Outsourcing makes headway among Australian law firms

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Australian law firms see a greater role of outsourcing in the near future as they seek to reduce costs and achieve greater efficiency. Over half of firms (52%) predict they and their peers will increase their use of both Legal Process Outsourcers (LPOs) and Legal Services Outsourcers (LSOs) over the year ahead, according to a recent survey by Commbank.

The rise appears to have been driven by law firms and clients.  The bank said top-tier firms are especially likely to feel pressure to demonstrate cost-effectiveness to large institutional clients. 

Sentiment was split between top-tier firms and mid-tier firms. Some 25% of top-tier firms outsource fee-earning work today. The figure is predicted to reach 38% in two years. Mid-tier firms were more receptive – about 34% utilize outsourcing today, with the figure expected to reach 56% in two years.                

“We do not want to win new work on discounted price, but know that is often where the battle is. Our new work is being scoped more stringently and priced accordingly,” said one unnamed respondent, a managing partner of a mid-tier firm.

Law firms recognize that outsourcing “can have benefits for everyone,” Commbank said. Just one respondent expected the practice to have a negative impact on margins, while 12 others believe the impact would be positive. “These results suggest that firms have become adept at managing the outsourcing relationship to create additional value, reducing margin pressure by delivering a more flexible service at a lower overall cost,” Commbank said.

Results came from a May survey of CEOs, managing partners and other senior leader from 40 of Australia’s top 50 firms.

“The outsourcing and automation of lower value, high volume work has created attractive opportunities for firms to focus on their areas of greatest expertise, where they can maximise their competitive advantage,” said Marc Totaro, Commbank national manager, professional services business and private banking.

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