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An Outsourcing Story – Why (and How) Law Firms Outsource Their IT Operations. A Series in Five Parts.

January 14, 2013

Introduction

In my first post I set out (as is traditional) the top five IT challenges that I see Law firms facing this year. One of the five I suggested was outsourcing – as IT becomes a more and more important element within a firm’s overall strategy then internal IT teams will come under even greater pressure and perceived shortcomings will become increasingly visible. Outsourcing is a realistic option to meet the IT requirements of a firm that needs ‘more for less’ from their IT investment.

I am not alone in this prediction – The next issue of the Knowlist Report has Outsourcing, Insourcing and Managed Services as three key topics to be explored.

In this series I will consider the why and the how of outsourcing your legal IT.  I will publish one post each day this week to complete the series by Friday.

In my career to date I have experience of selling and delivering outsourced IT services and ‘on the other side of the table’, I have bought, contracted, implemented and managed outsourced IT services. This experience gained in the legal and non-legal sectors. I hope some of what I have learned will be helpful to you.

My aim is to describe the journey that some law firms have already made and others may now be considering. That journey starts by setting a business strategy to address the very well-known challenges of today and then looks to see how IT can support and help deliver that strategy. Once it is clear that IT has a key part to play, it is now that sometimes the shortcomings of the existing IT function come in to sharp relief. So then, an IT strategy to address internal IT issues is essential as well as a plan to deliver IT services in support of the business strategy. It is at this point that IT outsourcing is typically considered. Of course IT outsourcing is not the only solution, but my story will continue down the path where outsourcing is decided upon. The journey will then continue to look at how a partner is selected, the key factors in a successful contracting and will conclude by looking at implementation and benefits realisation.

So five parts

  1. IT in today’s business context
  2. Issues faced by IT departments in Law firms today – a context for outsourcing
  3. Outsourcing within an IT Strategy – starting with successful partner selection
  4. Contracting and Transition
  5. Benefits realisation – the reason you are doing this in the first place!

Part 1    – IT in support of a Law firm’s business challenges

The views of Professor Richard Susskind are pretty well known. In his new book – Tomorrow’s Lawyers. An Introduction to Your Future – he re-iterates his view of a fundamental change heading this way. Two quotes from his book encapsulate his prediction:

“Law firms in the coming decade and beyond will be driven relentlessly by their clients to reduce their costs”.

He states, with respect to banks and retailers “it is likely that these alternative business structures, fuelled by external investment and driven by experienced business managers, will standardise, systematise, and package legal services and bring cost savings, efficiencies, and experience that the traditional, small firms will find impossible to match”.

Whether you agree with Professor Susskind or not, the challenges across the worldwide economy alongside the increasing competition in the ABS world are undeniably hugely significant factors influencing the strategies and operations of law firms today.

So what of IT in this harsh economic climate? Well, a little while ago I worked with a well-known law firm on their IT strategy and, as part of that work, I did some fairly far reaching research into where both internal IT functions and suppliers were focussing their efforts. Three focus areas were clear, not very sexy but typical of any industry under pressure:

  1. Customer focus – new customers are important but make sure you stay even closer to your existing clients.
  2. Efficiency – no waste, slick process, minimised overheads.
  3. Cost Reduction – look at your budget and see where real cash can be saved.

And what about technology in this context? How are IT teams and suppliers looking to contribute to these fundamental business objectives?

Four themes emerged:

  1. Outsourcing, Managed Service, Cloud Computing (all flavours of the same thing). Outsourcing is often stated as being counter cyclical and that certainly seems to be true here.
  2. Client collaboration, CRM, Social Media – stay close to your customer through whatever technology media is appropriate. Remember if you are not close, your competitor will be!
  3. Workflow, Process Optimisation, Automation – this is where the ABS competitors will focus. They will offer lower priced services based on a lower cost base  – you will need to drive down the cost of your operations in order to compete.
  4. Online Provision of Services – I can buy an online will for £48 from Halifax. This may not seem to be a threat to mid-size commercial law firms but just wait to see how low cost online service moves up the value chain.

This relationship of business environment to business focus to IT themes is summarised in the figure below:

Picture1

In the part two of the series I will explore those issues that sometimes prevent IT from driving forward these key IT initiatives and then go on to show how the combination of these IT objectives being impacted IT issues lead Law firms to consider outsourcing.

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From → Outsourcing, Strategy

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