Trends & Opportunities in Law Firm Outsourcing survey
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1 Trends & Opportunities in Law Firm Outsourcing survey
2 Trends & Opportunities In Law Firm Outsourcing
3 Copyright 2015, Sandpiper Partners LLC, All Rights Reserved. Trends & Opportunities In Law Firm Outsourcing
4 Trends & Opportunities In Law Firm Outsourcing
5 Table of Contents 1.0 Introduction Methodology Survey Respondent Demographics Current Back Office/Administrative Functions Landscape Outlook for Back Office/Administrative Functions Back Office/Administrative Staffing Trends Back Office/Administrative Outsourcing Copyright 2015, Sandpiper Partners LLC, All Rights Reserved. Trends & Opportunities In Law Firm Outsourcing
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7 1.0 Introduction Crossing the Rubicon While last year s Survey found a significant and growing interest in law firm outsourcing, it might be said that 2014 was the year a large number of law firms crossed the Rubicon when it came to expanding the types and activities of back office support and administrative functions they undertook through utilization of outsourced services. Pressure from clients fueled these developments, notably to reduce costs and ensure data security and data protection. Against this background, the Third Annual Trends & Opportunities in Law Firm Outsourcing Survey, commissioned by Williams Lea and conducted by Sandpiper Partners LLC, legal industry consultants, offers an illuminating picture of what took place in 2014 and what is on the drawing board for In sum, firms are striving to become even more productive and rethink their approaches to the management of processes and workflows as 2015 unfolds. Clearly, these issues have been elevated to senior levels of management at Big Law, large, and medium size firms in major legal markets covered by the Survey. These markets include New York, Los Angeles, San Francisco, Chicago, Washington D.C., and London. More than one out of every 10 respondents identified themselves as the managing partner, and over one third were executive directors, administrative directors or finance heads. The Survey is an excellent barometer for measuring what happened in 2014 and how it compares with prior years. It offers many insights on how law firm leaders intend to manage these functions going forward while keeping in mind the external requirements of clients. Firms also are placing high priority on service quality, the latest technology, availability of more experienced third party firms to assist them, and the goal of exceeding industry norms. Copyright 2015, Sandpiper Partners LLC, All Rights Reserved. Trends & Opportunities In Law Firm Outsourcing
8 CLIENT PRESSURES DRIVING OUTSOURCING DECISIONS Pressure from clients to reduce cost and the need to show clients progress in this endeavor are the prime reasons for outsourcing. In addition clients remain most concerned about whether firms are sufficiently emphasizing data security and data protection measures. In fact, 60% of law firms now see these activities as the top challenge in satisfying clients. Management of process and workflow reengineering also are of primary interest to firms with 64% citing it as a top three need. CENTRALIZATION OF RESOURCES IS A KEY ENABLER FOR CHANGE The survey results illuminate two related trends. The first is the growing use of centralized and shared services locations to support back office and administrative functions. The second trend is the prioritization of workflow processes improvements and related technology investments in Firms are taking a page from their clients best practices and are looking to gain better command of resources and processes through centralization. Highlights of Findings Back office/administrative functions are increasingly centralized, rather than operated on a regional, mixed, local or global basis. Back office centralization has caught on: 40% of respondents have centralized back office/administration functions. Almost one-third (27%) indicate they use a combination of venues including centralized, mixed, and local. Only 6% use global locations. The wave of the future Of those utilizing centralized services, 19% are performing those services in shared service centers, and these numbers are likely to grow even higher in For global firms, 46% have onshore facilities and 32% use captive/shared services centers. Overall onshore facilities account for 92% of outsourcing while offshore facilities