Outsourcing: Is It Right for You?
by Shekhar Chitnis and Scott Shea
(County Bar Update, March 2005, Vol. 25, No. 3)

 

Outsourcing: Is It Right for You?

 

By Shekhar Chitnis and Scott Shea at the request of the Law Practice Management Section Executive Committee. Chitnis and Shea are the presidents of Chisk Inc. Law Support Services (www.chisk.com/lawsupport.htm), providing law firms with outsourced support services. They can be reached at 949-388-2433, scott.shea@chisk.com or schitnis@chisk.com. The opinions expressed are their own.

 

You've heard about the growing trend of outsourcing, some of it to specialized companies in the information technology field such as IBM and EDS but increasingly to overseas locations such as India for call centers and document processing. As it has evolved, this trend has implications for the law profession.

 

The concept of outsourcing is not new. Since the beginning of civilization, humans outsourced work as the offering of goods and services became more and more specialized. While the issue of what exactly was first outsourced would be better addressed by anthropologists, it is easy to visualize housekeepers going to millers to get their grains milled into flour instead of doing it themselves.

 

In business, too, similar outsourcing must have started early, perhaps when the same millers purchased their mills from specialist mill makers instead of building the mills themselves as the mill making technology grew more complex. As our society became more and more specialized, this trend accelerated.

 

The key criteria for choosing what to outsource have always remained the same: Is it more cost effective to outsource instead of doing it yourself (assuming you have the luxury of time to even contemplate doing it yourself)? Will the outside source do a better job than you? And, finally, is the work your core competency or a distraction from it? (You should never outsource your core competency.)

 

The outsourcing trend has accelerated even more with the convergence of the Internet, low telecommunication costs, liberalization, globalization, and the like, creating the capability to use a remotely located, highly educated, talented workforce either in the next county or in another country.

 

Implications for Law Firms

 

Off sourcing (offshore outsourcing) has devastated industries as manufacturing jobs move out of the country to a younger, cheaper workforce. In areas such as law, however, where there is "job protection" due to the need for a license and customer interface, outsourcing still offers a tremendous opportunity. Besides the benefit of lower costs, many firms can benefit with improvement in quality (support by a better educated workforce that can be afforded due to lower cost level); timing (they work while you sleep); and process improvement (outsourcing creates the need to streamline your own process to take maximum advantage, usually resulting in improved operations). A better return on existing assets also can result by allowing attorneys to focus on core competencies, thereby increasing billable hours.

 

The Negatives

 

Like everything else in life involving change, there is a price to pay: the feeling of loss of control, which is common to any kind of delegating. Before outsourcing, it is also important for lawyers to consider potential issues involving breaches of confidentiality, conflict of interest, and other forms of malpractice. With proper planning, these issues can be overcome but need to be addressed up front with mitigating measures and disclosures to clients to avoid future misunderstandings. There is also the issue of learning curve investment: You need to learn new ways to operate, and you need to teach your vendor your own way of operating, but if you see this as an investment and not an expense, then the payback time is very short.

 

Who Should Outsource?

 

While anyone can benefit from outsourcing, it typically benefits the firms that:

-- have enough work volume of a particular type to send out (rule of thumb: at least one person-day per month)

-- want to leverage present infrastructure without additional capital commitments

-- are looking for process improvements

-- are seeking quality improvements

-- need quick turnaround without overtime payment

 

What Type of Work Can Be Outsourced?

 

Almost any type of work that does not require a license or a direct customer interface can be outsourced:

-- administrative and back office requirements

-- digitizing libraries/documents for electronic storage, computer analysis, and Internet access

-- document processing

-- information technology and data processing

legal/litigation research, drafting, and support

-- intellectual property research, drafting, and support

-- e-graphics and litigation exhibits preparation

-- computer forensics and electronic data recovery

-- forensic accounting analysis and damages valuation

 

Outsourcing is a growing trend in all industries and professions. It can offer a significant competitive advantage to law firms that are innovative and can adapt to change. It can help achieve the dual goals of expanding business and the bottom line simultaneously while re-engineering law office practices to take advantage of 21st century technology and environment. Change is difficult, but it can be an opportunity for improving the bottom line and operations as well as the quality of life.

# # #