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28 Legal IT July/August 2004
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Is outsourcing the way ahead for law firms? Dave Cunningham discusses how to evaluate the proposals
Back to the future The evolution of legal IT has followed a path sim-
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ilar to that of law firms themselves — both are
increasingly adopting the business practices of
mature companies. The implications to legal IT are
important.
Growing customer sophistication is a sign of this
maturity. The increasing exposure of issues like
electronic records management, cross-office client
teams and profitability measurements are pushing
law firms to consider more complex solutions like
identity management, Chinese walls-by-default,
matter-oriented storage and business intelligence
systems. Mobility, enterprise searches, client rela-
tionship programmes and other projects meant to
get useful information into the hands of lawyers
require IT to be adaptable and executive minded.
Ironically, lawyers want simple IT that delivers
against highly complex requirements.
Supplier consolidation and technology maturity
are also symptoms of legal IT’s stage of develop-
ment. For example, legal document and records
management suppliers have been acquired by cor-
porate ‘enterprise content’ suppliers. Some of the
legal financial system suppliers have also been
acquired by companies with broader ambitions.
The corporate financial, HR, client relationship
management and portal providers are now com-
peting with the legal specialty systems. These hori-
zontally-broad suppliers realise they increase their
profits by leveraging the 80/20 rule, in which one
solution fits as many industries as possible.
As a result, IT processes and systems in law firms
have become increasingly similar to that of other
industries. This is also evident in leaders themselves
— many law firm IT and financial directors were
hired for their broad company experience rather
than their knowledge of law firms. Some fear this
apparent commoditisation of legal IT diminishes
its value. However, lessons from other industries
reflect that this is a time when technology can have
the highest impact on the business. The focus shifts
from what you are providing to how you provide
value for the investment — how cost-efficiently
you can provide IT services and how well you can
apply IT to the shifting and often imprecisely-
defined business needs.
At a recent conference, managing partners
agreed by including the leveraging of technology
among their top issues in leading firms — other
issues included increasing efficiency without
losing key assets, multi-office planning, the effects
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30 Legal IT July/August 2004
OUTSOURCING
Continued from page 28 smaller scale work and increases their trust and recovery and no back-up for key skills are
compatibility with them over time. These try- common)?
of a consolidating market, alliances, under- before-you-buy-longer-term situations help to ● Where am I about to make large capital pur-
standing outsourcing of legal or back office ser- ensure common expectations post-contract, but chases where a vendor might provide services on an
vices and other challenges that also affect their shorter term and more limited scope lowers as-needed basis for greater value (storage manage-
technology. the potential benefits. ment, proactive network management and new
The diminishing uniqueness of some aspects of IT staff can be affected by outsourcing in many data centres are big budget items where vendors
legal IT combined with the growing complexity of ways. Despite popular corporate headlines, law already have excess capacity)?
IT requirements mean that law firms will consider firms will not be sending significant IT work to ● What IT activities constrain the pace of my key
external service providers to help the IT department India. It would be most common for outsourcers to projects?
be as effective and focused as possible. provide a service in addition to the firm’s IT staff, ● Am I able to provide services equally to all
take responsibility for training and managing IT offices?
Law firm IT and outsourcing staff or take on IT staff as their own, in that order. ● Where are procedures too ad hoc, but too time-
Law firms rely on vendors for many services today, When IT staff do transfer from a company to an consuming to create in-house?
but just a few firms have prepared to make outsourcer, they often continue to work at the same ● Where do I have trouble attracting the right
changes in favour of long-term vendor services. location, at the same pay but with additional skills and providing the right training?
