Change not easy in any profession. With cost-cutting being a significant outcome of the recession, organizations across sectors, especially legal, have been forced to rethink their business models to achieve a common goal financial prudence. Due to reduced legal budgets, organizations do not have the means to continue to outsource their legal work to law firms. Rather, just to be able to outsource the essential work, GC's are insisting law firms lower their billing rates or risk losing them as clients. In the face of this uncertainty, Legal Process Outsourcing (LPO) established itself within the legal landscape. Being able to perform low-value high-volume work at a level of quality comparable to law firms but at a far lower cost has been the key reason for its growth.
Large to medium-sized law firms have typically built their reputation on the experience and background of their leadership team, the types of clients they service and the length of these relationships. The downside to this approach is that the business model used, is built on prior industry knowledge of its directors and client relationships; no longer making good business sense in the current economic environment. Components of the model include a single pricing model, irrespective of the service being outsourced and a single onshore platform through which services are delivered. What law firms have now realized is that altering this model is difficult, given its integration into their different operational processes. Additionally, while a bulk of the law firms work from their longstanding clients is low value, given its volume, the work is also highly profitable. This makes it harder to give up or outsource when clients demand a lower pricing structure. Law firms need to re-think and modernize their business models, such as their billable hour and move from a single delivery model approach to offering alternative delivery models to guarantee their financial permanence in the legal industry.
Given the rigidity of the law firms operating model, transitioning to a framework similar to that used by LPOs, will be more successful in appeasing their clients The model adopted by LPOs allows them to adapt on the fly based on the needs of the client. For example, should there be an urgent need to scale up, the LPOs have a pre-approved team on bench that can be allocated for a one-off project. They are able to offer a variety of billing models based on the nature of each project rather than based on the client as a whole. They are also able to offer onshore delivery support should the client require it. To keep costs down further, LPOs either look to build alliances with technology partners to license platforms or showcase their innovation by creating their own tools to improve workflow processes and efficiencies.
Law firms main challenge will be amending elements of their existing business model to cater to clients needs on a project to project basis instead of the relationship as a whole. For instance, certain clients might like the opportunity to off-shore low value work to keep costs down. Additionally, forming partnerships with LPOs or inviting LPO employees as part of a work-exchange program will offer law firms a perspective of LPO mindset. For now, even a demonstration of this planned innovation will go a long way in helping retain current and acquire new clients.