are used by 8% of firms. Technology s growing place in improving processes and procedures. A majority of firms (56%) say the chief strategies they employ to achieve savings are increased use of technology, automation of workflow and project management. Last year, headcount reductions were the strategy most firms cited they used to achieve savings. Top factors that will change back office costs. A majority of respondents (64%) say better command and more efficient use of workflow processes will have the greatest impact on back office costs in Last year only 25% said this would make a difference. Downs and ups of headcount. A majority of firms (57%) are still reducing headcount in back office functions. 90% of firms are reducing support staff in the area of records management. Top areas where firms are reducing staff include accounting and finance document processing and mailroom. Almost one in five firms are increasing headcount in cyber security and data protection. Secretarial headcount remains a priority. Firms are pushing ahead with their plans to reduce attorney to secretarial ratios. The survey showed 45% of firms have achieved the most often mentioned ideal ratio, 1:4. 86% of firms who answered that they are reducing back office administration head count said they are reducing secretarial head count. Overall firm expense budgets (not including legal staffing) are growing in the next 12 months. Investment in technology and technology staffing (32%) as well as cyber security and data protection (24%) are the top targets for increased spending. Over half of the firms (57%) plan to increase their budgets for back office functions but 98% of firms who answered this question expect the increase to be under ten percent. Key benefits and barriers of outsourcing include: cost savings (77%), better, more efficient service (65%), and improvement of processes and procedures (60%). Barriers to expanding outsourcing strategy include concerns about quality of outsourced work (65%) and not enough volume to achieve benefits (53%). 8 Trends & Opportunities In Law Firm Outsourcing
9 2.0 Methodology The Williams Lea Survey: Trends and Opportunities in Law Firm Outsourcing was conducted by Sandpiper Partners LLC in fall The Survey was sent to Managing Partners, Chairmen, and senior business executives of selected Am Law 150 firms, large firms in the United Kingdom and to registrants at Sandpiper Partners events. Not all respondents answered all questions. Respondents were contacted via and could complete the survey via fax, phone, , or online using Survey Monkey. The Survey asked questions in four categories: Background Information, Firms Current Situation and Outlook, People, and Process and Outsourcing. For some questions, respondents could select more than one answer; in these instances, the total percentage for that question will be greater than 100 percent. The charts were compiled from the completed survey data. Copyright 2015, Sandpiper Partners LLC, All Rights Reserved. Trends & Opportunities In Law Firm Outsourcing
10 10 Trends & Opportunities In Law Firm Outsourcing
11 3.0 Survey Respondent Demographics Respondents completed the Survey on behalf of a wide range of firm types. Firm size ranged from less than 100 to more than 1500 lawyers, with almost 60% of respondent firms having more than 400 lawyers. One-third of respondent were C Level administrators, one-third Executive Directors or director level administrators and the remaining one-third of respondents were practice partners and functional support personnel. The vast majority of respondents were located in the United States, but this year approximately 17% were located in the United Kingdom bringing survey participation from the UK up 7% year-over-year. Size of Law Firm % % 19% 13% % % % Over % 9% 14% 12% 16% 17% Respondent s Role Director (Administrative, Executive, Finance, etc.) 34.5% Chief Executive Officer (CEO).9% Chief Operating Officer (COO) 9.1% 15% Chief Administrative Officer (CAO) 2.7% Chief Human Resources Officer 1.8% 3% 2% 34% Chief Financial Officer (CFO) 9.1% Chief Information Officer (CIO) 10% 12% Managing Partner 11.8% Partner 1.8% Senior Partner 2.7% Other 15.5% 10% 9% 2% 3% 9% 1% Copyright 2015, Sandpiper Partners LLC, All Rights Reserved. Trends & Opportunities In Law Firm Outsourcing
12 Location of Law Firm 17% United States 83% United Kingdom 17% 83% 12 Trends & Opportunities In Law Firm Outsourcing
