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Ron Friedmann on November 20th, 2008 at 2:02 pm :
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“You can’t save your way to growth” is a frequently heard refrain. In the current economic turmoil, however, when growing revenue is hard, the focus must be on cost control. A recent report, article, and conference session drive home this point.
Hildebrandt is a leading legal market consultancy. The Hildebrandt Special Client Advisory: Fall 2008 notes that
“the current downturn has not yet been significantly offset by increases in other traditionally “counter-cyclical” practices…. the current year will represent a significant downturn for the legal industry… we are unlikely to see any significant turnaround until late 2009, at the earliest… firms [will be] forced to lay off legal and non-legal staff, slow down the hiring of new attorneys, restructure operations, and weed out unprofitable practices.”
The Advisory suggests steps to deal with the downturn, including focus on collections, negotiate credit agreements, examine expenses closely, consider layoffs, deal with performance issues, and adjust practice areas. Longer term, Hildebrandt says we may see more fundamental changes such as new lawyer compensation systems, alternative billing, and more legal process outsourcing.
Driving home many of these points is the new article Partners at UK’s ten biggest law firms take home £1.1m in profits (TimesOnline, 19 Nov 2008). It reports on profits at top UK law firms, citing an annual law firm survey published by PriceWaterhouse Coopers:
“[T]he gap between the top ten and the rest of the market is set to widen as lawyers begin to feel the impact of the financial crisis… the biggest firms had tightened their hold on the market through an increased focus on efficient management. ‘Larger firms have been looking long and hard at their cost base and how much can be outsourced,’ Mr Rose said [head of the Professional Partnerships Advisory Group at PWC ]…. managing partners [are] switching focus from revenue growth to reducing staff costs.”
The topic of growing revenue versus controlling cost was central in an October panel discussion at the Law Firm Leaders Forum. In a session called “Running Your Firm as a Business - A Closer Look at the Middle Office”, my co-panelists Ed Poll of LawBiz and Ron Yano, CFO, Loeb & Loeb and I debated that question. Mr. Yano and I shared the view that cost control could increase profits by 1.5 to 2.0 profit points, which is significant in tough times.
Mr. Poll focused more on growing revenue but. In his follow-up blog post, Law firm overhead - Can we cut?, he writes “focusing your energy on producing revenue will produce greater benefits than focusing your energy on reducing overhead”. He points out, however, that that increases in the right costs can increase revenues.
Integreon can help law firms control costs by outsourcing (onshore or offshore) and process improvement. We can also help on spending wisely to increase revenue, for example, by providing cost-effective business and industry research can help win new business.
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Ron Friedmann on November 10th, 2008 at 2:24 pm :
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Richard Susskind, the well-known legal market thinker and futurist, has published his newest book, The End of Lawyers. The Times Online previewed the The End of Lawyers last year and included excellent commentary related to it. At Integreon, we do not see the end of lawyers anytime soon, if ever. But Susskind is a deep and provocative thinker and lawyers and law firms will benefit by understanding his views.
Today, in AmLaw Daily, Paul Lippe, founder of the legal community and social networking site, Legal Onramp (itself a likely player in re-shaping law practice), interviews Susskind in Welcome to the Future: An Interview With The Futurist.
Agree or not, Susskind’s predictions provoke thought. He hedges on the timing of some changes, but not on legal process outsourcing (LPO):
“[L]ook out for two major growth areas in the next two years. The first is legal process outsourcing. The Big Four tax firms have already shown how complex professional work can be outsourced to India and other low cost centers. Lawyers will and should follow suit.”
We’d love to hear from readers on your views of Susskind’s vision generally and the role of LPO specifically.
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Ron Friedmann on November 7th, 2008 at 10:09 am :
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The BBC’s Chris Morris reports today on Outsourcing the law to India. Accompanying this written article is an audio report by Morris “on the skilled labour now being outsourced to India to save costs.” (BBC audio, 7 Nov 2008, 0731 GMT).
The article notes the increasing trend of western companies to outsource legal work to India:
“Tens of thousands of lawyers graduate in India every year and an increasing number are now taking on work from around the world, as companies look to cut costs wherever they can.”
Both the article and audio piece quote Integreon’s SVP Legal Services, Matthew Banks. Quoting Banks, in part, Morris writes
” ‘But,’ [Banks] adds, “no matter how much money (companies) may be saving, even if they’re going to save 50%, it’s going to be a false economy if the work isn’t up to scratch.’
So quality is critical and the interest of global companies and legal firms suggests that - most of the time - the quality is first class.”
