Financial Times Global Outsourcing & Offshoring Conference 2009

I’ll be heading back to the U.K. at the end of April for the 2009 Financial Times Global Outsourcing and Offshoring conference. I attended and spoke at the 2008 event and I have no hesitation whatsoever in recommending the event to potentially interested delegates. The conference is being held at the Andaz Hotel, London, 27-28 April.

The Financial Times 2009 conference - Navigating the Waters: Economic Turmoil, Business Models, Industry Transformation, will draw on the unique strengths and resources of the Financial Times to focus on the vital issues which will influence outsourcing and offshoring decision making in the years ahead.

The conference will feature live, on-stage interviews and presentations from leading FT Journalists and COOs as well as roundtables focused on the transformational power of outsourcing and offshoring for key industry verticals.

On the second day of this year’s conference, Tuesday April 28, I will be hosting the Legal Process Outsourcing roundtable. With the LPO market fast maturing, this roundtable will provide attendees with practical insight and case studies addressing the substantive concerns surrounding LPO, including selecting which services to outsource, sourcing a service provider, and structuring an LPO outsourcing agreement. Speakers will share their ideas on the dramatic changes taking place in the legal profession, the ethical implications specific to LPO, and the most effective LPO operating strategies before, during and after the implementation process.

Key Issues Covered Include:

• Assessing LPO's Role in an Organization's Current Business Needs
• Structuring and Negotiating an LPO Agreement
• How to Successfully Structure and Manage Offshore Document Review
• Measuring ROI of LPO
• Introducing LPO, Firm Wide Buy-in, and Change Management
• Ethical Implications of Outsourcing Legal Work


If any readers require further information about the conference or the LPO roundtable feel free to contact me directly.

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Big Law – Reports of Death May be Somewhat Exaggerated

Over the last couple of weeks the legal blogosphere has been inundated with reports covering the demise of Big Law. The hourly rate is also apparently in its death throws, and soon to be confined to the history books. So, is this pure sensationalism, or is the very survival of Big Law and its conventional, billing modus operandi, in doubt?

The departure, (or I could quote LegalBlog Watch, and refer to this as a “jumping ship”) of two high profile Skadden litigators, to form their own law firm BuckleySandler, has become the cause célèbre of the doom and gloom merchants.

In the same article I reference above, Professsor Larry E. Ribstein, is quoted as saying:

“I don’t know about Skadden in particular, but this move has significant implications for Big Law. As I've been saying, here, the model of law firm as worker coop highly leveraged by the inverted pyramid of associate leverage is doomed. The associates no longer can pay the stars enough to make them stay. When it starts happening even at a firm like Skadden, you know, notwithstanding comforting noises by law firm managers, and deep in your heart, that I'm right.”

The Las Vegas Sun once again revisits the question I raised three years ago in my “Time to Stop Time Recording” and asks whether The Billable Hour has Run its Course? The piece highlights the formation of a new law firm in Chicago, established by three former large-firm lawyers, announcing in January that their business model would depend almost entirely on alternative billing methods for all commercial and civil litigation matters. They also plan to cut costs by outsourcing legal work to offshore firms.

Law school students on both sides of the Atlantic appear to be stuck between a rock and a hard place. I reported recently, with incredulity, that leading London Colleges of Law were increasing the Legal Practice Course tuition fees by an inflation-busting 8 percent in the same week that legal giants Allen and Overy, and Latham and Watkins announced just shy of 700 layoffs. Reports abound discussing the continuing deterioration of job prospects as major firms routinely push back the start dates for new trainees and associates.

Harvard Law School Office of Career Services recently convened a panel to address the concerns of HLS students. According to Professor John C. Coates, a former partner at Wachtell Lipton Rosen & Katz, 70 of the AmLaw top 100 have undertaken some form of labor cost reduction strategy. Coates indicated that the average firm has decided to eliminate about 5% of attorneys, although some have eliminated up to 15%. Click here for the full Harvard Law Journal piece.

Now before we sign off on the AmLaw 100 obituary, lets take a moment for a reality check. I recently went for lunch with the Global Operations Manager of one of the world’s top firms. Although by no means in a state of denial as to the seriousness of the current financial meltdown, I got the distinct impression that he was firmly focused on the opportunities available as a result of the crisis. When I quizzed him about his own firm’s future, the leverage model, partner to associate ratio, outside finance, law firm capitalization, and alternative billing arrangements and of course the firm’s KPO and LPO future plans, his response was clear and concise - nothing was off the agenda.

