Monday, February 18, 2008

Outsourcing lawyers claim to create efficient business, neglect to mention gigantic legal bills for corporate customers

Well, using a legal service is never cheap in a monopoly so one shouldn't complain. The answer of course is to open up the legal services market,and definitely not rely on lawyers to outsource your ideas and staff ... for you many never know what you are getting in some cases - as record numbers of corporate spies trade info back to base ...

The Scotsman reports - but we wouldn't call JV for any fresh ideas ... :

Who are you going to call for fresh ideas?


IT IS the sort of business buzzword that has a tendency to get trade union reps hot under the collar. But, according to Dundas & Wilson, "outsourcing" is not a euphemism for cutting jobs or switching to cheaper foreign call centres.

The lawyers behind some of Scotland's biggest outsourcing deals say they have helped clients to create more efficient businesses – and that contracting out to external service providers can even be good for the staff involved.

Building on work with clients such as RBS, National Australia Group and Standard Life, D&W has just launched a dedicated outsourcing team of 40 lawyers. Co-ordinated by partner Laurence Ward, the team will aim to cover all aspects of outsourcing, with 13 partners pooling expertise on issues such as competition, employment, financial services, IT, telecoms, pensions and tax.

Ward, whose background is in corporate law and IT/IP, has been working on outsourcing deals since clients began to look at hiving off their back-office functions such as computer helpdesks in the early 1990s. While the concept and practice have been around for a long time, Ward says for many clients, outsourcing remains a "sensitive" term because of employees' fears about losing jobs to offshore providers. Yet sometimes moving to another company can make sense, he says.

"Often it does work better, because jobs are going from a back-office function to somebody else's front-office function," he explains. "If you are an IT professional, for example, working for a law firm or a bank, you are in a back office. But if you go and work for IBM or Accenture, that's what they do and there's more opportunities for you, so it's not always a bad thing."

If the early days of outsourcing involved transferring staff, often in the face of bitter opposition from unions, the focus is now on renegotiating deals and switching suppliers, says Wendy Colquhoun, one of the team's partners who specialises in financial services: "You can only, in its pure sense, outsource once, the first time you put the activity out. What we are now seeing is a lot of these first-generation deals, from when outsourcing first started becoming fashionable, coming to an end and being renegotiated and moving on to the second-generation deal. There aren't people moving again from your original operation, so there are fewer people-consequences now, and it's more about strategic sourcing and various service arrangements."

Ward says the team has built considerable experience from working with the financial services sector, advising Standard Life, RBS, Artemis, Martin Currie and Scottish Friendly on the outsourcing of regulated back-office functions.

"We were focusing initially on the financial services sector, which is where our core commercial business has been for many years," he says. "At that time, it was the early days and they were outsourcing back-office functions such as helpdesks. As the market for this has developed, the evidence is that not all outsourcing is successful – far from it. But, generally speaking, it has been, and it has developed from back-office functions to business functions.

"We're not just looking at a helpdesk or IT support but doing what the business does, selling products or business functions. Almost anything can be outsourced – there is nothing that isn't up for consideration."

The amount of work surrounding outsourcing in the public sector has been one of the motivating factors for D&W to create a dedicated team. The firm has advised councils including Glasgow and Stirling on outsourcing, including facilities and shared services management. It's not all about saving money, says Ward: "People tend to think that outsourcing is about reducing costs, but the public sector are doing it to get efficiencies and to fund things that they might not otherwise be able to do."

As a general rule, clients from both private and public sectors have similar reasons for outsourcing, he adds: "One is they don't have the resource to do it themselves so, for affordable cost, they can piggyback on the investment other people have made and buy a service. Some of the things they need, they don't need all the time, but they need that expertise occasionally."

Cost and efficiency do not tend to be the sticking points during negotiations, he says. Clients are more concerned about risk-management issues and where the buck will stop if something goes wrong.

"When you are negotiating these deals, it is surprising how risk is the thing people focus on most, because the customer is trying to lay off risk on somebody else and manage risk better," says Ward. "The supplier isn't wanting to take an awful lot of risk. So a lot of the negotiation is about, where does the risk ultimately lie in providing this function?"

It is areas like this that underline the importance of getting the right advice and right deal at the outset, he says: "It pays to have experienced advisers who know how to structure and negotiate to minimise legal risks and get a deal which is capable of standing the test of time. If a business is ill-prepared going into an outsourcing contract or on its renegotiation, the exercise can become massively inefficient and time-consuming and difficult to exit."

Outsourcing deals also place heavy demands on legal firms, and as one of Scotland's "big four", D&W is one of the few north of the Border that can cope with them, says Ward.

"They are very complex transactions, and one of the reasons why we have pulled all this together is you need so many different skills to do it well. I have just been looking at one transaction and we had 60 lawyers working on it at one time or another."

Ward says, though, that if D&W wants to compete with the London-based firms specialising in outsourcing, they will need to grow further: "There are firms in England who have 150 lawyers, with 40 partners doing that. If you want access to the type of work they are getting, you have to have that number. But people are very surprised at the credentials we've got.

"They really match whatever anyone is doing, other than major multinational outsourcings that really only the very biggest firms would do."

1 comment:

Martin said...

"Well, using a legal service is never cheap in a monopoly so one shouldn't complain."

Why should it be cheap? Nobody has ever been able to properly excplain to me just why going to law should be cheap. I spent too long at university for my time to be artificially discounted.

"The answer of course is to open up the legal services market"

This is the core of the whole ABS mania.

Legal services are not a true market. Economists assume that in a true market of willing buyers and willing sellers, the goods or srvices being marketed are identical. In legal services, they are not. As we both know there are good lawyers, bad lawyers, diligent lawyers, lazy lawyers, lawyers you would trust with your life and lawyers you wouldn't trust to buy a pint of milk - so no two lawyers are ever going to find the same solution to the same problem; and commoditising the whole profession so that people can pay less is never going to solve that dilemma.

I am not an economist, but I know more about economics than most lawyers. When LSS got rid of the table of fees, it was assumed fees would fall in the face of greater price consumption - but they did not. They rose instead, to their true level.

Why? Because the table acted as a price control. In 1992, the Russians abolished price controls, and prices soared overnight. The abolition of the table of fees had precisely the same effect; and LSS managed to re-invent Gaidarism for the benefit of the Scottish public.

Now ABS is coming along, presumably in the hope that it will act as a form of price control by any other name. We'll see.