This article does not make clear that the work LPOs perform is in support of law firms and corporate legal departments and tends to focus on high-volume, repeatable processes such as document review in litigation, contracts, and IP.
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Ron Friedmann on October 19th, 2008 at 11:20 am :
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The Financial Times (London) has published its annual “Innovative Lawyers” edition (17 October 2008), based on extensive research which finds that legal process outsourcing is a leading legal market trend.
Thought Leaders is the lead article in a collection around the innovation theme:
“[T]he trend that is having the most impact on the thinking of the partners at top law firms, according to the research for this report, is the impact of globalisation and its intersection with people and technology… Outsourcing to India was the theme of many top-ranked submissions both from company legal departments and private practice… LPO may have a huge growth spurt as top corporate clients in the US and Europe cut costs.” [emphasis added]
The article cites corporate example of Deutsche Bank and BT and law firms Clifford Chance and Baker & McKenzie for their offshoring initiatives.
Two related articles discuss specific outsourcing examples. Use IT or lose it cites Baker & McKenzie for its “combined outsourcing and offshoring” which creates an “insourcing” hybrid in Manila, where the firm’s “Global Services Manila, accounts for about 5 per cent of the firm’s total staff and is linked to the rest of the firm by technology, culture and reporting lines.” Structural engineering cites Clifford Chance for taking “two vital but relatively routinised support functions ‘information technology and finance’ and centralis[ing] them in one place: India.”
Innovative Lawyers is a collection of articles reporting on the full range of FT’s research. For highlights of other articles, please see my personal blog post at FT.com Innovative Law Firms.
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Ron Friedmann on October 15th, 2008 at 10:52 pm :
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Lawdragon, a web site that rates lawyers, has just released its list of 100 Legal Consultants You Need to Know. Integreon CEO Liam Brown is one of the 100 consultants honored to be listed. Liam is not a full-time consultant but is instrumental in assisting Integreon’s large law firm and law department clients. With the support of Integreon’s global teams, Liam has helped many law firms and departments rationalize their Middle Office to enhance internal and external client service, improve workflows, and reduce expenses.
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Chris Egan on October 11th, 2008 at 12:30 am :
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Finding the Right Five Questions for EDD Vendors (Law Technology News, 6 Oct 2008) asks e-discovery experts to answer the question “What are the five most important questions that any organization should ask of vendors before signing the contract?” Most of the experts’ questions focus on EDD hosting and processing capabilities rather than the end-to-end discovery process, including document review. In our experience, companies spend far more on the lawyers who review documents than on the (albeit often daunting) mechanics of e-discovery.
That said, we were surprised by a recent survey finding. Law firm Fulbright & Jaworksi L.L.P. conducts an annual survey of litigation trends. In its 2008 Fulbright’s Litigation Trends Survey, of the 253 U.S. respondents who answered a privilege review cost question:
“30% estimated that privilege reviews comprised 6% to 10% of their litigation costs, while 16% estimated the figure as high as 30% to 50%. Most of the latter figure consisted of the mid-sized and the largest companies participating… When asked for the largest amount spent on preproduction privilege review in a single matter or collection of related matters… Two percent of all the respondents spent between $1 million and $2 million, and 2% were in the $3 million to $5 million range. Five percent of the largest companies spent $3 million to $5 million for privilege review on a single matter or group of related matters.”
We’ve often heard it said that 60% of the cost of litigation is discovery and 60% of that is document review. If true, about 35% of the total litigation cost is doc review. So reading that one-third of responding companies spend less than 10% on priv review surprised us. We wonder if both the perception of and the actual total cost of privilege review is skewed upward by the 4% that spend over $1 million on at least one big case.
Irrespective of how much privilege review costs, we increasingly see inhouse counsel seek a single point of contact and fixed price per document for all of e-discovery. They want to minimize the headache, reduce cost, and offer predictability.
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Filed under E-Discovery (EDD), Legal Economics, Legal Outsourcing (LPO)
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Chris Niccolls on September 30th, 2008 at 1:42 pm :
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Investment Banks are famous (or perhaps infamous) for their analyst programs. The premise of these programs has long been suspect if you examined the facts carefully. Now, with the Wall Street and legislative meltdowns, investment banks must truly re-think the analyst position.
Since the early 70’s, investment banks grew their analyst programs, high paying but physically demanding employment programs that provide entry-level experience for the very best graduates of top tier colleges and universities. A theory existed to justify the 100-hour weeks: employees got high pay, great experience, and a career path to banker; banks got the analytic horsepower they needed.