In many ways this echoes the view of Harvard Professor David Wilkins. He opined that the current crisis comes as a part of a larger historic shift in the structure of legal employment, and that the down economy will provide impetus to more rapidly implement changes to the structure of big law firms which would likely have occurred anyway over the course of time. He also indicated that firms which are currently deleveraging their business model will likely experiment with new, unorthodox strategies like outsourcing and offshoring to keep costs down even after the volume of legal work picks up again.

The financial crisis, although catastrophic, is creating opportunities within Big Law. I truly believe that many major firms have finally woken up and smelled the coffee. Historically these firms were guilty of the charge of being reactive as opposed to proactive. However, what I believe is crucial now is the pace and extent of the reaction. When I hear key decision makers advocating change across an entire spectrum of operational and strategic issues its clear that Big Law are taking the steps necessary not only to survive, but more crucially, thrive, in this brave new world.

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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.

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Is There a Duty to Propose LPO?

Taking into account the harsh economic climate, the mood at ACI’s recent LPO summit was relatively upbeat. Having attended several LPO conferences over the last three years, it was particularly refreshing to witness several client case studies from leading firms and corporations, including, Clifford Chance, Baker McKenzie and Accenture.

On day two of the event, Maria McMahon from Baker McKenzie expertly navigated the maze pertaining to a large scale document review project, currently being undertaken offshore. Maria’s final slide contained a table highlighting the benefits of a well managed offshore document review project. She identified the benefits by comparing offshore to a domestic based solution. Her conclusion was that for first pass document review, measured across four metrics, namely, quality, learning curve, productivity and cost, offshore LPO scored extremely favorably on cost, was comparable in terms of productivity and quality, and with a marginally slower learning curve. Ok, hold that thought, and I’ll come back to this in one moment.

In my humble opinion however, clearly the most thought provoking, defining moment, of the conference, came when a question was raised, and a discussion ensued, during the Q&A session that immediately followed the Ethics of Outsourcing panel. The question raised, was whether there is a valid argument, that a U.S. law firm is now compelled, or even under a duty to at the very least inform their clients of the “offshore” option for document review?

Let’s revert back to the Baker McKenzie “experience”, and the conclusions reached, namely, that offshore review is significantly more cost-competitive and also comparable in terms of productivity and quality. If one doesn’t inform a client that conducting first pass document review offshore is an option, how does this sit with one’s ethical obligation set out in the Model Rules of Professional Conduct at Rule 1.5?

(a) A lawyer shall not make an agreement for, charge, or collect an unreasonable fee or an unreasonable amount for expenses.

Is it reasonable to assume that billing anything approaching AmLaw 200 junior associate hourly rates for first pass document review could be deemed to be “an unreasonable fee”?

While writing this post, I reflect back on the San Diego Bar Association Opinion and a post I wrote in April 2007. I commented at the time that the Opinion discusses the concept of a client’s “reasonable expectation”, as to whether the work would be performed in-house within a law firm, or outsourced. Click here for the full post. Where I felt the San Diego Opinion fell short was in failing to consider that “reasonable expectations” change over time. I commented:

“The Opinion only really considers the here and the now. A client’s “reasonable expectations” are not static, immovable, and unchanging over time. The legal industry now operates in a global marketplace and clients are evermore sophisticated and accepting of the concept of globalization. A client’s reasonable expectations today will be vastly different tomorrow. Soon, a client’s only “reasonable expectation” will be that the quality and confidentiality of the work-product is maintained by whoever completes it, wherever he or she may be. In fact, I would go as far to say that we are not far from the day when a client’s reasonable expectations will be that work-product should be outsourced to the most efficient and cost-effective provider!”

Almost two years have passed since I wrote this piece. Taking into consideration the debate I reference above from the ACI conference, I wonder if we are closer to reaching that “tipping point” day. If one stops for a moment to consider the potential wider reverberations here, the implications for both the legal profession and the growth of LPO are tremendous. I generally don’t formally solicit comment on my blog, but I would be delighted to hear your views on this point.

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