Outsourcing Revisited

With the announcement from Slaughter & May that they are "in talks with an LPO [LegalProcess Outsourcing] supplier", the legal world is again aflame on the subject of outsourcing.

I have already written once on this subject (here) and James Dunning had more to say on the subject (here), but I remain concerned that the notion is not always going to be thought through by some firms. The implication from some of the press coverage is that "if Slaughters are doing it then it's mainstream and so we should all be doing it...". Let me just set down some of my concerns:

• Slaughter & May are not yet outsourcing anything. They are "in talks" with a supplier. That can mean anything, or nothing.
• I wrote before about client concerns. How will a client feel about work being outsourced? What safeguards will be retained? Consider a medical example. A routine piece of surgery can, one might argue, be carried out anywhere since its simple and so should be carried out as efficiently as possible - which might mean in a small local hospital, or a private clinic. That's fine unless something goes wrong. I'd prefer to pay a little more to have a procedure done in a large teaching hospital so that, if the less that 1% chance of failure occurs, I will be surrounded by highly trained (and so expensive) people who can step in and take over. The same is true for a "simple" client matter. 99 times in 100 there will be no problems - but what will happen in those 1% cases? Who will be there to step in and sort things? How quickly will the lead lawyers find out that there is a problem.
• Consider this too - how often has a client told you that a piece of work will be simple - only for you to find that it's not? How commoditised can legal work - especially that of the largest firms handling the more complex tasks - be?
• How will the data protection act apply. My (somewhat limited) understanding is that special measures will be required if private or personal data is to be processed outside the EU (or EEAA). Will outsourced "partners" have full access to the matter files? Can they perform adequately if they do not? I know of firms where the partners (that's the partners in the law firm - sorry for the confusion) have concerned about secretaries from other departments having access to files - never mind employees of different companies.
• How will outsourced work be fitted into staff reviews and bonus considerations? How will departments react to not being able to pad hours on "grunt work"? At what point will the law firm's "value added" come into the process? I'm not sure how happy I would be to receive a bill from a partner briefly reviewing outsourced work and stating "it's fine".
• How will the law firm control the outsourcing third party. What skills will be required to manage the relationship. I'm sure that legal knowledge and training will not help much - so who will manage the liaison?

This is not to say that I think outsourcing is a bad thing. It is probably a good thing - but care must be taken before jumping onto the bandwagon. It needs to be the right thing for your law firm and you need to be absolutely sure that you fully understand what benefit the firm and its clients will receive.

Outsourcing - the way forward?

Outsourcing is big news at the moment. A key new phrase I've recently had to get used to is "Legal Processing Outsourcing" or LPO. I read a very interesting article on the subject which asked "Is it worth the effort?". The article gave an example of a firm having three legal teams spread around the world at 8 hours intervals who were able to devote 24 hours a day to servicing a client.

The article raises a number of questions about the LPO system but seems to miss one or two issues. Intra-firm trust can be a serious issue in many firms - why else do so many spend so much time persuading partners to be open with information. If lawyers can have difficulty assuming that anyone else in the firm can do the work "properly" then I'd suspect that the chance of them using people outside the firm are very low. Larger firms are presumably already in a position to do this. The "big boys" can logistically offer 24 hour service (without simply demanding longer hours from the lawyers working on the deal or case) - but how many of them will work in this way at a matter level? So why will it be any different for smaller firms? Why should they choose to outsource to offer this service?

One vital things is required. The quality of service. Any outsourcing firm must be able to offer at least the quality of service provided by the "host" firm. The "host" firm must be absolutely sure that the work provided will be good enough every single time. The firm must also be absolutely sure that the client will be happy that the matter is being dealt with in this way. It is one thing to explain that the firm's Hong Kong office will be dealing with the matter out-of-hours - it is quite another to explain that a completely different firm will be working on the client's matter.

The issues above are very serious - so serious, in fact, that I doubt about the practicality of outsourcing a client matter in the way described in the article. Efficiency in processing is absolutely vital - but outsourcing it is a much more complex thing altogether. It will come - and possibly come soon - to law firms. It will, however, be in simple, transactional issues rather than in any complex litigation, I am sure.

Update: James has an interesting take on this item - see here.