Low-level legal work goes offshore but it’s still in-house
MORE Australian law firms are slashing costs by moving low-level work offshore, but not all have adopted the traditional approach to outsourcing.
In 2001, Baker & McKenzie established a dedicated back-office facility in Manila with the aim of deflating costs across the firm’s international network.
The Global Services Manila (GSM) operation is located within the existing Baker & McKenzie Philippines office.
“It’s legal process offshoring, rather than outsourcing,” said Greg Walters, Baker & McKenzie’s global chief operating officer.
“By building up the scale, the processes and the quality, we can do things quicker, cheaper and more efficiently as one unit there, rather than in 67 separate offices.
“A lot of law firms are now talking about getting into LPO (legal process outsourcing), I think really they are getting into the stuff that we were did in Manila 10 years ago.”
The initial success of the operation prompted management to expand the range of services undertaken in Manila.
As well as back-office functions, GSM now handles “middle office” functions, knowledge management, the firm’s help desk and much of its IT work.
The Manila experiment paid off. By centralising a range of lower-level operations the firm has created multiple economies within its global web.
The shared services centre now delivers cost savings to Baker & McKenzie of up to $US25 million ($26.8m) a year.
Mr Walters argues the Baker & McKenzie model and mindset contains an inbuilt readiness to embrace offshore solutions in order to minimise overheads.
“We are very used to the idea of doing work offshore, and we always look for opportunities to do work in our lower-cost jurisdictions,” he said.
“Because of our geographic footprint, that stuff is much more normal. The idea of shipping work offshore scares a lot of people still, quality concerns jump up, and (there are) fears about losing control.
“We have much less of that. We’re used to moving stuff around and trying to find the most efficient way of doing things.”
Manila was selected from a basket of cheaper markets, with its attractive time-zone and depth of talent among the decisive factors.
“Ten years ago that was quite a brave bet. It was not where people were going. It was just a good call,” Mr Walters said.
GSM has not stripped all low-level functions out of Baker & McKenzie’s local offices.
The Australian office delegates parts of its creative design and production work, IT network operations, client billing and accounting to Manila.
“We’ve had different levels of take-up across the offices. Every office does something there, and certain offices have entire functions there, for instance help desk, some data entry work.”
Concerns over control linger in some local offices, and there are pockets of reluctance about sending work to GSM.
“When we talk about it internally, we say not only is it cheaper, we think you’ll get a higher quality document, with quicker turnaround than you can get in your own office,” he said.
In spite of any internal resistance, the Baker & McKenzie strategy is to scale up its GSM operation, which currently employs 460 staff.
“Wherever we’ve got global functions, we try first and say why wouldn’t we locate the next vacancy in Manila, say our next business development person, our next marketing or HR person.”
But GSM is not intended to become a one-stop-shop for the firm’s spectrum of legal processing requirements.
Indian-based LPO firms are expected to continue to manage the flow of high-end process-oriented tasks, such as document review and litigation support.
“At the moment we have no plans to develop that capability inside. We use Manila for certain work, and we use Indian firms for the higher-end legal work,” Mr Walters said.
Like Baker & McKenzie, many firms in the US and Europe have integrated the use of outsourcing providers — largely based on the subcontinent — into their practice. Adoption has been slower in Australia, but interest in the practice is on the rise.
Boutique Sydney firm Advent Lawyers recently teamed up with Indian-based outsourcing firm Pangea3 to deliver litigation and compliance support to its clients.
CPA Global is one of the firms leading the charge in Australia. The international outsourcing provider has 15 offices worldwide.
Most of its work is serviced in India and Britain, followed by the US.
“The days of outsourcing everything to your law firm and paying by the hour are about to end,” said Eve Johnson, CPA Global Asia-Pacific senior manager said.
The company opened a Sydney office in 2002, with intellectual property filings its core focus. Over the past three years it has branched out from intellectual property work into litigation, transactional and contract review support.
Ms Johnson said the appetite for its general legal services was growing. “About five years ago, the market was saying, can you do more? Why are we paying junior associates $250-$300 an hour to do relatively simple, process-driven tasks?” she said.
The degree to which the outsourcing outfit says it can outprice the big firms is compelling.
“We have seen legal services outsourcing deliver cost savings of 80 per cent when compared with hourly charge-out rates of large law firms,” Ms Johnson said.
“We’ve looked at one piece of litigation where an Australian law firm was quoting around $10 million. The client asked them to revise this, and they looked at their version of outsourcing, which was just the document-management component, and that knocked off another $1.5m.
“If we were to handle the actual document-review component we’d take off another $6m.”
Ms Johnson said the dramatic fee reduction reflected an alternative approach to traditional discovery and billing processes.
“It’s a combination of a very different way of charging, and also a utilisation of technology, so (using) lots of forensic searching technology to narrow down the number of actual documents that have to be searched.”
Despite the numbers and some big-name clients in Rio Tinto and Microsoft, the broader domestic market has cautionbeen cautious about the concept.
“They are very head-in-the-sand about this sort of stuff in Australia,” Ms Johnson said.
“The corporates are going to have to force (the majors’) hand before they act, and that’s certainly what we’ve seen in the UK. I think it’s very new, and no one is willing to bet the farm on it yet.”
Should large slabs of low-level, process-driven tasks be offloaded to third-party providers, it may force a shift in the traditional bread-and-butter work of junior solicitors.
Ms Johnson believes this will strengthen talent in the top firms.
“It actually means that they will get better training,” she said. “These kids that are going into the Mallesons or the Allens of the world are bright, they are accomplished. So rather than going through boxes of documents and doing really boring work, if that’s taken away from them, they will actually get to do more challenging work early on in their career.”
The bulk of that work is instead being picked up by CPA Global’s Indian lawyers and welcomed with a greater degree of interest, according to Ms Johnson.
“They’re just so keen to be working for a client like Rio Tinto or a large telco,”‘ she said.
