Off shoring of legal services has caused a lot of debate involving its sustainability and viability as an alternative to law firms. These discussions usually involve buyers of organizations, law firms and Legal Process Outsourcing (LPO) service providers. Buyers are usually faced with managerial problems when dealing with LPOs. These include but are not limited to communication barriers, poor quality of work delivered and data security concerns. Problems with law firms are few and far between, primarily because of the extensive tenure of the relationships. What is overlooked however is the need behind why general counsel (GC) are pushing for alternative engagement models to the traditional law firm standard and trying to find solutions for the problems they are confronted with. Buyers of legal services are facing growing pressures to vigorously monitor their legal budget to ensure costs remain low while innovating the way they outsource legal services to further reduce legal spend without the quality of work suffering.
Organizations have typically had long standing relationships with law firms to service all their legal needs. These relationships have characteristically spanned 10-15 years. With the recession and the subsequent need for cost cutting, these relationships were put under tremendous strain. Law firms were pressured into lowering their billing rates or risk losing business relationships cultivated over years. Buyers unable to afford these billing rates were forced to seek out new partnerships more in tune with their internal legal budgets.
And so began a series of events that started a chain reaction, which most importantly, saw the progression of LPO, among others. Fast forward to present day and the same challenges remain for buyers. The recession's effects are still evident and general counsel now more than ever face growing pressure to efficiently manage their legal budget and reduce their legal spend where possible. Accordingly GC's need to carefully analyze the legal landscape and only then chart their course with their ability to change direction when and if needed.
Even though the realization might have happened, it is crucial that GC's conscientiously keep their internal team fairly lean and reserved strictly for high value work. Subsequently, I suggest they form relationships with mid-sized law firms with sustainable billing rates. The key difference between the large and medium law firms is the mindset; with the mid-sized law firms more than often, willing to go the extra mile by not having an established brand and its history to rest on that speaks for their work. Lastly, partner with those law firms that advertise or are open to alliances or partnerships with LPOs. This way costs can be further cut by outsourcing the low value " high volume work offshore, keeping the medium " high value work with the law firm and reserving the purely high value work to be done in-house.
What I feel will be the most beneficial to GC's in helping curbing their legal spend, is to aggressively track the return on their investment (ROI) whether it be outsourcing to a law firm or off shoring to a LPO. Only in continuous tracking of their ROI will they be able to ascertain where additional expenses can be curtailed and the avenues through which additional investments will yield higher returns.
Given the ever changing legal landscape, GC's and their partners need to adapt and evolve to stay financially competent and competitive.