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An Outsourcing Story – Why (and How) Law Firms Outsource Their IT Operations. Part Two of Five.

January 15, 2013

A Context for Outsourcing – Issues faced by IT departments in Law firms today

In part one of this series describing how and why Law Firms outsource their IT functions I set out the link between the challenging market conditions and the ways Law firms are seeking to use IT to drive cost savings, efficiencies and enhanced customer focus.

My reasearch shows that the key areas where law firms want their IT teams to seek business benefits are:

  1. Outsourcing, Managed Service, Cloud Computing (all flavours of the same thing).
  2. Client |Collaboration, CRM, Social Media.
  3. Workflow, Process Optimisation, Automation.
  4. Online Provision of Services.

All well and good you might say. However, many IT departments really struggle to get to these new initiatives as they operate under the day to day pressure of delivering the production service and try to meet the ‘more for less’ requirement expected of them by firm’s management teams.

Some of the issues faced by IT departments in law firms today:

  • Ageing Infrastructure – The difficult economic climate over the past four years or so has meant that server and network upgrades have been postponed. It’s difficult to build new services on creaking and failing hardware.
  • Inconsistent system performance – as new applications and new users have been added to existing environments inevitably performance has degraded, especially at peak times.
  • Degrading service availability – more and more system failures are the inevitable consequence of a lack of investment over a number of years.
  • Unsupported core/critical business software – as well as putting off hardware upgrades, many firms have not upgraded their application software which are now running at levels unsupported by vendors.
  • Difficulty in accessing and retaining key technical skills – the technical skills required by law firms are by and large those required by financial institutions and consultancies. Law firms often struggle to match the pay rates at these organisations and in most cases cannot provide the career progression that larger organisations offer.
  • Key man dependency – IT skills in law firms tend to provided in a broad and shallow model compared to larger organisations. That is single individuals may cover a number of different technologies for a firm whereas in a bank each technology may have a whole team looking after a single technology. Inevitably this represents a risk to the firm.
  • Poorly managed third parties – third party organisations are under similar pressures to do more for less. Unless they are actively managed their service will suffer as the firms that shout loudest get access to scarce resource.
  • Constrained infrastructure – limited scalability/flexibility. Another consequence of the lack of investment that the difficult economic crisis brings is that the existing infrastructure is at maximum capacity and has little or no room for new services or projects.
  • Limited strategic view for IT – IT management is technical not strategic. IT management in many firms is really ‘hands on’. Often coming up through a technical route the IT Manager is technically capable but less able to set out a strategy for taking the end to end capability forward or being able to communicate the IT roadmap to partners and management.
  • Poor service management – In cases where the service is poor (for many of the reasons above), just fixing the issues as they arrive is as much as IT can do. Unless the service is actively managed by recording, tracking and reporting all incidents and service requests it is almost impossible to escape from the vicious circle.
  • Poor communications – as a service provider, effective communications between IT and its customers is essential. Describing the service offered, the service delivered and the future strategy for IT is an absolute minimum but is often either not communicated or not listened to.

OK so this is a bleak picture and of course very few IT departments have all of these issues. However, many are struggling with a fair number of the above and are finding it very difficult to get to the projects that will really help the firm.

In short, IT is fire-fighting the issues and has no time to grasp the opportunities that the firm so desperately needs.

So Why Outsourcing?

When things come to a head, it is accepted that the immediate issues must be addressed and that this requires a significant programme right across the IT capability – then outsourcing starts to look like an interesting proposition.

When this point has been reached the following benefits of outsourcing are attractive:

  1. Outsourcers ‘should’ offer a contracted service (with SLAs) that is significantly better than is currently delivered and at a guaranteed cost no greater than the internal cost.
  2. The transition of the capability (infrastructure, applications, processes, skills, third party management….) can be part of the transition to the provider’s new service. They will typically do this at a greatly discounted rate as it gives them access to the recurring revenues of the outsource deal.
  3. Reduced business risk based on access to skills, upgraded infrastructure and contracted SLAs.

There are a range of additional benefits associated with outsourcing that I will cover in a later post in this series but the three above look very attractive to a management team facing up to significant IT issues and a world where IT is becoming more and more important to the success of law firms.

So, in my story that is the ‘Why’ (some) law firms decide to outsource IT – the next three posts cover the ‘How’.

Part three is titled: Outsourcing Within an IT Strategy – Starting with Successful Partner Selection

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From → Outsourcing, Strategy

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