Yesterday, we began our recap of the Contract Lawyers & Outsourcing webinar with Tim Corcoran and Kevin Colangelo. Today, we continue the discussion.
Who is Doing this Successfully, and How?
Tim said that one of the challenges he’s heard from law firms about outsourcing is that their work is unique, their firm is unique, and as such, their work is hard to routinize and find a common way to deliver the services. So he asked Kevin to comment on how others who have done this have found that there are practices that can be improved through this approach – and not just the low-end, simple document reviews, but some high end work as well.
Kevin said that they analyze the tasks going on within a law firm, legal department our sourcing department to see what can be disaggregated. Those that they’ve been able to disaggregate, they rebuild in a very process-heavy, documented environment. This extends outside of just outsourcing – firms can understand both how they get their work done and improve the way they’re doing it with the people that they’re using. This blends into not only the way that clients want their firms to do the work, but also how the firm itself wants to be operating.
Kevin said that he worked with lawyers for many years who believed that everything that came across their desks was bespoke, as if someone wiped all knowledge from handling a matter as soon as it was completed. But truthfully, what they knew about something could be winnowed down to the core issues in about three or four hours, and it was taking them 14 hours. In a seller’s market, that was easy. But in a buyer’s market, it’s very challenging to do this time after time if you want those clients to keep coming back.
He went on to talk about some of the other models of outsourcing, beyond just that of sending work to a single company. There is also using temporary attorneys, people on flex schedules, and more. His overall message is that there is a strong movement, driven by clients and smart firms of all sizes, to rationalize the way that work is done across all specialties.
There is, of course, the work at the top of the pyramid which will always be the "backbone" work – this can only be done by this attorney. And Kevin argues to his clients that they should pay a premium for this type of work, because that person or specialty is rare, the subject has all kinds of landmines you can’t predict, and it’s not the type of work that’s subject to disaggregation. But that kind of work is only at the very top of the pyramid.
As technology evolves, this portion of the pyramid is getting smaller, so firms need to focus their time on the vast majority of legal work that is getting done, which is work that is more appropriate to discuss from a process perspective. Tim agreed and said that it starts with understanding how firms deliver legal services and which of those are premium, versus those that are repeated multiple times. Find the commonalities in the steps, paths and ways to deliver those services. This might result in finding a third party to do that work at a lower cost, using your process, or it might be embracing that process improvement and finding different lifestyle lawyers at your own firm.
Kevin said that the clients have the power, but they’re not being jerks about it. They face significant pressures to do more with less, and they’re trying to look to their trusted advisors to help guide them. He emphasized that it is happening, but he’s heard from all of his clients that it’s not happening fast enough, particularly at the largest law firms. There is the notion that firms are going to squeeze as much as they can out of this market before they’re forced to move to phase three, and clients know this. But he suggested flipping it a little – when you show a client that you understand the way you do your own work, or you inquire about how they do their work, so that you can map your work processes to theirs, the word "commodity" isn’t offensive – it’s a weapon.
When you look at core versus non-core work, core will always be at the top of the pyramid, and it’s what keeps the firm chugging along. But the reason that firms have their clients and the way that they can expand their client base is using the entire pyramid – the work at the bottom of the pyramid might not be as profitable as it used to be, but if you can keep that non-core work in-house and show your clients that you’re doing it in a way that’s beneficial and provides value to them, they’ll give you more of the top level work.
Okay, I’m Sold. But How Do We Figure Out Which Practices are Amenable?
Tim asked Kevin to comment on how to assess which law firm practices might be amenable to the outsourcing approach. Kevin said that there are number of ways, and when looking at the models out there, he draws a stark line between the law firm model and what is not a law firm. He uses the term "LPO" to define individual companies that are providing legal services in a very process- and technology-heavy environment, and that’s one category of non-law firm outsourcing.
Another would be contract attorneys – they have been around for many years – and this is when an attorney sits in a room, is paid by the hour, and goes through and redacts volumes of documents. Kevin said that this model has been tested, and it’s used by clients and law firms alike.
One of the newer models is "flex time." He’s seen some in the US, but there has been more press about them in the UK, where there are companies popping up who are bringing people back into the workforce. Technology enables them to provide valuable services using their experience at hours that are convenient to them. It’s not a process-heavy model, and not a staffing model, but Kevin plans to keep his eye on this. However, he also pointed out that they’re not working in an environment designed to deliver the most efficient approach to legal services.