13 4.0 Current Back Office/Administrative Functions Landscape Back Office centralization has caught on; 40.4% of respondents have centralized back office/ administration functions. Almost one-third (27.2%) indicate they use a combination of venues including centralized, mixed, and local. Only 6% use global locations. Regardless of support structure (centralized, regional, mixed, etc.), the majority of respondents tell us that the preferred location for this functional support is onshore, with less than 10% of the support provided offshore. Although, of those respondents who have a global structure (6.0%), almost 23% sited that those services are fulfilled through an offshore location. Location of respondents back office/administrative functions Centralized 40.4% 6% 6% Mixed 27.2% Local 20.5% 21% 40% Regional 6% Global 6% 27% % Percent centralized, onshore or offshore % Offshore CapDve/Shared Services Center Onshore 80.00% 60.00% 40.00% 20.00% 0.00% If Centralized If Regional If Mixed If Local If Global Copyright 2015, Sandpiper Partners LLC, All Rights Reserved. Trends & Opportunities In Law Firm Outsourcing
14 Key challenges facing firms back office/administrative functions While reducing cost of services was cited as a key challenge it is third on the list this year at 59.1%, versus last year s leading 78.8% this year more than 60% of survey respondents cited that process and workflow challenges and client pressures around data security were their key challenges. Client pressure to reduce costs is also a considerable issue for firms with 54.5% of respondents citing that as a key challenge facing their firm. Management of process and workflow reengineering Client pressures to assure data security and data protection Reducing cost of services 60.2% 59.1% 63.6% Client pressures to reduce costs 54.5% Quality/timeliness of service 46.6% Resistance to change 42.0% Management of security/ confidentiality in workflow 30.7% Real estate considerations 25.0% Demands from firm expansion (regional, national, or global) 23.9% Impact of remote working 17.0% Management of outsourced service vendors Management of different pricing structures 11.4% 13.6% Emergence of alternate service providers 3.4% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% People may select more than one response so percentages may add up to more than 100%. 14 Trends & Opportunities In Law Firm Outsourcing
15 Significant cost saving measures firms have achieved over the past 12 months In 2014, firms once again turned to their administrative support (not including finance) functions to achieve cost savings. The majority of respondents achieved savings by improving processes and procedures and increasing use of technology. This is a change from last year, when the number one method for cost savings was headcount reductions. Administrative support (secretarial, reception, IT, travel, etc.) other than finance 61.6% Supplier management of procurement initiatives 18.6% 9% 6% 5% Finance functions 9.3% Litigation support 5.8% 18% 62% Centralized services (HR, marketing, etc.) 4.7% Strategies most utilized to achieve cost savings Improving processes and procedures (including use of project management, automated workflows, etc.) 55.8% Increasing use of technology 52.3% Reducing workforce 43.0% Vendor/contract renegotiation 41.9% Cross training staff 38.4% Outsourcing services 25.6% Consolidating services in one location 24.4% Use of outside vendors or consultants 20.9% Eliminating services 14.0% Captive/Shared Services Center 14.0% Moving services offsite to a lower cost location 8.1% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% People may select more than one response so percentages may add up to more than 100%. Copyright 2015, Sandpiper Partners LLC, All Rights Reserved. Trends & Opportunities In Law Firm Outsourcing
16 16 Trends & Opportunities In Law Firm Outsourcing
17 Outlook for Back Office/ Administrative Functions Anticipated expense budget growth in the next 12 months Similarly to last year, more than half of the respondents said they anticipated their firms budgets would grow by up to 10%, whereas 30% of respondents said they expected their budgets to remain constant in Of the small number (13.3%) of respondents who expect their budgets to decrease in 2015, the majority expect those decreases to be less than 5%. This year, we asked respondents to identify the areas that they anticipate budget increases will support. In keeping with the theme of technology and automation playing a larger role in firms efficiencies, 32% of respondents expect budget increases will be allocated to in-house technology and staffing, 24% to cyber security and data protection and 20% to workflow management. 13% Increase 56.7% Remain the same 30% Decrease 13.3% 30% 57% Increase by 1%-5% 71.7% Increase by 6%-10% 28.3% Increase by 11%-15% 2.2% Decrease by 1%-5% 10.0% Decrease by 6%-10% 1.1% Decrease by 11%-15% 1.1% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% Copyright 2015, Sandpiper Partners LLC, All Rights Reserved. Trends & Opportunities In Law Firm Outsourcing
