Two current articles raise some interesting questions about law firms and outsourcing. 

Small World in Law Firm Inc. (10/07) is an interview with White & Case CFO Greg Dolan. The firm outsources some word processing to a legal process outsourcer (LPO) in Chennai. It has also opened its own “captive” or “insourced” center in Manila to handle accounting, finance, and some tech. Asked why outsource, Dolan says “we decided to do both and see which one we like over the longer term.”

Now that I work for an LPO, I am not dis-interested, but I think that captive centers are unlikely to prevail long term. Scale, focus, and specialization are key reasons to outsource; running a captive does not capture these benefits. (That said, I applaud W&C’s empirical testing; my Best Practices posts argue that firms should manage based on real evidence, not myth.)

Look at legal technology as an example: large law firms increasingly outsource. The reasons range from business continuity, to eliminating headache, to reducing cost, to improving service levels. The decision is not all or nothing. For example, Good chemistry in Legal Technology Journal (Issue 6, fall 2007) describes in excellent detail Eversheds‘ decision to outsource significant aspects of its information technology. The firm is keeping “a relatively large IT team” but shifting its focus “from day-to-day service delviery to strategic development and innovation.”

My sense is that firms that once would have only considered “captive” IT solutions now readily consider outsourcing. I suspect that this same trend will apply to other law firm functions (as it has to everything from the mail room to food service to e-discovery processing).

Captive Carve Outs (Global Services magazine, 9/20/07) is a more general take on challenges captives face. It examines IT and business process outsourcing operations that were started as captives of single multinationals but have since been “carved out,” that is, spun out and taken private or sold to a specialist outsourcer.