholesale move to fixed-fee pricing. Surveys of in-house counsel show that they are resolute in demanding fundamental change over the next twelve months.
Delivering profit from fixed-fee work requires wholesale changes to historic operating models and has far reaching implications.
One inevitable consequence will be the demise of associate lockstep, the process by which salary (and hourly rate) increases are pegged to years of qualification rather than any objective measure of increased ability to add value for the client. Another will be a significant acceleration in the use of legal process outsourcing for increasingly complex work.
An emphasis on better management skills will also be necessary as firms disaggregate the legal process, undertake individual work components at the lowest price point and then reassemble the “legal product” at its point of delivery to the client.
The effect on firm culture, talent management and the psychological contract between partner and associate will be hugely significant. However, these are nettles which must be grasped to emerge from the recession with businesses that are viable in the longer term.
Simply hoping that one can hold out long enough for better times to return is not a strategy. Temerity in the face of turbulence is unlikely to deliver the desired result!
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.
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.
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.
Friday, September 25, 2009
Worst Is Over According to PWC
While some heralded the recent economic challenges in the US and UK as a basis for growth in the legal outsourcing industry, the actual outcome has been less than expected. Many vendors in growth positions have not been immune from challenging economic times, either.
When litigation and transactional work dries up, domestic legal firms work to keep their own staff busy before using an outside vendor either domestically or abroad. General counsel who have the same or even increased legal requirements in economically challenging times are often forced to delay or forgo legal services due to internal capacity and budget restraints. While client pressure on their legal counsel can have a positive impact on outsourcing, many times firms don’t even have time to consider augmenting their staff with an outside vendor during arduous periods.
What is often lost is that what is good for domestic US and UK legal professionals is also good for legal outsourcing industry. And vice versa.
A well-structured legal outsourcing engagement helps firms proactively manage risks previously uneconomical to pursue. It helps firms direct and allocate internal resources and provides better support to internal personnel. In short, legal outsourcing is not a zero-sum game. This is true for both the buyers and providers of outsourced legal services.
Recent economic volatility has highlighted many benefits of working with outside vendors. In addition to cost savings, outsourcing enables firms to manage variability better, improve client servicing, and initiate transformational change without expenditures among others. Current increased client cost sensitivity is another positive outcome in favor of outsourced legal services.
As organizations see a pick-up in their work dockets and more stable financial conditions (as noted by PWC), law firms and corporate counsels are now able to focus on more proactive organizational initiatives such as a new or expanded outsourcing engagement to better support their staff. We are looking forward to it as well now that the worst is behind us.
When litigation and transactional work dries up, domestic legal firms work to keep their own staff busy before using an outside vendor either domestically or abroad. General counsel who have the same or even increased legal requirements in economically challenging times are often forced to delay or forgo legal services due to internal capacity and budget restraints. While client pressure on their legal counsel can have a positive impact on outsourcing, many times firms don’t even have time to consider augmenting their staff with an outside vendor during arduous periods.
What is often lost is that what is good for domestic US and UK legal professionals is also good for legal outsourcing industry. And vice versa.
A well-structured legal outsourcing engagement helps firms proactively manage risks previously uneconomical to pursue. It helps firms direct and allocate internal resources and provides better support to internal personnel. In short, legal outsourcing is not a zero-sum game. This is true for both the buyers and providers of outsourced legal services.
Recent economic volatility has highlighted many benefits of working with outside vendors. In addition to cost savings, outsourcing enables firms to manage variability better, improve client servicing, and initiate transformational change without expenditures among others. Current increased client cost sensitivity is another positive outcome in favor of outsourced legal services.
As organizations see a pick-up in their work dockets and more stable financial conditions (as noted by PWC), law firms and corporate counsels are now able to focus on more proactive organizational initiatives such as a new or expanded outsourcing engagement to better support their staff. We are looking forward to it as well now that the worst is behind us.
Saturday, July 18, 2009
EquaTerra Survey Findings: Outsourcing Up
The following are some of the most recent findings by the research group EquaTerra. While the survey findings are focused on more general outsourced services, it does demonstrate that the first movers are now engaging outsourced solutions to survive the lengthening economic downturn.
Demand for Outsourcing Increases as Organizations Seek to Cut Costs – EquaTerra 2Q09 Survey: The latest EquaTerra’s 2Q09 Advisor and Business/IT Service Provider Pulse Survey cited an increase in the demand for global outsourcing services from organizations seeking options to reduce operational costs. The survey also revealed that the ongoing economic slowdown has shifted the key aim of majority of outsourcing buyers from realizing competitive advantage to surviving in this environment. Stan Lepeak, Managing Director of Global Research for EquaTerra, stated that the current economic conditions have made cost savings the key reason for outsourcing services.
Among the key findings, about 46 percent of EquaTerra’s client-facing advisors reported increased outsourcing demand and about 65 percent of outsourcing service providers reported continued growth in their new deal pipeline during 2Q 2009. Moreover, about 58 percent respondents stated the current economic environment as the reason behind the increase in outsourcing, reflecting a quarter-on-quarter increase of 20 percent. Additionally, majority of respondents cited transition-related issues as the leading reason behind the failure to meet clients’ outsourcing objectives.
