Taylor Wessing mulls due diligence spin-off
2 May 2011 | By Gavriel Hollander
Taylor Wessing’s new in-house due diligence division, which the firm launched last week (The Lawyer.com, 20 April), could be spun out as a separate business in a move that represents a challenge to outsourcers.
The City firm’s New Street Solutions (NSS) arm promises the mouthwatering prospect of 60 per centsavings on document management work for the clients that choose to use it. But what is more intriguing for a market in which firms continue to seek innovative ways to cut costs is the fact that the technology could be made available to competitors.
“We strongly believe that this is just the start of a much larger transformational project that will revolutionise the way the legal profession operates,” is the bold claim made by NSS chief executive Philip Learmont.
The move may well offer an alternative to some of the other low-cost options firms have hitherto explored.
“Our vision is to see this spin out of Taylor Wessing as a standalone entity,” says financial institutions chief Tim Stocks, who worked with Learmont and information management specialist Swiss Post Solutions to develop the project. “Over time we don’t see a problem with it being offered to other firms. It would be a strong transactional support tool, especially for regional and high street firms.”
The move has not gone unnoticed among legal process outsourcing (LPO) providers.
“It is a concern [for outsourcing specialists],” admits one source with strong links to the LPO market. “There are some compelling reasons for firms to keep everything integrated. The challenge now for Taylor Wessing is to keep up its commitment to this.”
Although the firm will not be drawn on the number of employees it intends to divert to NSS, it did reveal that it will be staffed by a combination of new hires and existing personnel at all levels. Some Taylor Wessing partners will also be involved in projects that use NSS.
“There’s considerable investment from the firm to make this work,” asserts Learmont, adding that the use of the technology will also allow “greater flexibility” on pricing models.
“The challenge is to create a profitable change in the business that will provide long-term competitive advantage,” Stocks adds.
And the competition is fierce. The outsourcing market has ballooned in recent years, with two major firms, in the shape of Osborne Clarke and latterly CMS Cameron McKenna, joining forces with Integreon to offer shared service centres.
Meanwhile, both Allen & Overy (A&O) and Herbert Smith have set up centres in Dublin to handle some commoditised work, albeit on very different scales.
“This move highlights the idea that law firms are acting more like LPOs, while LPOs act more like law firms,” says Michael Bell, managing principal at legal outsourcing adviser Fronterion.
We’ve seen that with what A&O and Herbies are doing in Belfast. Firms are adopting the kind of best practices that LPOs have been using for years.”
What the Osborne Clarke and Camerons setups have in common with the Taylor Wessing product is that they have all been established with the intention of offering services to competing firms.
“I suspect most firms will end up with their own versions of this in due course,” suggests one managing partner. “You’ll see many variations on this theme before too long.”
But the implicit danger is that, if more firms move to this type of model, there may not be space in the market for all these variations on the theme.
“From a historical perspective, you don’t see too many law firms that are keen to use another firm’s network,” warns Bell. “I don’t think we’d see the major firms jumping on this, but some of the smaller ones might.”
While the controversial Camerons project is still in the process of being bedded down internally, it is understood that some firms have already made use of the shared service centre in Bristol that came about through Integreon’s Osborne Clarke tie-up.
The hope for Taylor Wessing is that it has got in before the rush and can convince clients and competitors alike that its system is the most cost-effective. The firm itself seems confident that is has secured that vital first-mover advantage.
“I don’t think there are any limits on where this could go,” declares Learmont.