“So is outsourcing dead,… or is it just that this deal simply did not work?

3 Apr 2013

Chris HoweI was surprised and interested to see the reaction this week to the news that Osborne Clarke have scaled back their outsourcing deal with Integreon. The fact the deal itself hasn’t worked out as expected is one thing, but to suggest this challenges the whole outsourcing model is quite another. Even the parties to this particular deal seem to be continuing to work together, so it can’t be all bad.

We need to be clear on the rationale, benefits and disbenefits of outsourcing. In principle these are:

  • get the “best in the business” to run certain non-core processes for you – hopefully more efficiently and effectively
  • economies of scale as the outsourcer “pools” instructions from a number of firms
  • cost savings as the outsourcer applies the best processes and uses people, technology and infrastructure fit for purpose (expensive city centre office space is not appropriate for invoice processing or call handling)
    but
  • once you involve an external supplier there is an additional “hand over”/barrier as you pass your material to them for processing
  • the process outsourced needs to be distinct, highly repeatable and self contained for best results.

The reality is that law firms are pretty small businesses when it comes to back office processes. So any savings to be made from outsourcing are also correspondingly small whereas once outsourced the benefits of proximity to the main business to deliver ad hoc support are lost. It follows only the largest firms will get significant benefit from outsourcing back office services, and firms should think twice before outsourcing anything but the most repeatable process-driven aspects. 

Conversely, and perversely, there remains plenty of scope for outsourcing legal processes. Clients are increasingly looking for “one stop shop” for services and not all legal support is best provided from within the same business model. We should therefore see more outsourcing of legal process to reduce cost and promote effectiveness – either through explicit outsourcing, or through the setting up of processing “sheds” or through reciprocal deals. Of course not all of these would be called outsourcing, but in reality they are.

And finally, none of the above changes the pressing need to improve the performance of processes in the legal industry – either legal or back office – and any approach that reduces cost, improves reliability and responsiveness will win out. The only question is how this is achieved.”

 

“Chris Howe is Director at Raedbora Consulting Ltd. and was for 10 years a Director at Addleshaw Goddard LLP. He has over 20 years’ experience consulting to both the Legal industry and to blue-chip and multi-national corporates across a range of sectors. He advises businesses on Pricing, Key Account and Client Management as well as Practice Management and Process and Financial Improvement.”