UK firms become Cape crusaders

As a topic for conversation, legal outsourcing is as close to yawn-inducing as you can get, but if the IT speak is stripped away it’s clear that there’s something of a quiet evolution going on in the legal market

The concept of outsourcing is hardly new – Clifford Chance has been doing it for years, lopping millions off its cost base by sending back-office and some paralegal work to India. But until now it has been a peripheral part of any firm’s strategy. As our lead story details, Pinsents is to become the first firm to offshore lawyer work to South Africa, admittedly initially on a small scale, while Eversheds could cut its cost base dramatically by sending secretarial work from across its entire network to the subcontinent.

The impact it could have on the traditional law firm model has the potential to be radical.

There is undoubtedly an element of protectionism in the use of outsourcing: cost-cutting is now a ubiquitous obsession and there is the very real concern that, if firms don’t consider cheaper ways of working, their clients could beat them to it by outsourcing directly to low-cost economies.

Rio Tinto is a case in point. As reported on last week (18 June), the mining giant is to outsource parts of its internal and
external legal work to India, cutting its legal spend by around 20 per cent.

The truth is that, even though they are trying to put their swingeing job cuts behind them, most firms are having to face up to a new reality, and
part of that will involve positioning themselves for an uncertain future after years of above­inflation fee increases.

David Holme of South African outsourcing company Exigent, which is working with both Eversheds and Pinsents, says: “Carrying high levels of overhead gearing is neither sustainable nor desirable and, as a result, there are fewer sacred cows.”

Which isn’t to say that firms will suddenly drop their standards, but law firms – and businesses in general – are all about minimising costs and maximising profitability. Outsourcing, if it’s used properly, can propel firms towards that end. But don’t expect your employees to be ecstatic about it.