Legal Outsourcing: The Need for More Rigour
Almost all law firms in Australia now outsource some part of their essential support functions. In-house legal departments have also embraced outsourcing. This fundamental change in the way lawyers operate has happened over the past 10 years. To take advantage of this demand, the market has been flooded with start-up vendors, often owner operated, offering slickly marketed, bundled and low-cost services.
The vendor market offers a huge amount of choice and almost every aspect of supporting a law firm’s operations can now be outsourced, locally or internationally. Choice and competition are a sign of a healthy market. However, we would like to sound a word of caution.
We have noticed that the rigour with which law firms advise their own clients on outsourcing: the careful tendering process; the extensive due diligence; regulatory checklists; and evidence of a successful track record, to name a few, are not being applied when law firms outsource their own functions.
In fact, we have seen many service provider appointments made with almost no form of due diligence at all. Similarly, we have seen untried and untested service providers being appointed to very large outsourcing projects with no form of tender process and no track record in providing service at that level. This is not to say that those service providers are incapable of providing a good service. However, it shows that large contracts are being awarded to providers without any in-depth market analysis or like for like market comparison. Increasingly, large outsourcing appointments also are being made on the basis of aggressive sales and marketing drives or on the basis of personal relationships. This means that if the service provider does the best, most cost effective job, then that appointment will have been a matter of good luck rather than a carefully analysed decision.
The decision maker tasked with finding the right provider faces a difficult choice. The extensive number of services, from highly specialised narrow focus to broad, generalised functions make it impossible for any CIO to be aware of all of the specialised regulatory and technical issues involved with each function without careful market analysis and a tendering process. The tender process becomes even more important when trying to unpick bundled services, which would otherwise make like for like comparisons impossible.
There are many small, start-up vendors delivering excellent services to law firms and in-house legal departments. It is only vendors providing inferior services that benefit from this current lack of rigour. All credible vendors welcome in-depth analysis of their services and the associated costs.
We would urge all decision makers to apply the same rigour to their own outsourcing that they recommend to their own clients. As a starting point, it is important to assess the real costs of carrying out the function in question in-house, including staff costs, materials, technology, building costs, regulatory costs, overheads, etc. While this may sound obvious, without an accurate assessment of the real costs to the business, it is impossible to accurately assess service providers’ offerings or indeed, whether it is necessary to outsource the function at all.
When carrying out this cost assessment, many of our clients found that document reproduction shrunk revenue by an average of 3%, making a clear case for outsourcing this function. When assessing our own services, our clients found that with our bespoke print room management services, they reduced their document reproduction costs by 30%.
In addition, in our own field of print room management, it is important to question vendors on at least the following:
- whether the vendor has any standard certifications, such as ISO certifications;
- whether the vendor will provide the most appropriate and up to date equipment;
- whether the vendor will provide and manage suitably qualified, trained and screened staff;
- the hours the vendor will operate the service;
- the software the vendor will use and whether the vendor has the appropriate licences to carry out the tasks for the time needed;
- the vendor’s provision for business continuity and backup in the event of an emergency, such as a power outage;
- whether document and data security comply with regulatory requirements;
- the vendor’s provisions for client, document and data confidentiality;
- whether the vendor will use any third parties to carry out any of the services; and
- how long from the execution of the services agreement will it take to begin service delivery.
In the field of print room management, it should raise a red flag if any vendor is unable or unwilling to answer any of these questions clearly with supporting evidence.
In the spirit of transparency, here at LitSupport, we are pleased to answer all these questions and would be willing to provide more detail to any interested persons. I urge all decision makers to conduct due diligence on each potential service provider. All good vendors should be proud to answer such questions about their business.