Law Firm 2.0 – Re-architecting the Law Firm – Outsourcing

Well, I’m back. I took some time off blogging about Law Firm 2.0, as I wanted to “take in” all the layoffs and such – a blog on that is coming soon. But without further delay, here are my thoughts on outsourcing as a critical change coming soon to a law firm near you.

As a venture capitalist, I’ve seen the advantages of outsourcing. One of our largest success stories, Stratify, controlled costs and provided 24/7 support through a well-managed outsourcing strategy. Most professions are outsourcing at least part of their work, why not lawyers?

I can see two potential ways outsourcing can work in the legal setting .

The first way is simply outsourcing outside of metropolitan areas that are expensive to live in. Why make all of your lawyers commute to New York City or the Silicon Valley to work in an office where they never see their clients? In fact, many of these lawyers would prefer to live outside the city centers to avoid the higher costs of living. I would posit that after some type of apprenticeship program at the law firm, well-trained associates could move anywhere in the country and work effectively. I know for a fact that most law firms have some lawyers working from home in locations where offices aren’t located and no one knows the difference. Maybe now it’s time to do that wide scale. Law offices could start to look like consulting offices in that most of their now smaller and cheaper office space is for visiting professionals. Salaries could be adjusted on cost of living analysis. The law firm could increase margins and pass some of the savings onto their clients. As an example of one firm thinking outside the box, Orrick has outsourced its entire back office to West Virginia. Why not some of the lawyers? Wouldn’t many Silicon Valley lawyer prefer to practice from home in San Francisco or Marin? Who says all the good lawyer want to live in expensive places to live? Who says that good lawyers don’t exists in secondary or tertiary markets today?

The second way would be to actually outsource work to other countries. This clearly works better for some practice areas than others, but if it works for processes as complicated as software development, it will work for the legal process. I think patent drafting, licensing / contract drafting, diligence and some other non-client facing tasks can easily be outsourced. I’m sure most lawyers reading this will brush it off saying it’s too hard, but nearly every other industry has figured out outsourcing. One reader of this blog suggested the following:

Although the model did not work well in the airline industry, I think that smart law firms should develop “budget line” practices for routine work.  These could be staffed with Indian attorneys, part-time stay at home attorneys and maybe attorneys in smaller markets with lower costs of living – in all cases, non partnership track attorneys.   They would be supervised by the higher paid, partnership track attorneys with a roughly 10%/90% split of time between the supervising attorney and these lower cost attorneys.  These groups would not handle things like general client counseling,  high stakes litigations or large scale M&A.  The managing attorney would manage the allocation of work between the value line and the main line of the firm.  Given the lower cost of labor and the increased possibility of leverage, assuming a reasonable mark-up, this proposal still might maintain per-partner profits

I actually think he’s got a good point.

Something to consider. As always, fire away…