Legal process outsourcing, law firm staff offshoring opportunities for new legal business models

The Australian legal profession has only recently begun to understand the possibilities offered by legal process outsourcing. Those firms that have ventured down this path have usually experienced mixed success. Often, the difficulties they have encountered have related to the quality or consistency of the work performed. This, when combined with a lack of transparency around the staff performing the work and an inability to train or otherwise assist with the development of these staff, has often produced unsatisfactory outcomes.

A different perspective

An alternative concept for the use of low-cost offshore staff has recently been on the rise. This concept is commonly known as “offshoring.” Over the last decade, a number of the large American legal firms have ventured down this path, establishing their own back office facilities in low-cost jurisdictions such as the Philippines. One of these firms now employs almost one thousand staff members in Manila who support their offices worldwide. The staff are not lawyers (or not yet at least) but rather perform a range of business support functions in the areas of finance, marketing, IT, HR and the like. The savings enjoyed from this are significant with the average labour costs in the Philippines being less than one-sixth of those in Australia.

For those firms either not large enough or not having the desire to establish their own back of office support facility, there are service providers who offer this service.

Typically, the service provider will do everything from developing the strategy and timetable for the functions to be offshored to the recruitment of the actual staff, their in modern office facilities and the provision of all IT, HR and related support needs.

Using these providers can deliver significant savings. The likely savings, when comparing the total cost of a staff member in Australia against the total cost of a similar staff member in the Philippines (including allowances for rent, electricity, internet, etc), will be in the order of 75 – 85%. If the comparison made is between the total cost in the Philippines against the salary cost only in Australia, the likely savings will be in the order of 50% to 60%.

Rapid advances in technology are enabling these remote staff to work in exactly the same way as locally based staff members that choose to work from home. This is providing legal firms with an opportunity to rethink the way their business model works. Offshoring can significantly reduce their fixed platform costs by making a significant portion of their operation a more virtual offering with a range of people working flexibly and remotely for them both from home and abroad.

Times are a changing for law firms and it is quite likely that the law firm of the future will bear very little resemblance to the traditional ones in existence today.

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