The year 2010 has been a watershed for legal services outsourcing (LSO). As the sector has developed and its offerings grown in sophistication, LSO has been acknowledged in industry reports as a valuable tool for helping law firms to evolve and for enabling in-house counsel to play a more active role in corporate management.
All of which demonstrates that LSO is becoming more deeply embedded in the legal business arena. Leah Cooper, Director of Legal Services Outsourcing at leading provider CPA Global, shares that view. ‘As LSO has become more established and accepted in the legal mainstream,’ she says, ‘so has its credibility and prestige increased. This, in turn, has attracted more top legal talent to the sector – both onshore in the UK and US, as well as in offshore delivery centres – with LSO being seen as a viable alternative career for legal professionals.’
According to Cooper, that proliferation of talent has been characterised by a busy spell of cross-pollination between sectors. In the past year, CPA Global has recruited senior lawyers from leading corporations such as Virgin Media and Home Depot, plus top law firms such as Baker & McKenzie, Allen & Overy and SJ Berwin. This hiring strategy has broadened and deepened CPA Global’s working relationships. ‘Our growing teams in the UK, US and India,’ says Cooper, ‘are working with some of the world’s best-known corporations in the financial services, technology, telecommunications, pharmaceutical, healthcare, and fast-moving consumer goods industries.’
So, if 2010 has embodied values of credibility and prestige, what is 2011 likely to bring?
That question has spurred a new announcement from business consultancy Fronterion. In ‘10 for 2011: Top Trends for Legal Process Outsourcing (LPO) in 2011’, Fronterion predicts that the sector will garner increasing recognition as a cornerstone of progressive legal business. Already, it argues, ‘Ripples from the rapidly growing LSO industry are shaping professional ethics; altering long-standing law firm-client relationship dynamics and challenging the general notion of how legal services are procured, delivered and consumed.’
‘As 2011 approaches,’ it adds, ‘all legal professionals – from LSO industry veterans to those in firms who have banned the very mention of outsourced legal services – need to maintain a firm grasp on legal outsourcing trends.’
One of Fronterion’s predictions indicates that law firms will begin to implement LSO programmes at a more enterprising, firm-wide level. This approach will allow legal professionals to better manage risks and ethical exposures, and leverage the greatest value from engaging LSO providers. While law firms have been keen to stress their autonomy in the face of increasing commoditisation, says Fronterion, their LSO purchasing decisions are likely to become more cohesive, rather than piecemeal.
Proof-of-concept on LSO projects – in other words, a growing recognition that LSO works – will be taken to heart by law firms, and successful programmes ‘will result in more expansive captives, virtual captives and well-invested provider-engagement structures’.
CPA Global’s Leah Cooper is similarly excited for LSO’s integration potential. ‘Looking to 2011,’ she says, ‘we believe LSO will become more deeply embedded in the legal services industry as an increasing number of corporations and law firms see for themselves the benefits to be gained from the highly cost-efficient, three-way collaboration model that LSO is able to deliver.
‘Law firms,’ she adds, ‘will increasingly recognise that LSO providers are not aiming to replace them – we never will, as we don’t practise law. On the contrary, by ensuring better use of resources and proper segmentation of work, we can ensure that law firms and in-house legal teams are able to spend much more of their time practising law, which is what they do best.’
This flexibility, according to Fronterion, will be supported by increasing technological sophistication. ‘More pervasive and advanced technology platforms,’ it says, ‘will increase clients’ abilities to engage with LSO providers and expand service opportunities.’ In addition, the consultancy argues, ‘Major LSO players who now have the established scale will continue to develop customised technology tools as they offer integrated solutions to their established and new clients.’
LSO providers have much to look forward to in 2011: a year of enterprise, innovation and collaborative spirit.
Year of dynamic change
Fronterion’s predictions for 2011
1. A fundamentally changing legal profession
Greater technology integration, broader globalisation and mounting pressure from buyers for value will bring sweeping changes to sole practitioners and major law firms alike. A new regulatory climate in the UK will have global implications, and a continuing sluggish economy will make corporations more alert about how and when to engage providers.
2. Enterprise approach
The emergence of law-firm managers with more corporate approaches will lead to a trend of firm-wide LSO adoption. Broader experience of LSO within law firms will be viewed as crucial to risk mitigation.
3. Onshore expansion
A growth in onshore and hybrid on/offshore delivery solutions will begin in earnest. This will be particularly prevalent in the US and UK. Onshoring will highlight the value of LSO beyond the attraction of labour arbitrage.
4. Expanding jurisdictional reach among clients
New markets for LSO services will emerge, as large corporations that have pushed for LSO adoption in their corporate headquarters start to request that their globally dispersed satellite businesses should follow suit; and regional law firms follow their larger, metropolitan counterparts.
5. Progressive value proposition
Providers will need to offer more services and a more progressive, or strategic, value proposition to remain competitive.
6. Increasing technology applications
LSO vendors will use technology as a key selling point. Technology platforms will be used to offer more diverse services and as means for providers to tighten links with their clients.
7. Dynamic provider landscape
Consolidation within the sector will reduce purchasing costs. Buyers will begin to think more about how to engage providers by adjusting their own processes than which provider(s) to engage. And providers will undergo consolidation driven by LSO and non-LSO players.
8. Public acknowledgement
Increasing numbers of key US law firms and corporations are likely to be more publicly open about their work with LSO providers. Clients may begin to compete with each other in the media over their understanding of the LSO sector.
9. Divergent provider approach
Competition will lead to increased diversity between providers as they strive to offer eye-catching and unique delivery models.
10. Ethical guidance
Formal commentary from ethical bodies will impact on the kind of work that legal professionals are permitted to send to outside providers, and how they are permitted to do it. This will have a significant effect on how vendors engage clients.