Nearly all law firms will be outsourcing and offshoring at least some of their operations within the next two years, according to new research from Deloitte.

Almost all law firms are currently outsourcing some or all of their support functions. IT operations are the most commonly outsourced function, with 61 percent of firms confirming that they already outsource or plan to in the near future. Document management and production is the most common operation outsourced to an offshore location by law firms, with 31 percent of respondents planning or already doing so.

The report showed a trend for larger law firms to be either considering or planning to extend their outsourcing to HR, payroll, knowledge management and finance functions. Paul Thompson, professional practices partner at Deloitte, says: “Outsourcing and offshoring are still relatively new concepts to the legal sector and there are real opportunities for law firms to gain competitive advantage by considering which of their operations could be appropriately managed this way.

“Mid-tier firms have traditionally steered away from outsourcing and particularly offshoring for two reasons – the lack of partners willing to work with smaller firms and the scale of their operations. However, there is increasing interest from both these firms and vendors in ‘shared service’ arrangements, where several firms work with a common outsourcing vendor, to set up operations on or off shore, giving these firms economies of scale.”

The key reasons for law firms to consider offshoring or outsourcing operations is the opportunity to make cost savings and improve service levels. The typical cost savings in areas such as document management and IT operations ranged between 10-20 percent, with a typical pay back period of one to two years.

The survey confirmed that many of the main barriers to working with external partners are cultural rather than practical ones. Paul Thompson, says: “Law firms face more challenges during the decision making process for offshoring or outsourcing operations, compared with other industries, such as telecoms and financial services. Several firms highlighted seeking board approval for outsourcing as a significant hurdle in the planning process.

“Challenges in obtaining partner buy-in where many firms will have limited experience in outsourcing or offshoring, coupled with the lack of outsourcing partners with experience in the legal sector, has led to a slow take up. However, the legal sector is where the financial services and telecoms sectors were only a couple of years ago, and the transformation in these industries’ attitudes towards outsourcing and offshoring has happened at a remarkable pace. This is an indication of what is happening now in the legal sector.”

Ends

Notes to editor

Definitions:

• Outsourcing – contracting specific services to specialist firms, based either locally or ‘offshore’.
• Offshoring – relocating activities to lower-cost offshore locations, either to outsourced or internal providers.

The law firms who responded to the survey represent a good cross section of the UK’s top 40 firms. They range in size from fewer than 150 to over 1,200 fee earners. In most instances the survey was completed by the COO, CIO or Managing Partner.

About Deloitte
In this press release references to Deloitte are references to Deloitte & Touche LLP.

Deloitte & Touche LLP is the UK's fastest growing major professional services firm based in 21 UK locations, with over 10,000 staff nationwide and fee income of £1,246 million in 2003/2004. It is a member firm of Deloitte Touche Tohmatsu, a leading professional services organisation, delivering world class audit, tax, consulting and corporate finance services, with around 120,000 people in over 140 countries. Deloitte Touche Tohmatsu is a Swiss Verein, and each of its national practices is a separate and independent legal entity.

Deloitte & Touche LLP is authorised and regulated by the Financial Services Authority.

The information contained in this press release is correct at the time of going to press.