Legal Business Process Outsourcing Industry Direction Continues to be Dominated by Price-Driven RFP Processes
Law Firm Business Process Outsourcing services sourcing projects, typically Requests for Proposals often run by industry consultants have recently become price-intensive. This is especially true in the AM LAW top 100 firms where many services areas are under price scrutiny.
Law firms are also feeling the pinch of the conversion of their traditional time and materials-based business and billing structure towards more fixed, predictable-priced models. The advent of Legal Project Management, which enables law firms to fix a price or not to exceed for relatively redundant, predictable matters and legal processes continues to get sea legs. Law Firm clients have been pushing for years to get their law firms to move away from time and materials-based billings in favor or fixed cost models.Legal Project Management is in direct response to that.
In fact, law firm clients now use this modeling to create RFPs for matters that they may even bid out to multiple law firms. Further, Legal Process Outsourcing, where non core legal functions like eDiscovery and document review are largely outsourced to cheaper on or off shore options is also gathering steam at law firms in order to remain cost competitive.
This commoditizaion or heavily cost-drive focus of some legal matters and practices is akin to the same approach taken on Business Process Outsourcing. While being cost-reduction conscious to remain competitive is of course a necessity in today’s world, for on-shore Business Process Outsourcing companies, the intense price focus they claim is severely hurting the industry. Business Process outsourcers–many of whom have significant overhead structures needed to support their clients, often overlooked by RFPs that only focus on the dedicated on site staff–are finding it difficult to remain afloat in the traditional “bodies and boxes” (staff plus office equipment) model.
Consultants managing RFPs for the services for law firms who fixate on the on site staffing costs only, comparing them in competitive bidding scenarios to other vendors who’s wages and benefits are suspect, skew the results. Further, Business Process Outsourcers bake other overhead costs in their on site staffing costs such as for technology resources, industry expertise, research, new product/services development and yes benefits, training, career path that are differentiators in their business offerings. In a business where you truly get what you pay for, law firms are often stuck with new supplier relationships that are less than optimal, unrealistic service levels for the price point paid, higher turnover due to staff with less competitive wages and benefits and a reduction in the traditional value-added provisions outsourcing providers should be introducing.
There are outsourcing providers that will accept lower margins and profitability to get a toe hold in the door, hoping to leverage their expertise in other areas to compensate with other billings at their client engagements, with no guarantees.