Is Legal Onshoring the New Legal Outsourcing in the US?

Legal onshoring is a trend that is gaining momentum as an alternative to traditional Legal Process Outsourcing. In the US, a growing number of law firms are exploring onshoring or a hybrid of onshore and offshore legal teams to handle work that was once performed in-house.

How Onshoring Fits into the LPO Mix:

Onshoring involves the outsourcing of work domestically. The onshore LPO model is a viable alternative for legal professionals who are unwilling or unable to send work to outside jurisdictions, and allows LPO vendors to expand their delivery capabilities and service portfolios to new geographies.

Unlike the offshoring model, which focuses on reassigning legal work to lower-cost service providers overseas, onshoring transfers work to lower-income, lower-cost rural communities. Like typical LPO, onshoring allows law firms and corporations in major metropolitan areas to maximize productivity and minimize legal fees. It is no surprise that some big city law firms are sending work to small towns in Texas, the Midwest and the Pacific Northwest, or even to virtual America where costs are lower.

Why Choose to Onshore Legal Work?

US law firms are recognizing that American onshore providers may be a better fit for some complex projects that require a higher degree of expertise and collaboration. The skill, knowledge, and experience of US attorneys are attractive to law firms and legal departments looking to outsource. These attorneys understand the nuances and complexities of the US legal system, which can be an advantage in litigation, IP, and M&A matters. And, while the level of expertise is high, the costs are typically lower. Furthermore, should a problem arise, onshoring is extremely beneficial because the laws of the United States will be enforced. For these reasons, many firms are reevaluating their decision to ship projects overseas, opting instead for US-based outsourcing companies.

Offshore LPOs Come Ashore

As a further evolution of the Legal Process Outsourcing industry, some offshore LPOs, predominantly in India, have opened offices in the US and even employ American lawyers. These onshore service delivery centers are in cities such as North Dakota, Texas, Kansas City and Chicago. Additionally, some LPOs are ramping up the hiring of American lawyers to handle more sensitive client matters, such as military contracts, export control work and patent matters, here in the US.

Expanding Geographic/Jurisdictional Reach

The growth of onshore LPO is a result of third-party vendor investment in onshore solutions as well as captive centers created by major law firms. The onshoring trend illustrates the value of LPO beyond simple labor arbitrage. With the popularity of onshoring as yet another legal outsourcing option, LPO will be viewed as a flexible, effective strategy for delivering legal services to a global business community.

Outsourcing vs. Captive Operations – Which Model is the Best Fit For Your Business?

While feasibility of using offshore/nearshore resources for the delivery of certain activities or business processes has been already established, long term strategic feasibility and appropriateness of various engagement models are still under scrutiny.

The most common approaches nowadays are either working with a third-party outsourcing provider or establishing captive operations in lower cost locations. Engagement models can be differentiated based upon customer organization’s need for management control, costs of operation, risks and other factors.

Third-party Outsourcing

Third-party outsourcing is classic client-vendor relationship governed by contractual obligations and service level agreements. It is mostly driven by tactical reasons such as short-term cost savings and staffing flexibility. Non-core or non-critical activities are typical candidates for outsourcing.

Traditional third-party outsourcing comes in two main forms:

  • Project-based outsourcing is considered to be the most appropriate for development of software with well-defined requirements and deliverables. It is suitable for irregular but on-going or one-off projects. On-site presence may be required to facilitate estimating, specification and relationship management. Typical pricing models are Time and Materials (T&M) and Fixed Price.
  • Dedicated development center model caters for software with changing requirements, maintenance and support of large systems, research and development, testing as well as other types of complex ongoing medium- or long-term tasks. In this type of engagement vendor provides necessary facilities and allocates a team that works only on account’s projects and is managed by customer representative. This option is usually preferred when resource requirements are low. The customer is charged fixed monthly fee per full-time employee (FTE).

