What do Australian law firms think about outsourcing?

LitSupport put together a survey designed to examine how and why Australian firms use outsourcing.  We identified a small number of Australian law firms (less than 40) or international firms with Australian offices that we considered leaders in the area of law firm management. More specifically, we were looking for signs of innovation as a response to the systemic changes that are taking place in the market for legal services. On the whole, those executives we asked to respond to the survey had responsibility for financial management of a law firm or were senior partners in management roles.

• 42% said they outsourced
• 33% outsource IT assistance and document processing
• 50% outsource litigation support
• 33% outsource the obtaining of soft-copy legal resources
• 17% outsourcing content-based functions
• 80% stated that outsourcing had enabled them to provide a more efficient service
• 44% of respondents said that they had experienced one or both of the following disadvantages:
  • outsourcing caused disruption
  • the outsourcing provider did not understand the needs of the firm
• 44% stated that their firms are considering outsourcing further functions over the next two years
• 50% of the respondents said they were considering outsourcing over the next two years because they want to achieve one or more of the following objectives:
  • Improve processes and procedures
  • Reduce their headcount
  • Access the latest technology
  • Be able to provide more efficient services
  • Access outsourced services
• Only 25% of respondents identified saving costs or accessing experts in each field as drivers for outsourcing
• None of the respondents identified the following factors as drivers for outsourcing:
  • Reduce client fees
  • Focus on core work
  • Provide continuity of services
  • Achieve better cost recovery from clients
• 56% listed barriers to outsourcing as resistance by partners and/or confidentiality concerns
• 78% strongly agreed that an inability to demonstrate best practice in data would be a ‘deal breaker’ for any outsourcing.

Our survey showed that firms are very concerned about the quality of the service they receive when outsourcing, which indicates that providers are delivering an inconsistent level of service. It also suggests that the attitude of partners is preventing some firms from moving towards outsourcing.

From the survey, we can see that law firms are less willing to outsource functions that are seen as being close to the traditional analytical work lawyers do, such as legal research, writing articles and blogs, and reviewing documents. This makes sense because abilities in these areas are what distinguish average firms from outstanding ones.

Nevertheless, most law firms seem to be failing to identify and capitalise on those areas where outsource providers have the expertise and can make a valuable and significant contribution. Litigation support is one such area. Traditionally, a technological approach to discovery was the monopoly of the larger firms because they had in-house teams who specialised in the area.  However, these days the most highly qualified and talented specialists in eDiscovery have set up their own businesses. This is great news for mid-sized and smaller firms, which can now source specialist services on an as-needed basis and thus compete cost-effectively against the big end of town. In addition, as courts insist on a more technological approach to discovery, firms need to be able to assure their clients that they can handle these matters effectively. Our research through the survey indicates that firms are starting to realise that outsourcing such work will enable them not only to adapt to a rapidly changing market but to thrive.

At LitSupport, we believe that a transformation is taking place. It won’t be long before more firms, especially mid-sized and smaller firms, realise that outsourcing is the key to taking on and beating the large firms at their own game.