Offshoring legal work is not all about the money: discuss. This is not such an absurd assertion as it might seem.
Sure, law firms’ drive to cut costs (which has alone powered the industry’s return to high profits this year rather than client demand for legal services) means that managing partners are quizzing LPO providers on a regular basis to see what financial benefits outsourcing can deliver. But the evidence is growing that offshoring to overseas jurisdictions is becoming an increasingly hard sell to law firms and in-house departments alike.
As we report today, Integreon could be looking at start-up losses that are greater than budgeted for in its deal with Osborne Clarke, because the proportion of work sent overseas is lower than might have been anticipated - and remember that it is offshoring, not onshoring, where LPO providers are really hoping to make the best margins. Yet even if there are greater savings to be made by sending everything to India wholesale, this is just a step too far for most management teams. When you see the flak that CMS Cameron McKenna got for its putative £600m Integreon deal (TheLawyer.com, 14 May), imagine if the firm had committed publicly from day one to offshoring all its support functions to India instead of London and Bristol. It wouldn’t have been pretty.
Over the course of this year we’ve been picking up distinct signs of law firms’ jitters concerning overseas offshoring, despite the extra savings. Earlier this year The Lawyer reported (22 March) that 44 per cent of LPO providers were increasing the number of onshore staff because the firms were simply more comfortable with using services within the UK.
This dynamic raises very interesting issues for LPO vendors. The outsourcing industry is still in its infancy when it comes to the legal sector, so it would hardly be surprising if the model had to be rethought. And it doesn’t mean that the outsourcing model is fatally flawed. But it does mean that all the big outsourcers that are currently piling into the market may have to reassess exactly how they are going to make their targets. It’s not about the money; it’s about the comfort factor.