Understanding the approach, terms and bench- product-specific or procedural training. ● Do IT areas require so much time and effort that
marks related to outsourcing allows IT to make other high priority IT work is delayed or ignored?
informed decisions, reflect its own value and even Evaluation of outsourcing ● Are my best IT staff frustrated due to a lack of
defend itself against outsourcing pressures if You can start evaluating outsourcing by working progress or resources?
appropriate. through some basic analysis: These questions are really about effectiveness not
The potential values of outsourcing are well 1. Objectively evaluate IT’s strengths in the just outsourcing, but they help to focus on the option
documented. Few law firms have the scale to war- context of its changing responsibilities: of third party services. These questions are relevant
rant the specialist skills, training and investment Most law firm IT departments are being stretched for all IT staff to ask, not just IT management.
in methodologies that an outsourcer can provide. into new areas — business needs analysis, execu- 3. Gain experience with an outsourcing
approach: At the Society for Computer & Law’s
While IT lawyers have a solid understanding of relevant law, many do not Advanced Outsourcing Symposium, the IT lawyers’
advice was to never let a supplier dictate a service
have much experience with technology itself, so IT should be prepared to level agreement. This means that you should not
play a qualified role in contracting with vendors. If you do not expect to expect a supplier to sort out poor processes under
contract and that you should be familiar with
outsource for the next few years, it would be most beneficial to begin defining the scope and terms of SLAs.
using SLAs internally, to understand outsourcing terms and approaches While IT lawyers have a solid understanding of
relevant law, many do not have much experience
and to be familiar with the types of services provided by third parties with technology itself, so IT should be prepared to
play a qualified role in contracting with vendors. If
Outsourcers provide top end tools for monitoring, tive communications, lawyer working practices, you do not expect to outsource for the next few
managing and changing networks from remote merger integration and real-time disaster prepared- years, it would be most beneficial to begin using
locations without capital investments by the firm. ness, for example. SLAs internally, to understand outsourcing terms
Outsourcers can host systems in shared Tier 3 It is likely that the strengths and priorities of the and approaches and to be familiar with the types of
facilities and charge for their actual use dynami- department have changed while the expertise of services provided by third parties.
cally. In about half the cases, companies report the department is still adapting. It is not unusual As the pressure to consider outsourcing will
they save money by moving to an outsourced for more than 80% of IT’s responsibilities to be likely increase, you can be prepared to evaluate it
arrangement. focused on maintaining core systems — intelligently. A side effect could be that your due
In other cases, firms are willing to pay a pre- installing, supporting, upgrading and rolling out diligence allows you to be more prepared to avoid
mium for the mitigation of risk, service guaran- versions of hardware and software. For some firms, the need for outsourcing in the future.
tees and known payment schedules the vendor these are its areas of greatest value since it has the In the US, we have been asked to be an inde-
provides. Even in these cases, most outsourcers best knowledge of how the systems are used in- pendent facilitator of the new Legal IT Out-
will smooth payments so the initial outsourced house. In other situations, the day-to-day work of sourcing Panel. This panel is a set of law firm
costs are lower than current costs and provide maintaining systems slows the pace of important leaders working together, not to promote out-
payments for assets it acquires from the firm. new projects. sourcing, but to understand the implications,
Unsurprisingly, suppliers have taken the cue and 2. Perform an outsourcing assessment opportunities and benchmarks outsourcing pre-
are positioning themselves to provide outsourcing even if you do not plan to outsource: sents to IT and executive management. While not
services for legal IT. Most outsourcing suppliers use a combination of focused on European-based firms yet, this panel
Despite these positive concepts, many people ITIL, ISO and their own practices to establish should help to highlight valuable information for
feel the reality of outsourcing is not so rosy. IT processes for supporting IT. You do not necessarily any firm making decisions.
concerns include the risk of a big change to an need to learn each of these areas of IT quality stan- Evaluating outsourcing is a natural evolution of
outsourcer, the actual level of service for the dards, but addressing a few key questions will help the business nature of IT. Avoiding the considera-
quoted costs and the effect on IT staff. Out- identify gaps: tion altogether will risk not understanding poten-
sourcers are seeing that fewer firms are moving ● How do I define, measure and monitor service tial practices or solutions, whether or not you
directly to a significant contract with a new sup- levels? determine outsourcing is right for you.
plier because of the first two concerns. In these ● Where do I have risks that are not cost or time- Dave Cunningham is a consultant at Baker
cases, a company uses the selected supplier on effective to resolve (lack of appropriate disaster Robbins & Company.
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