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What’s Driving Legal Tech Outsourcing?

In addition to seeking competitive edge, many firms outsource to heed security concerns, efficiency demands, and a younger employee base.

From IT needs to cybersecurity demands, third-party vendors are proving essential to law firms’ ability to focus on their core legal offerings. But what exactly is driving this demand towards outsourcing? Swiss Post Solutions’ “Outsourcing Index: Law Firm Trends” survey of 67 North American law firms of varying sizes, around half of whom currently outsource legal services, found a variety of factors.

Demand for legal services and technology outsourcing was highest in mid to large-size firms with between 151 and 500 attorneys, of which about 73 percent outsource at least some services, compared to 57 percent that did so in 2015.

In addition, two-thirds of large firms with more than 500 attorneys and slightly over half of small to-mid firms with between 51 and 150 attorneys noted they currently outsource, followed by only 20 percent of small firms with less than 50 attorneys.

Janet Tarzia, vice president of marketing and communications at Swiss Post Solutions, explained that more mid-sized firms are turning to outsourcing as they are hire technology-focused C-suite executives, like the chief technology officers and chief operating officers, in an effort to become “more strategic as how they approached the support services.”

She noted that “back in the 1990's, only the largest firms were employing senior level executives, i.e. COOs [chief operating officers], to run their business operations. The trend has caught on with mid-size firms as well and with this executive structure within firms, outsourcing is being sought out and deployed as a process improvement program.”

David Hickey, special advisor to American Discovery and managing partner of Hickey Smith, also said that mid-sized firms “are playing catch up” with larger firms and “trying to compete for sophisticated clients themselves.”

But he cautioned that demand for outsourcing is not solely “size-dependent,” and there are many smaller boutique law firms who also turn to outsourcing due to client demands or cost-saving needs.

Philip Algieri, vice president of legal services at QuisLex, similarly saw “a wider array of firms embracing the legal outsourcing model, particularly mid-sized firms and litigation boutiques who can use outsourcing as way to compete for the larger and more complex matters.”

Whether large or small, however, the survey found that a significant amount law firms turn to outsourcing to help deploy or expand their digital processes.

Slightly under 80 percent of law firms not currently outsourcing see the need to digitize their records over the next two and three years, with 47 percent considering outsourcing in the near future. In addition, around 27 percent of law firms anticipate implementing more digital solutions such as mobile applications or workflow automation over the next two years.

The survey also found that for a majority of law firms (83 percent), a key reason for outsourcing was to improve their client services, while two-thirds cited cost savings and half access to workflow improvement and innovation.

Tarzia explained that digitizing records was a significant driver behind outsourcing because it helps firms increase productivity and flexibility through allowing their lawyers to work remotely or on their mobile devices.

She added that the move towards digitization and digital workflows is further fueled by the new millennial attorneys entering law firms, who are “digital natives that expect more from a digital application perspective.”

Law firms are also looking to increase the scope of what outsourcing providers handle under managed document review, which Algieri called “the most commonly outsourced service.” He noted that firms are now asking outsourcing providers to “include things like pre-review analytics and deposition support that would have been handled solely by law firm associates in the past.”

Beyond increasing efficiencies unloading more review services, law firms turned outsourcing providers to meet security demands concerning their client’s data.

Hickey explained that today’s law firms “understand that the cybersecurity [processes] are a necessary element in their practice, and many law firms don’t have that expertise [in-house].”

He added that firms “are now faced with fairly rigorously information governance questionnaires and vetting processes by their own clients, and a lot of law firms are incapable of handling client data at the level of security that the clients demand.”

Originally published on LegalTech News. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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Rhys Dipshan

Rhys Dipshan is a journalist who covers in-house tech issues from early disruption to ghosts in the machine for Legal Tech News, The National Law...

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