18 In which areas will you increase costs? Investment in in-house technology and staffing 32% Cyber security, data protection 24% 14% 10% 32% Workflow management 20% Other (please specify) 14% 20% External technology investment 10% 24% Top factors impacting back office costs over the next 12 months Similarly to last year, better command and more efficient use of workflow processes and data was cited as the number one factor impacting back office costs in the upcoming year. Investment in technology and staffing will also require greater expenditure, with 48.8% citing the need for inhouse technology investment and 33.3% for external technology investment, as will cyber security and data protection (31%). Better command and more efficient use of workflow processes and data Increased use and investment in in-house technology and staffing 48.8% 64.3% Staffing needs External technology investment Cyber security/data protection investment 31.0% 35.7% 33.3% Real estate/property requirements 25.0% Vendor/third party vendor service fees 19.0% Volume of transactions, litigation, regulatory matters and government investigations Working from remote locations Other (please specify) 3.6% 13.1% 11.9% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% People may select more than one response so percentages may add up to more than 100%. 18 Trends & Opportunities In Law Firm Outsourcing
19 6.0 Back Office/Administrative Staffing Trends Respondents plan to reduce business support, litigation support, or back office/administrative staff headcount in the next 12 months For the third year in a row, a majority of firms (56.6%) plan to reduce headcount supporting back office and administrative functions. Among UK respondents this number has increased from a smaller percentage - 20% last year- to 53.8% reporting plans to reduce staff headcount in these areas in Reduce 56.6% 43% Increase 43.4% 57% Areas of reduction by support function As last year, a significant number (86%) of those who said they planned to make headcount reductions expected to make those reductions in secretarial staff. This year, 86% of respondents also cited back office and administrative staff as target areas for headcount reduction, which is almost double the 44% of last year. Area % of respondents Average reduction % Secretarial staff 86% 6% Back office/administrative staff 86% 6% Business support 57% 4% Litigation support 43% 12% Technical support 39% 3% Copyright 2015, Sandpiper Partners LLC, All Rights Reserved. Trends & Opportunities In Law Firm Outsourcing
20 Planned back office/administrative staff reductions by areas and percentage Last year the lion s share of back office/administrative cuts were expected to occur in mailroom and copy services, reception, hospitality, and facilities management. This year, mailroom and copy centers are still targeted for headcount reductions by 79% of those planning reductions, but document processing and accounting and finance are new areas of focus for respondents with 79% and 71% saying they are planning staff reductions in those areas, respectively. Department % of respondents planning to reduce staff Average staff reduction Mailroom and copy % 79% 12% Document processing % 79% 16% Accounting and finance % 71% 4% Reception, hospitality, and facilities management % 54% 8% IT/technology % 54% 6% Human resources 50% 4% Marketing and creative services % 50% 5% Forecasted areas of attorney support staff reductions in 2015 Of the 43% of respondent firms who are planning staff reductions in litigation support areas, the vast majority (93%) are planning on reducing staff levels in records management. At the same time, more than half of those respondents planning to reduce litigation support functions, are planning those to be across the board staff reductions. Department % of respondents planning to reduce staff Average staff reduction Records % 93% 8% Litigation and practice support % 67% 11% Conflicts % 60% 8% Legal research % 60% 6% Paralegals % 53% 5% 20 Trends & Opportunities In Law Firm Outsourcing
