Australasian firms face outsourcing threat

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Legal services outsourcing (LSO) is becoming a heated topic in overseas jurisdictions. The Economist was writing about it as early as 2010, and now a book published in the UK suggests traditional firms who fail to recognise and harness the potential in LSO providers will suffer in the long run.

The book, The rise of legal services outsourcing, by Dr Mary Lacity and Dr Leslie Willcocks of the outsourcing unit in the London School of Economics and Andrew Burgess, a director of outsourcing advisory firm Source, claims both in-house legal teams and private practice firms cannot ignore the fundamental changes to the legal profession caused by globalisation, disruptive technologies and deregulation.

Australian firm Beaton Capital partner, David Goener, agrees, writing in an article last week that LSO is growing as a result of larger market forces demanding “leaner” organisations.

“Enterprise[sic] legal functions are seeking ways to reduce costs by erecting captives in low-cost areas, by pressuring major law firms to reduce fees and to be more efficient by off-shoring, and by engaging LSO providers directly,” writes Goener.

However, Auckland-based DLA Phillips Fox partner, Martin Wiseman, believes New Zealand firms and in-house lawyers are largely immune to LSO providers – for now – due to a lack of less expensive, English-speaking overseas markets.

“Where would we outsource to?...I suppose, overall, I don’t think it’s a big issue for New Zealand firms at the moment, but it’s certainly something that overseas firms would be looking at – outsourcing to lower-cost jurisdictions,” Wiseman tells Australasian Lawyer.

However, Wiseman notes that the rise of fixed-price and web-based legal service providers could have implications for local firms. He cites online legal document provider, legaldocuments.co.nz, as an example of a situation where technology-savvy clients might opt to use online legal portals, particularly when it comes to routine templates, rather than lawyers in a bid to save money.

“There’s no doubt that the advance of IP, combined with technology-savvy clients…is contributing what I call commoditisation, by which I mean standard documents or templates becoming fixed price, or at least constrained in what you can charge for them.”

Finally, Wiseman notes New Zealand could actually be sitting at the other end of the outsourcing relationship.

 “I do know that some UK firms have explored using what you might call the ‘other half of the clock’ for New Zealand firms who employ people with up-to-date UK experience who are also admitted there to turn documents overnight. In fact, we have done that with DLA Piper London.”

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