Several trends, however, undermine the theory. First, banks face increasing competition from other high-paying financial positions in hedge funds and private equity firms. Second, recent graduates now want lifestyle balance more than bragging rights to working the most hours. This makes it hard to recruit the same quality of candidates. And third, earlier traumatic events - specifically industry-wide retractions of offers to analysts immediately following 9/11 - raised doubts for some candidates.
So analyst-employees have been questioning the theory for some time. So too should the bankers and deal makers. They complain about analysts’ outputs and resent the re-work often required. Further, if they really understood the cost per analyst, they might have more than second thoughts. My back of the envelope calculation is that each analyst costs $250,000 per year.
Now comes a crisis many compare to the Great Depression. Can investment banks realistically maintain the analyst programs as they have existed? The trends described above were bad enough. Now, with the increased economic pressure on newly reformed I-Banks, can they still afford to pay hundreds of millions of dollars for these programs?
Does Wall Street have alternatives? Absolutely. In fact, Wall Street has been investing in these alternatives for years… automation, outsourcing, and improved market data services among others. These initiatives, however, focused on tweaking rather than re-thinking the role of the analyst. Today, the new shape of Wall Street is a pretty good indication that analyst programs need to become much more aggressive in defining the real requirements and then cutting the cost of delivery.
Now is the time for a real re-think: what analytic outputs do bankers actually need; how should banks recruit or groom future deal makers; and what combination of human and automated resources will best meet 21st Century needs.
The bank(s) that get this right can gain a tremendous competitive edge. It’s not just about saving money, it’s about creating a well-oiled machine that can pitch and win the most and the best deals, whatever those deals may look like post-crisis.
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Ron Friedmann on September 26th, 2008 at 3:55 pm :
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The September-October 2008 issues of the Association of Legal Administrators’s Legal Management magazine published Dealing with Documents: The Pros and Cons of Outsourcing (PDF), an article by Ron Friedmann and Renay Rutter (respectively, Integreon SVP Marketing and VP Legal Sales).
Renay and Ron examine how outsourcing document processing can slash payroll and facilities costs, reduce turnaround times, and boost in-house secretarial careers. They also explain the pivotal role of law firm administrators in assessing outsourcing options and planning the transition to outsourced services.
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Ron Friedmann on September 10th, 2008 at 1:04 pm :
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The TimesOnline has published a very good article about legal process outsourcing by Allen & Overy partner Stephen Denyer.
Legal outsourcing remains high on the agenda (TimesOnline, 9 Sep 2008) provides a cogent and balanced discussion of legal outsourcing. This is the first article I’ve seen by a large law firm lawyer that discusses both administrative and legal outsourcing. It examines the significant benefits of outsourcing: cost savings, client service, and avoiding some recruiting / retention problems. It also discusses potential risks and liability issues.
Mr. Denyer make many excellent points so choosing just one is hard but here goes:
“To outsource effectively, a firm must analyse and separate out all the processes that lawyers perform on a transaction or case. The firm can then work out which processes lend themselves to outsourcing and which do not. Many clients are now looking for law firms to offer a smart combination of outsourced and bespoke services under a single wrapper. “
The overall tone is markedly different than what I have observed from many BigLaw partners quoted in the legal trade press, who often cite the proverbial “parade of horrors.” In contrast, Mr. Denyer systematically analyzes the business drivers, the benefits, and the potential risks.
If I were the General Counsel of a company, I would read this and think “Here’s a firm that’s looking out for my interests.”
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Ron Friedmann on September 2nd, 2008 at 2:24 pm :
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Two US publications published articles published September issue articles, one by an Integreon executive, the other interviewing an Integreon executive.
The Datum Legal - Integreon Merger: The Whole Is Greater Than The Sum Of Its Parts, published in Metropolitan Corporate Counsel, is an interview of Chris Egan by the MCC editor. Chris is Integreon’s SVP for Discovery Solutions, and an e-discovery expert. In the interview, Chris explains the benefits to lawyers of an end-to-end integrated discovery solution at a fixed price. (For more information on Integreon’s specific solution, read about Doctane.)
Why and What Lawyers Should Consider Outsourcing, published in LLRX.com, is by Ron Friedmann, Integreon SVP, Marketing and a legal domain expert. Ron provides an overview of legal process outsourcing, from document review to word processing. The article explains the benefits of legal outsourcing, the range of services lawyers should consider outsourcing, and the potential cost savings using legal document processing as an example of how to analyze costs and benefits. (Learn about Integreon outsourced legal services).
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