Captive Operations

When considering how to organize the remote delivery of software development services, captive subsidiary option often does not receive full consideration in comparison to outsourcing. While it is generally accepted to outsource certain non-crucial activities, in certain cases this approach is inappropriate for core functions and critical activities. Decision to take work offshore/nearshore doesn’t necessarily mean that you have to outsource it. Use of remote resources for the delivery of functions close to core business while retaining operational control and benefiting from real cost advantages can be achieved by means of setting up captive facility, thus keeping work within the company.

Captive model means that customer organization makes strategic decision to create its presence in the lower cost location and conduct work there as a part of its own operations. The activities are performed remotely, but they are not outsourced to the vendor. Thus the customer is able to retain full control and mitigate respective risks associated with intellectual property and other sensitive business information.

Organizations that want to establish captive centers have similar goals as those deploying traditional enterprise or shared services operations. In the first place captives are supposed to lower cost through labor arbitrage. But recent research shows that buyers are seeking not only cheaper but skilled labor at offshore/nearshore locations. They want to obtain competitive advantage and gains from process improvements. In order to avoid risks of underutilizing captive capacities, organizations must thoroughly assess their long-term operational requirements and predict service needs that may arise in the future.

The most common approaches to setting up captive operations are the following:

  • Creating captive center from scratch (do-it-yourself captive) can be successful when customer organization has necessary resources, local expertise and market knowledge. Decision to set up own captive center may evolve organically through growth. Organization can either perform extensive due diligence on its own or buy existing company with operations in the chosen location.
  • Build-Operate-Transfer (BOT) approach means partnering with third-party vendor to establish and stabilize center. Vendor is responsible for initial setup, staffing and operations of the captive center during the predefined period of time. At the end of the contract period the ownership is transferred to the customer. Thus organization takes over the turnkey captive center tailored to its specific needs. BOT option best suits organizations that do not have local expertise or extensive resources available. In this type of engagement only logistics associated with setup of the captive center is outsourced. Build-Operate-Transfer optimally combines control element of the pure captive model with flexibility of outsourcing. Essentially it provides maximum control at minimal risk.

Main benefits of having own captive center:

  • Ongoing realization of real cost savings
  • Full operational control and monitoring
  • Full ownership after the transfer
  • Minimization of intellectual property and data security risks
  • Retained knowledge of industry, specific business processes and techniques
  • Improved communications by continual reinforcement and experience
  • Easy replication of parent organization’s processes
  • Captive center can be commercialized at some point in the future

Both outsourcing and captive operations have similar driving forces (cost reductions and competitive pressures in the first place) and particular advantages, but main factors for choosing one or another vary.

Both approaches will deliver benefits in terms of improved focus, optimization of processes, reduction of operational costs, faster time-to-market etc. But companies must thoroughly evaluate each option to identify one that represents the best fit for their specific requirements, business culture and strategic goals.

The approach selected will depend on whether the primary driver is short-term cost savings or whether the company has long-term vision for offshoring/nearshoring and wishes to retain control over processes and intellectual property.

Establishing nearshore captive center in Ukraine through BOT model

If software development is a core competency of your company and you have long term specialized resource requirements, it makes sense to build your own capability in order to support the full software life-cycle, secure intellectual property and build up specific know-how. Nowadays this process is not as difficult as it used to be. The key to success is finding a trusted partner that already operates in the environment of country. By doing this you will benefit from:

  • Clearly defined setup methodology and timeline
  • Planned step-by-step implementation
  • Responsibility for all logistics associated with establishing a captive center
  • Practical knowledge of establishing IT business and dealing with related legal and contractual issues
  • Deep comprehension of cost and effort components associated with setting up and running a software development center in offshore/nearshore country
  • Hands-on experience in software engineering, generally recognized methodologies, processes and quality assurance that can be adapted to captive center
  • Established HR practices, experience in recruiting qualified IT staff
  • Attention to addressing security and business continuity issues
  • Consulting and support throughout the setup process
  • High level of business commitment and responsiveness
  • Flexible client-specific approach

7 Sure Fire Ways For Your Legal Marketing to Fail – The Essential Lawyers Marketing Guide

1. Failing To Define What You Want Your Marketing To Achieve For You

This is the number one pitfall of nearly all campaigns. You are guaranteed to fail if you don’t decide up front what you want your campaign to achieve for you. Without formulating your critical success factors for the marketing initiative you will never be able to measure success or failure, and if you cannot do that how will you know if your limited legal marketing budget has been well spent?

