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Pillsbury Winthrop Shaw Pittman is riding a new wave of corporate outsourcing work as companies farm out more types of professional work, reformulate older contracts and hash out contract disputes with outsourcing partners. Outsourcing � or subcontracting a business function to a third-party company � became a widespread business tactic for information technology departments and customer call centers at the start of the decade. The practice has since spread to so-called business processes or professional functions such as human resources, finance and accounting and procurement. Pillsbury’s global sourcing group totals 65 lawyers and 15 consultants, compared with about 40 to 50 lawyers and no consultants in 2001, said Robert Zahler, a Washington partner who founded the group. The core group came from Shaw Pittman before the merger that created the new firm in April 2005, Zahler said. The outsourcing group, which now constitutes about 10% of the firm, also took the rare law firm step of patenting one of its processes. “Our [outsourcing] clients are for the most part large companies spending lots of money on data processing and human resources and financing and accounting,” Zahler said. The firm’s outsourcing client list includes American Express Co., General Electric Co., Honeywell International Inc. and Morgan Stanley. Pillsbury upgraded its finance and accounting outsourcing expertise with two consultants last year and is looking for two more, he said. The on-staff consultants enable Pillsbury to get involved at an earlier stage of outsourcing deals for a company’s strategic assessment of its spending on a particular business area and options for outsourcing, Zahler said. If a company decides to outsource, Pillsbury will help it evaluate and pick suppliers and create term sheets that may be “hundreds of pages” covering financial, technical, operational and legal issues, Zahler said. The process takes nine months to a year, with outsourcing contract values ranging from $100 million to $1 billion. “In every case there’s significant client legal work and consulting work,” Zahler said If suppliers stumble on contract obligations, Pillsbury helps clients renegotiate new terms. Although 2007 did not see fast growth, Zahler said the year did match the group’s annual revenue growth of 10% to 15% since the merger. Spending on worldwide business process outsourcing is projected to climb from $384 billion in 2005 to $508 billion this year and $677 billion in 2011, according to Framingham, Mass.-based market research group IDC Research Inc. During the same time frame, information services outsourcing spending is expected to climb from $88 billion in 2005 to $111 billion in 2008 and $119 billion in 2011. Not alone Last month, the U.S. Patent and Trademark Office approved Pillsbury’s ValueChain outsourcing methodology patent. Pillsbury holds a business-method patent, a patent category usually, but not exclusively, for computerized data processing. The patent covers a matrix system that illustrates how a company operates before and after outsourcing and maps out all the steps to set up the outsourcing. Pillsbury is also developing a software program that can perform the same steps, Zahler said. Pillsbury isn’t the only firm with a firm foothold in the outsourcing space. Morgan, Lewis & Bockius’ global outsourcing group has doubled during the past five years to about 30 lawyers in nine offices across the globe, said Philadelphia partner Michael Pillion. In recent years, Morgan Lewis has scored major outsourcing deals in the life sciences, pharmaceutical and financial services industries, he said. “We weren’t getting all of that business, so we decided to make a conscious effort to build a team,” Pillion said. New York’s Milbank, Tweed, Hadley & McCloy now has six partners dedicated to outsourcing, compared with two in 2000, plus 20 to 30 dedicated associates, said partner Stephen D. Nordahl. Deal volume is climbing as more companies outsource noncore business functions, Nordahl said. The high volume of business-process outsourcing deals is driving growth, even though the size of individual deals is smaller than for information technology deals, said Allen Klein, a Washington partner at Latham & Watkins. Latham has nine partners spending most of their time on outsourcing, supported by another three, compared with four partners five years ago. “At the end of the day, these are document-intensive deals,” Klein said.

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