In terms of analyzing the type of work that is most amenable to outsourcing, there is some history now in the LPO space (eight years) of seeing what in-house lawyers and law firms are buying from these discrete companies. It includes much of what we saw in the slide about the types of outsourcing – document review, privilege logs, etc. Kevin said that the software in used today is incredibly good. He asked the audience to think about the amount of data we’re generating daily, versus even five years ago (mostly email) – the software goes through this and may pick 20,000 out of 1 million emails that need to have human eyes review them. This is down from 30,000 last year, and 40,000 the year before.
At some point, you need to have smart, well-trained eyes reviewing these documents for particular issues in a very process-driven, documented, reliable manner, and that’s well-suited for a process-driven company like an LPO. He said it’s the same thing with due diligence – companies now realize that their contracts are asses and liabilities that they need to start managing. Good, reliable software has also been developed in this space over the last 5-6 years, so it’s an analog to the document world.
Kevin added that IP has been very routinized from the beginning, and this work has been outsourced for many years, going back to the 90’s. The database of patents, particularly in the US, is very easy to search, and clean, third-party software has been developed for that, so that’s also well-suited to outsourcing.
Then, moving up the chain are things like compliance and actual contract drafting – these are more on the bespoke side of things, and is a result of almost a decade of these LPOs doing outsourcing work, understanding the cadence and the issues on the easiest, commoditized work, and starting to see patterns as they move up the value chain. Kevin said that one of his last roles in the LPO space was to train a team on corporate secretarial work – firms might argue that this is bespoke, but in reality, it’s just jurisdiction-specific. Once you master a jurisdiction, it’s very commoditized. There are a lot of phone calls required, but if you have people who are good on the phone, it’s easy to do. Kevin sees this as where the future is going – he still sees significant value for law firms in the top 40% of the pyramid, where law firms can provide services you can’t get anywhere else, but this is where the industry is going on front office outsourcing.
Thinking about Outsourcing – What to Think About?
Tim asked Kevin to discuss what he should be thinking about if he’s a law firm ready to embrace outsourcing. Kevin said that the first thing is to think about the market – onshore versus offshore. The market is primarily offshore, both labor/arbitrage and process. So one of the first decisions is where should we go with this, if we’re going to go offshore. Kevin offered his criteria to consider:
- English language legal system
- British common law legal system and training
- Capitalist economy
- Infrastructure & commitment to capital investment
- Advanced technology – secure, encrypted, redundancies, etc.
- Government commitment to growth
- Comfort with foreign business and investment
- History of commerce with the West
- Entrepreneurial spirit
- Labor cost savings
- Scalability (both in terms of lawyers and business factors)
The first two are the most important, along with a commitment at the right level of management. He said that it’s the same reason you’re in the law firm that you’re with – you’ve made a commitment to practice and you like what you see at that firm. It comes down to some common sense considerations.
Kevin said that he’s asked about the human resources side a lot – when he first started with his LPO company, it wasn’t really known whether or not Indian lawyers could do the work that US lawyer do, and that’s one of the reasons he encourages firms to look at the first two criteria. The Indian legal system is based on British common law, so the way that Indian lawyers learn contracts and the principles of law are the same, and it’s just that the execution is different. This is true of other former British colonies as well.
At the end of the day, there is a large pool of very talented, motivated professionals who understand the way that work needs to get done, and the legal principles. Wrap this around the right technology and the right leadership, and you’re in good shape. Kevin emphasized the importance of understanding the backgrounds of the people who put the operation together, along with the people who will be your primary point of contact. He added that you shouldn’t rely on references alone, but instead, be very comfortable with the day to day interface.
Additionally, you’ll want to make sure that your provider will be around from year to year – Kevin said that we’ve passed the danger point of that phase with the LPO, but the challenge when you talk about other kinds of outsourcing outside of LPOs is still there, so it’s important to be careful.
Tim suggested that firms do their due diligence as they would with any other service provider, and said that some of the myths and fears about the capabilities of lawyers in other jurisdictions will be dispelled by meeting these criteria.
Tomorrow, we’ll delve into the final part of the webinar!