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The evolution of legal IT has followed a path sim-ilar to that of law firms themselves — both areincreasingly adopting the business practices ofmature companies. The implications to legal IT areimportant.

Growing customer sophistication is a sign of thismaturity. The increasing exposure of issues likeelectronic records management, cross-office clientteams and profitability measurements are pushinglaw firms to consider more complex solutions likeidentity management, Chinese walls-by-default,matter-oriented storage and business intelligencesystems. Mobility, enterprise searches, client rela-tionship programmes and other projects meant toget useful information into the hands of lawyersrequire IT to be adaptable and executive minded.Ironically, lawyers want simple IT that deliversagainst highly complex requirements.

Supplier consolidation and technology maturityare also symptoms of legal IT’s stage of develop-ment. For example, legal document and recordsmanagement suppliers have been acquired by cor-porate ‘enterprise content’ suppliers. Some of thelegal financial system suppliers have also beenacquired by companies with broader ambitions.The corporate financial, HR, client relationshipmanagement and portal providers are now com-peting with the legal specialty systems. These hori-zontally-broad suppliers realise they increase theirprofits by leveraging the 80/20 rule, in which onesolution fits as many industries as possible.

As a result, IT processes and systems in law firmshave become increasingly similar to that of otherindustries. This is also evident in leaders themselves— many law firm IT and financial directors werehired for their broad company experience ratherthan their knowledge of law firms. Some fear thisapparent commoditisation of legal IT diminishesits value. However, lessons from other industriesreflect that this is a time when technology can havethe highest impact on the business. The focus shiftsfrom what you are providing to how you providevalue for the investment — how cost-efficientlyyou can provide IT services and how well you canapply IT to the shifting and often imprecisely-defined business needs.

At a recent conference, managing partnersagreed by including the leveraging of technologyamong their top issues in leading firms — otherissues included increasing efficiency withoutlosing key assets, multi-office planning, the effects

Is outsourcing the way ahead for law firms? Dave Cunningham discusses how to evaluate the proposals

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of a consolidating market, alliances, under-standing outsourcing of legal or back office ser-vices and other challenges that also affecttechnology.

The diminishing uniqueness of some aspects oflegal IT combined with the growing complexity ofIT requirements mean that law firms will considerexternal service providers to help the IT departmentbe as effective and focused as possible.

Law firm IT and outsourcingLaw firms rely on vendors for many services today,but just a few firms have prepared to makechanges in favour of long-term vendor services.Understanding the approach, terms and bench-marks related to outsourcing allows IT to makeinformed decisions, reflect its own value and evendefend itself against outsourcing pressures ifappropriate.

The potential values of outsourcing are welldocumented. Few law firms have the scale to war-rant the specialist skills, training and investmentin methodologies that an outsourcer can provide.

Outsourcers provide top end tools for monitoring,managing and changing networks from remotelocations without capital investments by the firm.Outsourcers can host systems in shared Tier 3facilities and charge for their actual use dynami-cally. In about half the cases, companies reportthey save money by moving to an outsourcedarrangement.

In other cases, firms are willing to pay a pre-mium for the mitigation of risk, service guaran-tees and known payment schedules the vendorprovides. Even in these cases, most outsourcerswill smooth payments so the initial outsourcedcosts are lower than current costs and providepayments for assets it acquires from the firm.Unsurprisingly, suppliers have taken the cue andare positioning themselves to provide outsourcingservices for legal IT.

Despite these positive concepts, many peoplefeel the reality of outsourcing is not so rosy. ITconcerns include the risk of a big change to anoutsourcer, the actual level of service for thequoted costs and the effect on IT staff. Out-sourcers are seeing that fewer firms are movingdirectly to a significant contract with a new sup-plier because of the first two concerns. In thesecases, a company uses the selected supplier on

smaller scale work and increases their trust andcompatibility with them over time. These try-before-you-buy-longer-term situations help toensure common expectations post-contract, buttheir shorter term and more limited scope lowersthe potential benefits.

