New York Times: Law Firms Are Starting to Adopt Outsourcing

Law Firms Are Starting to Adopt Outsourcing
By JULIE CRESWELL
For years, outsourcing has been a dirty word inside the world of white-shoe law firms.

While certain law firms hired companies to handle travel or records storage, most drew the line at sending client billing or confidential documents out of their offices, let alone out of the country.

A number of large law firms, though, are starting to tiptoe onto far-flung shores.

The latest is Clifford Chance, one of the largest law firms in the world with 29 offices in 20 countries, which will announce plans today to consolidate and move big chunks of its administrative functions like accounting and technological support to an operation in Delhi, India, by next spring.

The shift to India could eventually result in up to $18 million a year in savings, the law firm estimates.

While corporate America has embraced sending clerical, customer and technical support functions overseas, law firms have been much more reluctant to do so. Their chief concern is that confidential client documents or information could be leaked, stolen or simply lost.

But in the race to offer large global corporate clients like I.B.M. or the Gap around-the-clock attention and legal advice, many law firms are opening up satellite offices all over the world.

While good for the clients, the costs of operating dozens of offices across the globe leave law firms aghast. Therefore, some are looking at ways to centralize many back-office functions but also to move them out of high-cost cities like New York and London and into either lower-cost regions of the United States or abroad to places like India.

“The fully loaded cost for a clerical person in a major metropolitan area can run $85,000 to $100,000 a year,” said Mark Santiago, chief executive of International CoSourcing Group, a management consultant for law firms. “If you multiply that by 70 or 100 people, you have a major cost center, and law firms are being put under great pressure from corporations to reduce their bills.”

Despite the attractive economics, a mere trickle of law firms have actually moved operations out of their headquarters or to overseas locations. Yet some are betting that law will be the next industry to shift parts of its operations to lower-cost regions of the world.

“We think legal is going to be our biggest market going forward,” said Liam Brown, the president and chief executive of Integreon Managed Solutions, an outsourcing firm that is building the center that Clifford Chance will use in India.

About six years ago, a rival to Clifford Chance, Baker & McKenzie, opened an office in the Philippines to do word processing for offices in the Asia Pacific region. Today, that office, with Baker & McKenzie employees as its staff, creates spreadsheets and PowerPoint presentations; monitors the firms’ entire computer network; and handles about 40 percent of the financial work for the Pacific region, including client billing.

“We have a lot of small offices, and they can’t have 24-hour word-processing support or somebody who is going to make them a high-quality Power Point presentation,” said Craig Courter, chief operating officer with Baker & McKenzie.

Clifford Chance is following a similar model with its move to India. It will be the anchor client for a 45,000-square-foot operation being built by Integreon. Integreon will manage the center, but Clifford Chance will oversee the employees.

Clifford hired Integreon about two years ago to handle some of its word-processing functions. This step will involve moving certain accounting activities, like accounts payable, and technical support functions to the Indian site, said Amanda Burton, the director of global business services for Clifford Chance. Ms. Burton said client billing would not be done in the overseas office, at least for now.

“Nothing is in the ‘do not touch’ basket,” Ms. Burton said. “We just have to make sure that what we do initially works.”

Many other law firms are taking a similar baby-step approach to sending work overseas.

About a year ago when White & Case, another law firm, considered hiring an outside company in India to handle word-processing activities, it wanted to make sure documents going over its computer network could not be intercepted or that individuals working in India could not print out the documents or take them home.

And while Richard McKenna, the chief administrative officer for White & Case, said he had been happy with the work the outside firm had done and that some marketing functions had now also been moved overseas, he had concerns about sending other documents too far from home.

“We do continue to look at outsourcing as a way to improve efficiencies and manage infrastructure costs, but it’s not a quick decision that we would make,” he said.