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Winter/Spring 2010-11, Volume 18, Number 1 & 2 The Outsourcing Game by Debbie Legall Editor’s Notes by Liz Polly From the Board Room by Constance Ard From the Chair: The Challenge of Adding Value by John DiGilio SLA Legal Division Annual Conference Report by Colleen Cable A Little Blue Birdie Told Me the Legal Division Had a Twitter Contest! by Tracy Z. Maleeff Full Disclosure: Get to Know a Legal Division Member! by Tracy Z. Maleeff Mentoring Emerging Law Librarians: The Internship at Seyfarth Shaw LLP by Amanda S. Merk International Corner: Letter from Australia by Miz Brmbota Takeaway Tips from Managing Copyright in the Digital Age by Jill Strand Water Cooler: Spring Cleaning and Killing Cows – Organizational Responsiveness by Constance Ard The 2011 SLA Legal Division Board Awards and Grants Committee by Marilyn Bromley The Legal Division Welcomes New Members! by Lisa A. Ross Need to Know Forum: Alignment in Action by Jill Strand Thank you to our Sponsors! The Outsourcing Game by Debbie Legall ([email protected]), Freelance Journalist Client demand for reduced bills is forcing law firms to think carefully about the business benefits and ethical pitfalls of outsourcing. In the current economic climate, law firms are increasingly seeking out ways to streamline their operations and drive down costs. Outsourcing is emerging as a way to achieve such aims in the face of a rapidly changing legal landscape. And as the race to deliver efficiencies to clients without sacrificing effectiveness becomes more competitive, choosing appropriate outsourcing arrangements is key. In the global legal industry, two outsourcing operating models are becoming progressively evident: business process outsourcing (BPO), which entails using third parties to deliver non- billable tasks, including routine and repetitive work; and legal process outsourcing (LPO), where a law firm uses third parties to deliver billable client work. Shaping the future Perhaps the most high-profile example of BPO is demonstrated by CMS Cameron McKenna. The firm has signed an agreement with Integreon—a provider of integrated research, legal and professional business solutions—which delivers outsourcing services to top firms in the US and the UK. The deal, which is worth £583 million, is described by Integreon as “an exclusive ten- year agreement to outsource middle office services,” and is thought to be the largest outsourcing model of its type to date. Tony Wright, Director of Operations at CMS Cameron McKenna’s London office, explains the reasoning behind this choice of partnership. In early 2009, the firm carried out a strategic review to identify the best way to structure a number of services including business services, operations (such as communications, facilities, document production, IT, learning and development and procurement). He explains that the firm used the following objectives to shape its future business model: • deliver enhanced “best-in-class” service; • improve competitiveness and service flexibility; • create an innovative, scaleable business services platform (capable of serving multiple clients, offices and countries); • offer a stimulating new working environment and enhanced career opportunities where support staff become front-line professionals; • operate at the most efficient cost. Wright elaborates that as part of the strategic review, the firm carried out a “detailed assessment of [the above] five models on a spectrum, which at one end included a ‘build it ourselves’ shared services model, and on the other a pure ‘lift and shift’ outsourcing model. In the middle were a combination of strategic partnerships—from those based on private equity funding (providing predominantly financial input) to others that offered more by way of (law firm) outsourcing experience and existing infrastructure.” Insourcing approach Some firms have a long history of outsourcing, and have consequently developed the knowledge and experience to fine-tune their outsourcing proposition according to the precise requirements of their clients. One such firm is Baker & McKenzie, which, in 2000, developed a variation of the outsourcing approach in a process it called “insourcing.” This “insourcing” arrangement was a combination of outsourcing, offshoring and shared services, but with one key difference. It was delivered through a small team of employees who were hired at a carefully chosen location: Manila. The Manila-based team dealt with typing and the editing of dictated copy—and the team’s purpose was to add value to client work as well as to the firm’s internal services. Manila was chosen as the location for this work owing to the Philippines’ large contingent of highly educated native English speakers and because of the ready availability of support in other major languages including Japanese, Mandarin, Spanish and German. Baker & McKenzie’s insourcing model, known as Global Services Manila (GSM), has evolved over the years. The GSM team has undergone dramatic growth and, with a staff headcount of more than 450, is equipped to serve