Recession accelerates legal outsourcing commoditisation

Commoditisation of legal processes, driven by offshoring of tasks such as IP-related work, is poised to increase further during the recession, according to a study of leading law firms. The new analysis of legal business trends has shown that law firms are viewing commoditised services as sources of protection from financial uncertainty.

Published by management consultancy PrinceOMC, the study of 100 Dow Jones and FTSE-listed law firms shows that outsourcing of legal support tasks is set to proliferate, as four out of five of the firms predict challenging times ahead.

With law firms seeking a reliable fiscal buffer to see them through the next 12 months, offshoring document review and assembly tasks has emerged as an ever more common method for controlling workload and revenue problems. This is despite a prevailing resistance to offshoring tasks seen as specialist or value-added, which law firms are keen to retain for themselves.

According to PrinceOMC partner Jack Diggle, 'In a downturn you'd expect all areas of outsourcing to be of interest, but it seems that the industry's long-standing resistance to offshoring elements of legal work is withstanding even these tough economic times.

'What we are seeing, however,' he added, 'is an increasing drive towards outsourcing support services and commoditised legal work. There's pressure from clients to cut costs and also a need for greater internal efficiencies as headcounts fall. Moving some commodity aspects of the business to low-cost locations seems like a logical move in this market.'

In Diggle's view, this trend is creating a temporary perception change around law firms' main priorities. 'It raises the question of how much do law firms really see themselves in the "specialist" rather than "commodity" end of legal service delivery,' he said.

Commoditisation is emerging as a major force as legal business takes on a more global dimension, with law firms seeking solutions from developing economies. However, industry insiders are keeping a close watch on the trend as they wait for the time when specialist legal services will be entrusted to offshore providers in the same way as standardised tasks.

This was highlighted as by the results of US legal consultancy Altman Weil's recent Legal Transformation Study, which predicted that 70% of legal tasks would be commoditised by 2020.

Speaking about the study in April, Altman Weil principal researcher Dan DiLucchio said that law firms were approaching commoditisation from three angles: how it will affect pricing models; how it will affect client relationships; and how it will determine the internal structure of their businesses. DiLucchio was confident that the technologies which have helped to make the initial unbundling of legal services efficient will have useful applications in any future wave.

'Once it becomes a commodity service,' he said, 'there are going to be people who capitalise on technology to deliver those services. For some clients, that's really all they need. That doesn't mean technology cannot play into important strategic services either. There are uses for technology throughout the profession that can help lawyers better serve their clients and do it in a more efficient way.'