TCS-CVDFK Workshop on 23/03/2010

1. Is Outsourcing the Future for Law Firms?
March 2010

2. “I really get this but my partners would never accept it”
FD Top 15 firm
“Even billing is personal – it couldn’t be outsourced”
Partner Top 20 firm
“We don’t do outsourcing here!”
Partner, Top 25 firm
“Interesting idea but it only makes sense for large businesses”
Managing Partner of Top 50 firm
The Macro view – a bold assertion
The Micro view – why, how, who and what

3. Bold Assertion for SMEs
“Do you have a desk with a
little more resonance when I
thump it?”
“10 years from now it will make no more sense for
SMEs to run their own back offices than to set up
their own banks.”

4. Recognise this?
4

5. You tell me!
Could earn
higher fees
Earns
no
fees!
5

6. What if you could turn the way you
run your business on its head?
6

7. The outsourcing value proposition
Today Transformation Future
5% • Efficiency
Strategy
• Process
Performance • Governance
25%
Enhancement • Consolidation
• Technology
30% Transactions • Standardisation
40% • Flexibility
Administration
From now…….. ………to Efficient Organization
Highly transactional, tactically focused Able to focus on strategy, not tactics
Innovation constrained More capable of creating new value
Capacity limited Trained resources on demand
Cost saving potential capped Reduced, predictable cost to serve
Hard to transfer risk Enhanced risk management capacity
Responsive rather than proactive Forward looking
Multiple providers to manage One stop shop business partner
Protecting and maximizing your margin

8. Powerful Aggregation: Full Service capabilities for Legal Services
1
IT Services
6 • Outsourcing Solutions
• Enterprise Solutions
• Technology Solutions
Business Process
Outsourcing External Prof Services
Suppliers
•KPO
•HRO & Payroll
Finance
•Analytics
SALARIES
•F&A
Marketing Risk & Compliance
Partners @
5 Human FeeREarners
H
Resources
Information Systems
Quality Assurance 2
• Compliance Information
• Security Services
IT Infrastructure
Admin • Infrastructure Outsourcing
• Network Integration
• Hardware Support and
Customers
Installation
• Infrastructure Management
• Database Services
4
3 Asset Based Solutions
Legal Process Outsourcing
• IT Products
Paralegal Services
• Product Based Services
• Legal Support
• Corporate Law & Practice Practice Management
• Intellectual Property Services • Client Opportunity Management • Finance
• Conveyancing • Matter Management • Credit Control
• Patent Services • Time & Expense Capture • Compliance, Reporting
• Billing • HR and Talent Mgmt
• WIP Management • Client Self Services

9. What could law firms outsource today?
Back office
• Finance and accounting
• Reconciliations
• Payroll
• Management reporting and analytics
• IT Middle office
• General office • HR processes and analytics
• Facilities • Information support and analysis
• Training programme management
Front office • Sales, marketing and event planning
• Document generation and secretarial • CRM
support
• Document Review for Disclosure
• Due diligence
• Legal research
• Contract management
• IPR management

10. Illustration – two Law Firms
Support Potential
No. of costs savings Savings
T/o (£M) No. of Equity (£50k to from BPO per EP (£K)
lawyers partners £80k per (25%)
lawyer) (£M)
(£M)
Firm A 60 190 60 9.5 2.4 40
15.2 3.8 63
Firm B 30 120 24 6.0 1.5 63
9.6 2.4 100

11. What will push the legal sector
towards Outsourcing?

12. Prof. Richard Susskind’s Evolutionary chart for Legal Services
Bespoke Standardised Systemised Packaged Commoditised

13. Push Drivers in the Legal Sector
Driver Reason Anecdotal evidence
Falling prices Client buying power and sophistication
•RBS recently calling for its panel firms to
set up Mexican wave arrangements
•Calls for less FE gearing
Commoditisation
•Evershed’s LPO
•Irwin Mitchell’s interest in Commercial
Alternative billing arrangements Property
•Evidence everywhere
Uncertain workflows Recession – double dip? Too early to tell
Impact of coming public sector cuts Too early to tell
Impact of coming changes to FS Too early to tell
regulation etc

14. Pull Drivers in the Legal Sector – improving quality of Vendors and Services
Specialist providers – especially LPO and Integreon
KPO
CPA Legal
Exigent
Eversheds?
Global BPOs with SME offerings TCS/CVDFK
Others?
Growing understanding and interest Many firms are carrying out reviews
amongst law firms
PWC law firm survey report 2009

15. Law Firm Outsourcing – PWC Law Firm Survey 2009
Top 10 11 - 25 25 - 50 51 - 100
Doing/ Doing/ Doing/ Doing/
Discussing % Total % Discussing % Total % Discussing % Total % Discussing % Total %
IT
-Infrastructure 50 / 22 72 13 / 22 35 23 / 30 53 17 / 5 22
-User Support 0 / 40 40 22 / 11 33 33 / 26 59 5/5 10
Accounting processes 0 / 33 33 0/0 0 8/8 16 0/0 0
Payroll 33 /33 66 33 / 0 33 44 / 19 63 50 / 5 55
HR Processes 0 / 33 33 0/0 0 0 / 17 17 0/0 0
Secretarial 33 / 17 50 13 / 13 26 21 / 24 45 11 / 26 37
Appetite for 41 21 37 21
outsourcing

