Outsourcing legal work is simply hiring an outside lawyer or law firm to provide legal services previously performed by in-house counsel. Legal outsourcing consist of a wide range of options — from rendering a law firm for specific projects, to transferring all of legal work to outside lawyers or law firm.
Outsourcing should begin with identifying the company’s needs for legal services and determining whether that work can be performed more efficiently and effectively inside or outside the company. The following is what should not be overlooked:
a) determine the legal needs of the company;
b) determine the company’s ability to handle the legal work internally;
c) estimate costs and benefits of outsourcing the legal work; and
d) select appropriate outside counsel or other specialized service providers to perform the work.
a) First, outsourcing legal work often increases the overall quality of the services provided. Legal outsourcing allows corporate legal departments to have access to individuals with specialized skills and expertise which are probably too expensive and difficult to attract and retain as employees.
b) Second, outsourcing brings about cost savings as outside firms can perform many services more efficiently in terms of economies of scale. For instance, it help reduces or eliminates the internal cost of paying hired employees when the legal work load fluctuates.
c) Third, legal outsourcing also can result in the containment and predictability of costs for corporate legal departments. Outside counsels are frequently required to provide detailed budgets for the matters they handle, including increased use of alternative, transaction-based fee structures, has improved in-house counsel’s ability to forecast legal expenditures and better match costs with actual demand.
d) Finally, outsourcing simplifies managerial function by allowing a company’s management to focus on core business activities without having to supervise daily performance of the outsourced work.
Risks and pitfalls
Legal outsourcing is not perfect for all problems. In some situations, outsourcing can carry with it potential risks that may cause troubles. Risks of outsourcing include the following:
a) outside firms may focus on the short-term goals of the outsourced matter only, instead of the long-term strategic goals of the business;
b) cost reduction may reduce quality of outsourced legal work; and
c) outsourcing may result in job losses of law department employees.
Legal Outsourcing strategy
There are few specialized outsourcings approaches used widely, including:
a) diversifying sources of outside law firms by rendering different law firms for different types of legal works;
b) accepting secondment of an outside lawyer to the in-house legal staff;
c) using temporary or contract lawyers; and
d) outsourcing components of the electronic discovery process handled by legal tech provider.
It is crucial to consider the company’s overall strategic business plan, including current and anticipated usage of legal services in choosing the various approaches to outsourcing legal work. Each of legal outsourcing strategy has strengths and weaknesses. Whatever approach to outsourcing legal work is employed, the ultimate goals are to design and implement a strategic relationship pursuant to which both in-house and outside counsel have invented built-in and measurable incentives to reduce legal risks while assuring professionalism, quality, economy and predictability.
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