Integreon

by Matthew Banks

Boston based consulting firm Vantage Partners has published a White Paper, aimed at law firms, entitled Easy Mistakes to Make When Making Decisions About LPO. The Paper contains several pertinent market observations and useful recommendations for law firms, both at a practical and strategic level. I have selected a handful for comment (text copied from the Paper is in italics):

• In-house law departments are leading the way in the exploration and experimentation with LPO. And even where law firms are getting involved… Most law firm experience is centered around serving a particular client who has insisted in the use of a lower cost resource for some of the work. This is indeed true for most, but not all law firms. We are seeing more law firms folding LPO into their offerings and into their model. Recent examples include the Allen & Overy offshore document review option and the move by Simmons & Simmons to set up a core team in India. Most of this activity is from U.K. based firms. In addition, a number of US AmLaw 200 firms have set up either formal or informal LPO “investigatory committees”, as they conduct a due diligence process aimed at selecting one or more preferred LPO providers.
   
• The LPO industry is still relatively immature, populated by many small providers who may not have significant staying power and who do not, in fact, offer the usual outsourcing benefits in terms of scale, technology investments, or process expertise. An industry that in its formative years was characterized by the emergence of numerous, boutique providers, is now beginning to scale up and consolidate in order to meet the increasing sophistication of AmLaw 200, U.K. Top 50 and Global 2000 procurement. Although the market is still comparatively nascent, a handful of leading providers has pulled away from the rest of the pack in terms of their experience, scalability and infrastructure. Maturing providers combined with increased market activity and acceptability make now a great time for many law firms, used to following not leading, to examine LPO.
   
• Lawyers will generally be unable to shed responsibility for the quality of the work carried out by the LPO provider, even when the client has selected the provider and foisted it on the law firm. The structure for contractual relations and liability can vary. In some cases, the client will contract directly with the LPO even where a law firm is involved. In other cases, the law firm will be the aggregator who subcontracts to (partners with) with the LPO. In the latter scenario, the laws firm will have contractual recoverability from the LPO subject to any agreed limits on liability. We find that “risk” (reputational and financial) is a major part of any dialogue with law firms and should not be shied away from, but rather addressed and resolved head on. Quantifying risk (or lack of it) is very important, from the selection of suitable tasks for outsourcing through to transparency into the workflow process and quality regime. A robust documented and defensible process provides visibility into exactly what is being done, how and by whom, which means that the risk can be mitigated and managed. Risk management is something that Vantage has highlighted in their Paper.

The Paper goes on to list typical mistakes that law firms might make when they consider LPO:

• Failing to understand what your clients are really asking for. Be prepared to address a client desire for strategic transformational change. Procurement departments of major corporations and banks are getting involved in purchasing legal services. We see this in more and more RFPs. It’s not just the delivery of services that is changing but the way they are procured.
   
• Grudgingly accepting LPO when a client forces it upon you. It is easier to obtain quality outputs from an LPO provider if you enter into the relationship in a collaborative fashion rather than as the result of being coerced by your mutual client. It is even easier to do a quality job and get some credit for being responsive and innovative if, when asked by a client about LPO, you can identify some providers with whom you have already established a relationship and perhaps even have run some successful pilots. One hopes that all providers prioritize the best commercial and legal interests of the clients! Fortunately we experience highly collaborative working relationships with law firms. We also ensure that our documented process (which is approved by the client and law firm prior to project start) includes a pre-agreed communication and collaboration regime with outside counsel so this joint effort is not left to chance.
   
• Thinking you have to “own it”. There are “best friends” relationships or networks that can serve as good alternatives and don’t require a large capital investment. There are providers who can leverage economies of scale and process expertise to deliver a reliable and more flexible managed service and do so under fairly stringent service level agreements. At any scale, there are challenges with the captive model. Ownership and control are not the same thing. The unwinding of captives in the financial services sector is a warning indicator. See blogs at http://www.integreon.com/blog/cat/captive-v-3rd-party.