Practical tip: This is guaranteed to happen if you say yes to a speculative call from a newspaper which has some “last minute advertising space” but you must agree to advertise “today” or the firm of solicitors next door to you will be offered the slot. Let them have it and you can have the last laugh!

2. Trying To Please Everyone

Marketing obtains the best possible results when you have clearly defined your target audience and you speak to them in a language that they clearly understand. In business law, you might find that you work best with certain sectors of business, or in private law that families are your best audience. When you know this all of your marketing materials can be amended to reflect this knowledge and provide you with a much better return on your investment.

Practical tip: Review your current client lists for different legal sectors and see if there are any trends appearing.

3. Communicate Too Little Or Too Much

With solicitors it is always normally the first one which causes the problem. If you have a client database you must do what every hugely successful business does; that is to communicate with it and sell it more of your services. Look at Amazon or Tesco, they email their clients at least once a week, normally twice. I know that one of the concerns that lawyers have is that this will scare off their customers. This is simply not true. If customers do not want to read your emails or mailed marketing message, they will choose not to. It does not stop them using your service again but it will put your name front of mind when they need legal assistance.

Admittedly solicitors would find it hard to communicate with their clients once or twice a week, but once a month should be very easy.

Practical tip: It is 10 times easier to sell more services to existing clients than it is to recruit new ones. Start talking to your client database now before Tesco Law or Halifax Law does.

4. Not Making Use Of Your Free Marketing Space

When a client attends your premises they are a captive audience. What are you doing to communicate with them now?

Your clients should have a choice of marketing materials to read (see below), some educational information sheets about your various areas of law, and advertising messages in your office windows and on internal walls. Is this happening?

Practical Tip: Remove any materials that do not relate to your practice. Whilst it is good to support charities, do this from the extra profits your practice makes from selling more of your services to existing clients as opposed to displaying charity literature in reception (as a lot of solicitors do).

5. Not Having Brochures To Support Your Marketing Communications

Many solicitors seem to believe that brochures are now an expense that they can do without. This is a fatal mistake. Do Banks produce brochures for every service they offer? Do insurance companies produce brochures for their car and household insurance policies? Will they produce them for legal services when they enter the markets en masse? Yes of course they will.

If you are competing against an insurance company in the future and a client visits the insurance company’s amazing website and requests their brochure, when they then pop into their local solicitor to see how they can help them will they feel something is missing when no “sales materials” are provided to help them to make their “informed decision” of which legal service provider to use?

Practical Tip: If you do not have any brochures, obtain at least one practice brochure now and then add one more type of brochure per month until you have at least two types of brochure for every legal service that you offer.

6. Not Having A Website, Or Having One That Is Badly Out Of Date

Many solicitors still do not understand the power of the website. Please let me help you: If you are not receiving at least 20 new enquiries from your website every month you are doing it wrong! It is that straightforward, there are solicitors winning more business than they can handle online. If you are not doing so your website is not working.

Practical Tip: Ask a website professional to audit your website and explain why it is not working.

7. No Time To Market – Too Busy Helping Clients

This is the one area that is a huge problem for solicitors with their legal marketing. In most cases if there is a marketing deadline to be met and a legal matter deadline, the marketing will always fall by the wayside. The trouble with this is that marketing needs momentum to really flourish and provide you with outstanding results. You must commit to spend time growing your business as you do when working on the business you have already generated. Failure to do so could be fatal in a more competitive arena.

Practical Tip: Set aside at least one hour per week to ensure that your marketing builds momentum.