16. Disintegration of Law Firms
Partnership management
Back Office Middle Office Front Office
•Advice
•HR
•Accounting
•Representation
•Marketing
•Seminars •Client relationships
•IT •Research & Training •Document review
•CRM
•Due diligence
•Knowledge
•Facilities
•Mexican Waves
BPO and ITO HRO and KPO LPO

17. Typical law firm structure
PARTNERS
FEE EARNERS
REVENUE TEAM
DEPARTMENT
HEADS
SUPPORT TEAMS
•Documents
•IT
•F&A
•HR
•Marketing
•Knowledge
SUPPORT TEAM •Facilities
Typically strength of revenue and support team would be similar, having a lean partner strength
and a heavy fee earners/ support team

18. New World ?
PARTNERS
FEE EARNERS
Lega
i ng
ourc
l
SUPPORT
Proc
Outs
IN HOUSE
ess O
cess
u ts o
l Pro
BPO BPO
urcin
Lega
g
Lean-cost effective structure that benefits from outsourcing

19. Typical law firm structure New World ?
PARTNERS
PARTNERS
FEE EARNERS
REVENUE TEAM
FEE EARNERS
DEPARTMENT
HEADS
Lega
i ng
ourc
l
SUPPORT TEAM SUPPORT
Proc
Outs
•Documents IN HOUSE
ess O
•IT
cess
•F&A
u ts o
•HR
l Pro
•Marketing BPO BPO
urcin
•Knowledge
Lega
SUPPORT TEAM •Facilities
g
Typically strength of Revenue and Support team would be similar, Lean-Cost effective structure that
lean Partner strength and heavy Fee Earners/ Support team benefits from Outsourcing

20. What will stop the legal sector from Outsourcing?

21. Assuming there is a business case : perceived risks mitigation
Perceived risk Description Mitigation
Performance • Will outsourcing deliver? • Track record
• What happens if it doesn’t? • Thorough due diligence
• Benefits, confidentiality, internal • Customer references
security, communications, language, • Six Sigma performers
quality control and systems concerns • Staged, low risk implementations
Control • Will management lose control over key • Detailed SLAs
business functions? • Real time on-line performance
measurement and transparency
• Strong governance structures
• Collaborative approach
People • Effect on the “personal” and culture • Businesses must be efficient
• Ethics of off-shoring jobs and redundancy • Global marketplace & free trade
• Lawyers distrust process • Lawyers will experience the benefits
• Skills loss • UK economy needs real jobs
Transition • How difficult, time consuming and risky is • Experience and expertise
the transition? Is it worth the effort/risk? • Staged, low risk implementations

22. Done with, not done to!
The best outsourcing is a strategic partnership focussed on
continuous improvement

23. So how does it work?
23

24. Well, not like this…

25. Finance and Accounting Process Outsourcing Roadmap
High 4 2
Financial Planning & Analysis
Budgeting & Forecasting Fee earner reporting
Statutory Reporting Cashflow analysis
(Risk, Domain Skills, Lead-Time)
Financial Reporting Fixed Asset
Management
Complexity
SAR compliance
Direct / Indirect Bank & Account
Tax Services Reconciliation
Tax Advisory & Planning Tax
Receivables / Collections
Processing
Billing / Invoicing support
General Accounting / Ledger
Payables /
Payroll and PAYE compliance Disbursements
Travel &
Expenses Bank posting
Low 3 1
Low Benefits (Labor Cost & Quality) High

26. Outsourcing - Flexible Business Models
Typical Outsourcing Model
Direct third party outsourcing model • Lift and shift
• Outsourced FTEs
• Wage Arbitrage & Process Excellence
• Arms length outsourcing
• SLA Based Operations Management Hybrid Outsourcing Model
• Maximize right-shore leverage
• Leverage BPO expertise and process re-engineering
• Retained staff embedded in outsourced team
Shared Service Centre model
Outsourcing options:
• Established and owned by customer
• All in-house
• Joint venture with other customers
• All outsourced
• Operated independently for multi-users
• Hybrid
• Complete end –to – end SSC design
• Bespoke Implementation
• Potential to realise value In-house model
• DIY
Captive/in-house model • Services to third parties?
• Potential to realise value
• Customer retains ownership and
operational control Joint Venture/Outsource model
Potential to offer services to third parties • Leverage Supplier strengths and reputation
• Collaborative set up
• Services to third parties?
• Potential to realise value

27. So are you going to let this wash over you?
27

28. Uha, too difficult!

29. Thank You