Increasing regulation and pressure to reduce legal spend means that In-House Legal functions face growing challenges of how to respond to the increasing demand from their organisations for legal support whilst being expected to manage the company’s legal spend –in other words, they are being asked to do ‘more for less’. Many turn to outsourcing of certain elements of the work carried out in the department or firm as a solution, which allows costs to be reduced whilst maintaining or increasing quality. Legal outsourcing also brings inherent scalability and flexible to the organization so that it is able to cope with the peaks and troughs of demand.
The outsourcing options open to In-House Legal functions include external legal counsel (i.e. law firms), Legal Process Outsourcers (LPO), Legal Service Outsourcers (LSO), paralegals and lawyers-on-demand. Often General Counsels will utilize a combination of these different types of resources to get the best of all worlds.
The LPO market has developed significantly over the last 10 years, with a number of new entrants providing in-house legal functions with temporary legal resource or outsourced managed service options. These firms provide an alternative to holding the resources in-house or using more transitional (and expensive) law firm junior resources to perform aspects of legal work. Legal tasks supporting litigation, due diligence, contract management and compliance are most commonly outsourced.
Many in-house legal functions have achieved both efficiency and quality improvement benefits from outsourcing, principally due to the freeing up of valuable in-house lawyer time so that they are able to get closer to their business functions and to take on more of the workload traditionally given to external law firms.
The challenges that legal departments face when outsourcing generally centre around the process of sourcing the service provider, the nature of the relationship between the company and the outsourcer (a partnering approach versus a vendor supplier relationship)and a lack of investment or experience in the implementation of the service. Many GCs seek advice from sourcing advisory firms to ensure they select the right providers and get the best deal, but also to help create an organizational model that extracts the maximum value from all of the parties including the in-house team, law firms, outsourcing service providers and technology vendors.