the needs of the firm’s 67 offices throughout the globe. GSM delivers a broad spectrum of essential services including marketing, business development, IT and financial management. The firm acknowledges, however, that not all clients’ needs are the same, and it is the first to admit that rather than replicating the same formula firm-wide, a tailored approach is preferred. Greg Walters, Baker & McKenzie’s Global Chief Operating Officer affirms: “as a large, full- service firm with more than 15,000 clients around the world, a ‘one size fits all’ model is really not appropriate or feasible. Rather, we are focusing on what our clients are asking for—tailored solutions that address their specific business issues. For some clients, that may involve support from our insourcing team. For others, it may involve partnering with third-party providers on certain legal processes. It might even involve a combination of the two, or some other solution. Our approach will always be client-centric and client-driven.” A growth model Other firms have also embraced elements of the outsourcing model. In March 2009, Osborne Clark joined forces with Integreon to launch the first UK onshore shared-services centre for the legal market, to support the middle-office needs of Osborne Clarke, and those of other law firms. In late 2009, Allen & Overy became the first magic circle firm to outsource its legal work when it signed Integreon as its LPO provider for outsourcing basic litigation document review processes to teams based in New York and Mumbai. LPO was once thought to be too sensitive an area of activity to outsource, but the pendulum has swung sharply in the opposite direction. According to a recent PricewaterhouseCoopers and Duke University offshoring research study, LPO is growing steadily worldwide, and indications are that this trend will continue. In India for example—which has some 110 service providers specialising in LPO—legal services outsourcing is growing at a rate of 40 per cent per year. Asia Pacific meanwhile accounts for almost 60 percent of this market, with the remaining 20 percent being provided by the Philippines and Sri Lanka. But what are the reasons underpinning the growth in popularity of outsourcing? Ethics of outsourcing The answer could lie in the fact that outsourcing offers considerable benefits to its three key target audiences: the law firm, the law firm’s clients and the outsourcing partner. Wright affirms that for CMS Cameron McKenna, the benefits include access to the best available support services and technologies, as well as the opportunity to demonstrate a significant investment in talent, processes and technology. He adds that the firm’s clients benefit in the following ways: “access to a raft of improved client (business) services; sophisticated project management of complex transactions to innovative ‘best-in-class’ IT systems (supporting everything from eBilling through cloud-based, mobile electronic operations); a law firm focused on concentrating its resources and assets on the firm’s core business of servicing legal clients.” The outsourcing partner meanwhile can draw on “a talent pool of highly skilled, experienced business services professionals with experience of multijurisdictional support activities; and additional scale and capability against which to leverage operations to clients.” Walters credits insourcing for Baker & McKenzie’s growth since 2000—in terms of revenue and profit—but remains cautious about pinpointing any specific aspect of the firm’s outsourcing model as a single contributing factor to success. He believes “there have been a number of factors that have led to that growth, and it’s impossible to isolate the effect of a single factor,” but points out the overall benefits to having an LPO arrangement in place: “we have won engagements where an important part of our proposal was that we would—in consultation with the client—work with LPO providers to deliver the services required.” Thus, a process of continuous improvement clearly remains a watchword for the firm. But can it be argued that the act of outsourcing—despite the opportunities for improvement that it affords—can also lead to ethical dilemmas? In one jurisdiction—the U.S.—the problem is apparent. According to research released in July 2010 by Fronterion, a Chicago-based outsourcing consultancy firm, following a survey of 30 of the top US firms in the Am Law 50, the majority of US firms surveyed declined to comment about whether they were using LPO, even though the responses were confidential. Michael Bell, Managing Principal of Fronterion, believes that this wall of silence has been triggered because top US law firms appear to be in a quandary about whether to disclose that they outsource work, how they manage outsourced employees and maintain quality standards and, crucially, how they bill clients for such outsourced work. Firms will have no choice but to face these issues head on, because of the pressure to alter business models and address any number of challenges including increased competition and the demands of cost-conscious customers.