Shared Services and Outsourcing Network - The Financial Crisis, 6 Months In

To commemorate the six-month anniversary (since the collapse of Lehman) of the truly extraordinary events of last September, the Shared Services and Outsourcing Network (SSON) reached out to regular contributors, including me, asking for thoughts on how the crisis and downturn had affected shared services and outsourcing and upon their organizations in particular. Below is my own contribution, as it relates to LPO, in response to the question: What have been the biggest consequences for the shared services and outsourcing space of the economic crisis over the last six months? Click here to read the views of SSON regular contributors including, Anand Ramesh, Research Director, Everest Research Institute, Jean White, Principal, Deloitte Consulting LLP, Thomas Tunstall, Ph.D. Advisory Liaison, ACS.

The financial meltdown has impacted the LPO industry in several ways. First, undoubtedly the overall interest level in how LPO can assist major law firms and legal departments in cost control, is on a major upward trajectory. The pressure imposed on outside counsel by corporate clients in reducing legal costs has been ratcheted up several notches, and put quite simply, outside counsel can no longer bill junior associate rates for certain, commoditized legal functions, and have a realistic hope of retaining their clients.

Second, conversely, some deals within the LPO space that were on the verge of being concluded have been put on hold, due to a sense of paralysis in the decision making corridors of power. Although counter intuitive, outsourcing can be viewed as an expense, and potentially one that can be cut. However the overall impact of the economic crisis, on balance, over the medium term, is a positive one as far as LPO is concerned.

Finally, I have also witnessed an increasing number of U.S. qualified attorneys applying for positions within my own company, and I am aware of this happening at my competitors. Law firms have laid off, and are continuing to lay off, vast numbers of associates and support staff. Many of these individuals are seeking to reinvent themselves within the LPO space, whether that is in a project management or business development role.