IT staff can be affected by outsourcing in manyways. Despite popular corporate headlines, lawfirms will not be sending significant IT work toIndia. It would be most common for outsourcers toprovide a service in addition to the firm’s IT staff,take responsibility for training and managing ITstaff or take on IT staff as their own, in that order.When IT staff do transfer from a company to anoutsourcer, they often continue to work at the samelocation, at the same pay but with additionalproduct-specific or procedural training.

Evaluation of outsourcingYou can start evaluating outsourcing by workingthrough some basic analysis:1. Objectively evaluate IT’s strengths in thecontext of its changing responsibilities:Most law firm IT departments are being stretchedinto new areas — business needs analysis, execu-

tive communications, lawyer working practices,merger integration and real-time disaster prepared-ness, for example.

It is likely that the strengths and priorities of thedepartment have changed while the expertise ofthe department is still adapting. It is not unusualfor more than 80% of IT’s responsibilities to befocused on maintaining core systems —installing, supporting, upgrading and rolling outversions of hardware and software. For some firms,these are its areas of greatest value since it has thebest knowledge of how the systems are used in-house. In other situations, the day-to-day work ofmaintaining systems slows the pace of importantnew projects. 2. Perform an outsourcing assessmenteven if you do not plan to outsource:Most outsourcing suppliers use a combination ofITIL, ISO and their own practices to establishprocesses for supporting IT. You do not necessarilyneed to learn each of these areas of IT quality stan-dards, but addressing a few key questions will helpidentify gaps:● How do I define, measure and monitor servicelevels?● Where do I have risks that are not cost or time-effective to resolve (lack of appropriate disaster

recovery and no back-up for key skills arecommon)?● Where am I about to make large capital pur-chases where a vendor might provide services on anas-needed basis for greater value (storage manage-ment, proactive network management and newdata centres are big budget items where vendorsalready have excess capacity)?● What IT activities constrain the pace of my keyprojects? ● Am I able to provide services equally to alloffices?● Where are procedures too ad hoc, but too time-consuming to create in-house?● Where do I have trouble attracting the rightskills and providing the right training?● Do IT areas require so much time and effort thatother high priority IT work is delayed or ignored? ● Are my best IT staff frustrated due to a lack ofprogress or resources?

These questions are really about effectiveness notjust outsourcing, but they help to focus on the optionof third party services. These questions are relevantfor all IT staff to ask, not just IT management.3. Gain experience with an outsourcingapproach: At the Society for Computer & Law’sAdvanced Outsourcing Symposium, the IT lawyers’advice was to never let a supplier dictate a servicelevel agreement. This means that you should notexpect a supplier to sort out poor processes undercontract and that you should be familiar withdefining the scope and terms of SLAs.

While IT lawyers have a solid understanding ofrelevant law, many do not have much experiencewith technology itself, so IT should be prepared toplay a qualified role in contracting with vendors. Ifyou do not expect to outsource for the next fewyears, it would be most beneficial to begin usingSLAs internally, to understand outsourcing termsand approaches and to be familiar with the types ofservices provided by third parties.

As the pressure to consider outsourcing willlikely increase, you can be prepared to evaluate itintelligently. A side effect could be that your duediligence allows you to be more prepared to avoidthe need for outsourcing in the future.

In the US, we have been asked to be an inde-pendent facilitator of the new Legal IT Out-sourcing Panel. This panel is a set of law firmleaders working together, not to promote out-sourcing, but to understand the implications,opportunities and benchmarks outsourcing pre-sents to IT and executive management. While notfocused on European-based firms yet, this panelshould help to highlight valuable information forany firm making decisions.

Evaluating outsourcing is a natural evolution ofthe business nature of IT. Avoiding the considera-tion altogether will risk not understanding poten-tial practices or solutions, whether or not youdetermine outsourcing is right for you. Dave Cunningham is a consultant at BakerRobbins & Company.

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While IT lawyers have a solid understanding of relevant law, many do nothave much experience with technology itself, so IT should be prepared toplay a qualified role in contracting with vendors. If you do not expect tooutsource for the next few years, it would be most beneficial to beginusing SLAs internally, to understand outsourcing terms and approachesand to be familiar with the types of services provided by third parties

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