Lauren Leonard ()
Whether you call it legal process outsourcing (LPO) or legal services outsourcing (LSO), there’s little doubt that the concept of outsourced services is currently a hot topic in the e-discovery and litigation support worlds.
As little as five years ago, GCs and law firms routinely kept most of their specialized legal work, such as managing document review, in-house. Most felt there was no reason to do otherwise—they could do the work, do it well, and maintain end-to-end control over the entire legal matter. Today, however, the economics have changed and outsourcing is much more common, but many old-school legal professionals are still wary of the practice for reasons that focus primarily on control. They fear that vendors will fail to grasp the nuances of their business, the quality of results will be poor, the work won’t be performed in a timely manner and the security of the data may be at risk.
On the other hand, many inside counsel and partners at law firms are expressing high satisfaction levels with outsourced services, which they regard as an innovative means of reducing costs, gaining access to better technology, tapping into broader domain expertise, and achieving more timely results.
Outsourcing Versus Managed Services
So what’s the real truth about LPO? To answer that question, we need to drill down to an inherent question about value. Can LPO live up to its original promise of lower costs, improved efficiency and higher-quality results? It may require a shift in how leadership in the legal profession perceives or defines outsourcing.
LPO can be boiled down to a very simple idea: Take a detailed, time-consuming, expensive, repetitive process and outsource it to someone who can do the same work for less. Sometimes, however, the terminology can steer you in the wrong direction.
In my experience, many GCs or law firm executives who are now willing to consider outsourcing are really looking for a managed services provider (MSP). With managed services, it’s not so much a matter of taking one or more processes and farming them out to the lowest bidder, but rather developing a long-term partnership with a vendor who has the expertise to actually make your processes more efficient, add value to your clients and deliver consistently higher-quality results. It’s the difference between a reactive approach (who can perform this task at the lowest price point?) and a proactive approach (how can we get our ongoing processes and costs under control to create efficiencies and get better predictability?). That gets us much closer to what I mean by value.
Why Consider Outsourcing?
There was a time when legal departments and law firms thought it was more cost-effective to perform legal services in-house. But most people who buy a home don’t choose to do their own plumbing because it’s not their area of expertise. In most cases it doesn’t make sense to invest in the tools and training and time required to do an effective job. Similarly, most legal departments and law firms understand that they are best at practicing law; they are much less adept at managing complex processes that depend on rapidly evolving technologies and support specialists who can keep up with constant changes in a dynamic field.
Over the past decade or so, as matters began to involve increasing volumes of data and increasingly complex technology, legal departments and law firms began to contract with third-party vendors in order to focus on their core competency (practice law), ease the burden of performing complex functions, avoid the steep capital expenditures associated with of buying hardware and software, and get out from under the high cost of hiring and training employees with specialized expertise in both legal and technological processes.
But managing multiple vendors brings new risks and complexities. Because cost is all too often the primary motivating factor, you often get what you pay for. We’ve found that many corporations are frustrated with their outsourcing relationships because, while they may have saved a little money on an individual matter, they are really looking for a partner that will provide the strategic guidance, cost predictability, and high quality that will help bring efficiencies to the organization.
With multiple vendors, GCs and law firms can easily find themselves reinventing the wheel with each new matter. Instead of practicing law, they are spending their days assessing third-party vendor budgets for a dizzying array of services and trying to project future costs for each. They are—once again—moving away from their core competency and no longer want to assume the risk.
From Transaction to Partnership
The biggest mistake a GC can make is to regard outsourcing as purely a transactional matter—getting the best price for a specific process or service. By contrast, an executive board that understands the value proposition of an MSP knows that they are forming a long-term partnership with the objective of producing a better-quality product. This requires the legal team and the vendor to work together to manage expectations as well as deliverables.
For outsourcing to be a success within any organization, a cultural change has to occur. It’s a more complex and mature way of managing the relationship than simply contracting with a vendor to get you through a specific matter or help you with a specific process.
I would argue there are significant efficiency and financial gains that can be realized by thinking this way. You’re no longer simply buying technology at the lowest price, but rather investing in the people and in proven processes that allow the technology to live up to its potential. You also have cost predictability in certain areas—a benefit that all GCs need.
One of the advantages of transitioning legal support functions to an MSP is that matters can be managed by facts and data rather than instinct or emotion. Instead of reinventing the wheel on each new matter, a managed services approach forces you to look closely at a series of matters to identify patterns of activity. A competent MSP can look at your history and help you accurately forecast your monthly spend on technology for the next three years. Consumption of resources becomes something you can reliably predict.
Proactive GCs should be seeking answers: Exactly how much are we spending on outside firms? How much are we billing each year? How often are each of our vendors having to rework data because of errors? How often are we exceeding project budgets? By how much? How often are team members working overtime? How can we make optimal decisions about the distribution of resources across multiple projects? A good MSP can help GCs and their law firm counterparts address all these issues.
By asking these questions, GCs are able to take control back of an otherwise chaotic process. In fact, a good MSP can manage resources much better than most GCs can or want to. Imagine your legal department being run like a business. People are held accountable for their hours. Budgets and resources designated for specific projects are constantly monitored. All of that has a positive impact on the bottom line. Unfortunately, there are few drivers within the law firm to do that.
Evaluating a Potential Partner
While there are plenty of LPOs or LSOs out there, very few have the combination of legal acumen, cutting-edge technology and resource management expertise to take you beyond the transactional approach to outsourcing. Here’s what to look for when evaluating potential managed services partners:
- A deep bench of experience in legal, administrative and technical domains. This includes functions like project management and legal support, but may also include document review specialists or access to expert witnesses to validate defensible processes.
- Centralized support. You need a dedicated team of competent professionals who will be focused narrowly on your specific challenges and opportunities over the long run.
- A technology backbone. New technologies and methodologies can shave hundreds of thousands of dollars off of litigation costs per matter. Solid collection and forensics technology, robust processing and a quality document review platform can all make a huge difference. Online data hosting is a must, but make sure your provider isn’t just renting data center space; they need to be able to scale quickly at a moment’s notice.
- Quality control methodology applied to every aspect of service delivery, and a comprehensive set of monitoring and real-time dashboards and reporting tools to quickly identify weak points and refine processes. While many GCs are looking for sheer speed from vendors, I’d suggest that a focus on quality first will ultimately yield higher profits.
- Geographical reach. Providers should have the resources to travel among all of your locations.
- Understanding of your culture. This is a partnership after all, not just another transaction. You need a provider who demonstrates a commitment to building a relationship.
- Transparency. Clear roles, constant visibility and accountability on both sides of the relationship are essential to the ultimate success of the partnership.
Finally, be wary of entering into a relationship with a provider who promises to take control of all your processes and solve your problems. In an intelligent partnership, the MSP is a facilitator who provides dedicated professionals, targeted technology and a set of tools and protocols to monitor activity and provide transparency; the law firm or legal department should maintain control over delivery and execution, and should have the discretion to decide on rates to charge to clients. A good MSP will provide the structure for that to happen.
Lauren Leonard is the senior vice president of litigation services at UnitedLex, where she draws upon her 13 years of experience in managing the litigation support department at Shook, Hardy & Bacon in Kansas City, Mo. She is instrumental in framing and implementing processes and solutions for clients in order to affect great efficiency and cost savings as it relates to litigation.