21 Areas of focus for planned headcount increases in 2015 One-third of respondents who said that they are planning headcount increases are focusing on technology or finance functions and almost one in five of those firms are increasing headcount in cyber security and data protection areas. Response Percent IT/Technology 35.5% Financial/Data Analytics 32.3% Business Intelligence/Business Development Cyber Security and data protection 29.0% 19.4% Other (please specify) 12.9% Regulatory Compliance 6.5% Respondents current ratio of non-attorney staff (excluding paralegals) to attorneys More than 80% of respondents indicated a less than 1:2 ratio of non-attorney staff (excluding paralegals) to attorney. Only 44.8% of firms have achieved the most often mentioned ideal ratio of 1:4. Only 23.8% of firms have actually achieved secretary to attorney ratios higher than 1:4, while 57.1% site target ratios of 1:5, 1:6 and 1:7 14% 14% less than 1:1 13.8% 1:1 34.5% 1:2 34.5% 1:3 3.4% 1:4 13.8% 3% 35% 34% Copyright 2015, Sandpiper Partners LLC, All Rights Reserved. Trends & Opportunities In Law Firm Outsourcing
22 Respondents current and target ratio of secretarial staff to attorneys Current Ratio Target Ratio 1:2 3.4% 10% 3% 3% 1:2 0% 7% 0% 14% 1:3 27.6% 1:4 44.8% 10% 28% 1:3 14.3% 1:4 28.6% 25% 1:5 10.3% 1:6 10.3% 1:7 3.4% 45% 1:5 25% 1:6 25% 1:7 7.1% 25% 29% 22 Trends & Opportunities In Law Firm Outsourcing
23 7.0 Back Office/Administrative Outsourcing Areas that are outsourced Mailroom and copy centers, as well as reception and hospitality, are outsourced by the greatest percentage of respondents (84% and 51% respectively). The year-over-year growth trend of outsourcing document processing continues, with 43% of this year s respondents reporting that they outsource document processing versus 37% last year. The majority of outsourced back office work is still performed onshore. Captive and shared services centers are the most prevalent solution for IT, human resources, contract administration and CRM support. % Onshore % Captive/Shared Services Center % Offshore % respondents who outsource this function Mailroom and copy 91% 9% 0% 84% Reception and hospitality 96% 4% 0% 51% Document processing 86% 14% 32% 43% Records management 100% 0% 0% 33% Collections Process 67% 17% 25% 24% IT 75% 42% 25% 24% Marketing and creative services, including web development Business intelligence and research 82% 27% 9% 22% 50% 25% 38% 16% E-billing and billing process 75% 13% 13% 16% Human resources 63% 38% 13% 16% Data Security 71% 14% 29% 14% Secretarial services 71% 14% 29% 14% Finance, accounting, and data entry 83% 17% 50% 12% Research/library services 83% 17% 50% 12% Presentations 100% 20% 20% 10% Contract administration 67% 33% 67% 6% CRM (Client Relationship Management) 33% 67% 0% 6% Other (please specify) 0% 0% 100% 6% RFP, RFI and proposal creation 100% 0% 50% 4% Risk remediation and audits 100% 0% 0% 4% Transactions with high repetitive volume such as claims processing, mortgage processing 100% 0% 50% 4% People may select more than one response so percentages may add up to more than 100%. Copyright 2015, Sandpiper Partners LLC, All Rights Reserved. Trends & Opportunities In Law Firm Outsourcing
24 Reported results/benefits achieved through outsourcing As last year, firms that outsource various back office/administrative functions enjoy cost savings and improved service in those areas. Less than 50% of respondents see reduction in workforce as an expected benefit of outsourcing. Perhaps since workforce reductions have become more common, they are reporting that the benefits that outsourcing delivers are more closely tied to process efficiencies and service improvements. Cost savings 77.1% Better service, efficiency 64.6% Improvement of processes and procedures 60.4% 24/7 service capability 45.8% Reduction in workforce 43.8% Access to new technologies 27.1% Remediating risk 12.5% Enhanced data security 8.3% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% People may select more than one response so percentages may add up to more than 100%. Respondents considering further outsourcing 46.5% of respondents are considering expansion of outsourcing, while the remaining 53.5% indicated they are not considering outsourcing additional functions. These numbers have held constant for the past three years. Considering expansion of onshoring, captive/shared services center or offshoring 46.5% Not considering onshoring, captive/shared service center or offshoring 53.5% 54% 46% 24 Trends & Opportunities In Law Firm Outsourcing