One interesting point to note are the "transition-related issues" cited by survey respondents. Based on our experience, these types of challenges are a result of a number of factors, but primarily poor planning in the front end and lack of continued management support after the deal. Therefore it is important to take a holistic perspective at the earliest stages for sourcing engagements.
Demand for Outsourcing Increases as Organizations Seek to Cut Costs – EquaTerra 2Q09 Survey: The latest EquaTerra’s 2Q09 Advisor and Business/IT Service Provider Pulse Survey cited an increase in the demand for global outsourcing services from organizations seeking options to reduce operational costs. The survey also revealed that the ongoing economic slowdown has shifted the key aim of majority of outsourcing buyers from realizing competitive advantage to surviving in this environment. Stan Lepeak, Managing Director of Global Research for EquaTerra, stated that the current economic conditions have made cost savings the key reason for outsourcing services.
Among the key findings, about 46 percent of EquaTerra’s client-facing advisors reported increased outsourcing demand and about 65 percent of outsourcing service providers reported continued growth in their new deal pipeline during 2Q 2009. Moreover, about 58 percent respondents stated the current economic environment as the reason behind the increase in outsourcing, reflecting a quarter-on-quarter increase of 20 percent. Additionally, majority of respondents cited transition-related issues as the leading reason behind the failure to meet clients’ outsourcing objectives.
One interesting point to note are the "transition-related issues" cited by survey respondents. Based on our experience, these types of challenges are a result of a number of factors, but primarily poor planning in the front end and lack of continued management support after the deal. Therefore it is important to take a holistic perspective at the earliest stages for sourcing engagements.
Monday, July 6, 2009
The 4th of July and Future of Legal Services
This past week we celebrated the 233rd anniversary of American independence.
Our country was founded on the principles of personal and religious freedom and also on capitalism. Some referred to it at the time `as the “grand experiment” and we have seen it work.
The basis of capitalism is the private individual using resources most efficiently to produce what the buyer wants. It’s about giving the greatest value to the client at the lowest cost. And the beauty is that both producer and consumer win in the free marketplace.
Another important factor in a capitalistic society is the forward-looking approach. Americans have not accomplished what we have by looking backwards. We did not waste resources protecting the typewriter and covered wagon industries. (Or if we did, it didn’t help!) Dramatic and seismic changes invariably occur in every business. When change is embraced, it leads to new, exceptional and dynamic industries such as the personal computer and automobile industries, respectively.
While the recent economic climate is forcing many to consider making challenging decisions faster than they have been made in the past, these changes are not directionless. The outcome of many current tough choices remain yet unseen. What will happen to the newspaper publishing industry? How will the automotive industry re-emerge from the brink of insolvency? And in our situation, how will the legal industry forever be altered?
Outsourcing legal services is now inextricably linked to changes in the legal space, and only time will tell how it will all play out. With the strength of our capitalist spirit, the result will be better than we can even imagine today. We look forward to the unfolding of the ‘grand experiment” of legal outsourcing.
Happy Fourth of July.
Our country was founded on the principles of personal and religious freedom and also on capitalism. Some referred to it at the time `as the “grand experiment” and we have seen it work.
The basis of capitalism is the private individual using resources most efficiently to produce what the buyer wants. It’s about giving the greatest value to the client at the lowest cost. And the beauty is that both producer and consumer win in the free marketplace.
Another important factor in a capitalistic society is the forward-looking approach. Americans have not accomplished what we have by looking backwards. We did not waste resources protecting the typewriter and covered wagon industries. (Or if we did, it didn’t help!) Dramatic and seismic changes invariably occur in every business. When change is embraced, it leads to new, exceptional and dynamic industries such as the personal computer and automobile industries, respectively.
While the recent economic climate is forcing many to consider making challenging decisions faster than they have been made in the past, these changes are not directionless. The outcome of many current tough choices remain yet unseen. What will happen to the newspaper publishing industry? How will the automotive industry re-emerge from the brink of insolvency? And in our situation, how will the legal industry forever be altered?
Outsourcing legal services is now inextricably linked to changes in the legal space, and only time will tell how it will all play out. With the strength of our capitalist spirit, the result will be better than we can even imagine today. We look forward to the unfolding of the ‘grand experiment” of legal outsourcing.
Happy Fourth of July.
Monday, May 25, 2009
Zeughauser Perspective
The following article was published in Bloomberg on the state of US
There is some interesting insight by Kent Zimmermann of the Zeughauser Group as it relates to various avenues of cost saving avenues that still allow firms to retain top talent.
The Zeughauser Group typically takes a pretty hard-nosed approach to protecting the bottom line. As part of this tough medicine, Kent urges that, “cost-conscious firms to cut salaries, outsource more associate work to India, skip a year of attorney hiring and identify underperforming attorneys, practice groups and offices.”
One reoccurring theme throughout the second quarter is that firms are increasingly open to a multi- faceted approach to cut costs and retain profitability.
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