25 Biggest barriers to developing an outsourcing strategy Concern over the quality of outsourced work (65.2%) is the most prevalent barrier to expanding an outsourcing strategy at respondent firms in This is a departure from last year s survey results, which cited the concerns around lack of savings and volumes needed to achieve those savings as the top barriers to outsourcing back office and administrative functions. Similarly to last year, gaining approval of firm leaders remains a barrier to additional outsourcing with more than 40% of respondents citing that as a reason for not outsourcing. Concerns about quality of outsourced work 65.2% Not enough volume to achieve benefits 53.0% Gaining approval of the partnership Service level risks Confidentiality/security of client data concerns Dealing with current employees 42.4% 42.4% 39.4% 36.4% Considerations related to exporting jobs offshore Up front expenditures/ investment concerns Office space, lease considerations 3.0% 12.1% 10.6% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% People may select more than one response so percentages may add up to more than 100%. Perceived benefits of outsourcing This year, increased productivity and efficiency as well as reduction of head count and overhead were the top perceived benefits respondents expect outsourcing to deliver. Increase in productivity and efficiency 20% Reduction of head count and overhead 20% Increase in firm profitability 16% 10% 6% 4% 20% Achievement of higher service level 14% 10% Improvement in business outcomes 10% 20% Utilization of state-of-the-art technology 10% Risk mitigation 6% Consistent data security and cyber security standards at highest level 4% 14% 16% Copyright 2015, Sandpiper Partners LLC, All Rights Reserved. Trends & Opportunities In Law Firm Outsourcing
26 Respondents greatest areas of interest within outsourcing This year s survey shows a growing interest in outsourcing in functional support areas such as finance, accounting and data entry (51.7%), IT (44.8%) and marketing and creative services, including web development (37.9%). At the same time document processing and secretarial services remain strong areas of interest for potential outsourcing opportunities. Response Percent Finance, accounting, and data entry 51.7% Document processing 44.8% IT 44.8% Marketing and creative services, including web development 37.9% E-billing 34.5% Business intelligence and research 31.0% CRM (Client Relationship Management) 31.0% Records management 27.6% Secretarial services 27.6% Research library services 24.1% Presentations 20.7% Human resources 20.7% RFP, RFI and proposal creation 13.8% Reception and hospitality 13.8% Contract administration 10.3% Mailroom and copy 10.3% Data Security 6.9% Repetitive transactions and mortgage processing 6.9% People may select more than one response so percentages may add up to more than 100%. 26 Trends & Opportunities In Law Firm Outsourcing
27 Range of savings that makes outsourcing in a particular area attractive to a firm 86% of respondents suggest that a baseline of 10% savings is the minimum savings threshold for outsourcing a function. Almost 2/3 of respondents would like to see savings between 10% and 20% in order to consider outsourcing and just over 20% need to see savings greater than 20% in order to consider outsourcing. 5 9% 14% 22% 14% 10 15% 37% 16 20% 27% More than 20% 22% 27% 37% Types of business models currently in place at respondent firms Two-thirds of survey respondents are using outsourced solutions operating onsite at their firm locations. This is consistent with the most frequently outsourced services mailroom and copy centers as well as reception and hospitality. Just over 10% of respondents reported using an offshore outsourcing model. Outsourcing provider supporting services on-site at firm 65.6% Onshore (in UK Nearshore) 32.8% Captive/Shared Services Center 26.2% Business Process Outsourcing (BPO) to a third party provider 24.6% Shared services 19.7% Offshore 11.5% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% People may select more than one response so percentages may add up to more than 100%. Copyright 2015, Sandpiper Partners LLC, All Rights Reserved. Trends & Opportunities In Law Firm Outsourcing
28 Copyright 2015, Sandpiper Partners LLC, All Rights Reserved.
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