State of the Office Support Services Outsourcing Industry Today: One Man’s View

State of the Office Support Services Outsourcing Industry TodayOffice Support Services Outsourcing Industry

The office Support Services outsourcing industry has seen some consolidation in recent years with Ricoh acquiring IKON (which no longer exists as of Jan 2013) as well as Canon’s acquisition of Oce Business Solutions (also, no longer, as of January 2013). These unions have changed the landscape a bit in the office support outsourcing arena, as well as the equipment arena as clearly neither Ricoh nor Canon are equipment agnostic, like the companies they acquired were.

In recent years, on site office support services (Mail, Distribution, Document Production, Fax, Repro, Supplies, Conferencing, etc.) has become more price-driven and handled more like a commodity at law firms, unfortunately, in our view. This diminishes the reality that on site outsourcing services is still largely about people; human beings, and the management of them in providing the services and that career paths, training, benefits are important part of their offerings, same as if the staff worked for the firm.  There is also a cost to managing these resources and bringing expertise to the market place and customer by the outsourcing provider that has also sometimes fallen off the radar and is not accounted for, due to commoditizing of these services.

One key valid reason for onsite office support outsourcing services are  becoming more commoditized and price-driven is the continuing diminishing of transactional activities handled by most law firm mailrooms, distribution, fax and reprographic areas.

Volumes in these service areas have diminished by as much as 80% in the past 5 years (fax, copy) and the perception to many Firms is it simply isn’t economically feasible to continue to pay a premium for high level services in these areas, which are becoming less and less critical to the Firm, in particular as distribution means, with fax and interoffice mail volumes all but disappearing. Other areas like conferencing, litigation support services (paper based primarily) have seen increases i services needs, in contrast.

In addition, most documents are now digitized with legal staff doing far more scanning and document conversion work themselves at decentralized copier/MFDs than in central copy/repro centers, where volumes have been greatly reduced. However, this has opened the door for former Copy/Repro shops to now operate like digital document management services departments, offering a wider breadth of more specialized and higher caliber offerings (that require higher caliber trained staff as well).

In the domestic onsite office support services outsourcing space there are perhaps 10 or so major national players, along with some regional players in the Northeast.  They are;

Merrill Corporation: a company that specializes in legal office support outsourcing services, with 98% of their clients legal. Merrill is a solid company that invests in its employees through training programs and offers solid employee benefits. However, recently, that has put them in the cross-hairs of some of their clients, particularly the larger national or multinational law firm clients of theirs where Merrill’s often premium pricing (compared to some other players in the market place) has been subjected to pricing pressure.

In particular this has happened with Merrill law firm clients who retain consulting firms like Profit Recovery Partners (PRP), who treat outsourcing primarily as a purely price driven commodity–forcing Merrill to lower their margins and reorganize the client contracts downwards.  This trend is saving law firms money, but potentially jeopardizing their vendor/client relationships and has led to unattainable service levels and SLAs for the money in the contract.  True process reviews and or process re-engineering are rarely in the scope of these evaluations–how things can be done more efficiently with less people, vs. simply reducing the costs of those people of headcount overall based on a ration of staff to support benchmark. Of course, the customer and the vendor are left to manage the relationship long after the consulting firm is gone (and the consulting firm does not participate in change management, leaving that to the customer and vendor).

Merrill recently lost one of their largest customers, Bingham, to competitor DTI, when PRP was brought in to drastically cut the outsourcing services costs and Merrill eventually lost the business to DTI in a closed bid scenario. Essentially, according to Merrill, DTI absorbed most/all surviving Merrill staff members but at lower wages and benefit costs to achieve PRP and Bingham’s cost reduction objectives.

DTI has been growing, and indeed added Bingham and others recently to the fold. DTI has an outstanding track record in never losing a customer and like Merrill, most of their customers are law firms. DTI has been rumored to be up for sale for some time, something DTI fiercely denies, with several larger suitors like Williams Lea or Swiss Post the likely buyers.

DTI was perhaps the first outsourcing provider that really honed the onsite/off site it support services offering in the industry, having started out as an offsite lit shop in Atlanta some 14 years ago. DTI has made numerous acquisitions that have strengthened their position as a leader in eDiscovery and Lit Support Services. They provide onsite lit support services for many of their customers and generally do it well.

Pitney Bowes Management Solutions (now Novitex) continues along. PBMS formed a Legal Solutions Division some years back to solidify their on/off site lit support offerings and legal outsourcing services in general, but has never really made this a successful strategic offering to the extent they anticipated. PBMS too acquired a coding house and other eDiscovery companies to compete in the space. Pitney does run numerous successful on site lit shops for large law firms such as Foley Hoag in Boston and Snell Wilmer in Phoenix.

IKON/Ricoh, is now Ricoh, with the IKON brand all but gone, other than some of the IKON software products used in scanning and eDiscovery. Ricoh has taken over IKON’s former Management Services brand, appearing to be more polished and corporate in their approach. But partnering with Ricoh, likely leads down a path of only using their equipment. How the two cultures, IKON and Ricoh, will assimilate is now largely done. IKON/Ricoh has never been strong in legal, especially in the Northeast, though they have made some recent inroads like Fried Frank in the northeast.

Oce/Canon is now Canon USA, with the OCE brand finally discontinued in January 2013 officially. The cultures appear somewhat in contrast. Many of the OCE people have been with that company many years, even in the days it was still Archer Management Services before the Oce acquisition. It is expected that there may be turnover and people leaving once the Canon management team takes on more of a prominent role, though the former Oce President will lead the new combined division. Oce has done well in recent years, winning Weil Gotshal’s mail services and it will be interesting to see how the Canon take over impacts going forward.

Williams Lea continues to target large banking customers and some large law firms (although they lost Dewey LeBeouf in 2012). As a UK-based company, they had some challenges coming into the US market but that appears settled. Still a very viable player in legal outsourcing, though they tend to target large, national/international law firms only,  who also has made investments in eDiscovery companies and has diversified into IT outsourcing.

Swiss Post Solutions is one of the stronger outsourcing providers in terms of their financial strength (thanks to the backing of Swiss Post, one of the more profitable national postal services) who have been making inroads in legal and strengthening their overall market share. They offer diversified outsourcing solutions but are not quite as strong as some of the others in lit support and eDiscovery offerings, though getting stronger.

FSO, which bears Mitch Weiner’s moniker, has experienced tremendous growth thanks to the Chief Happiness Officer’s persistence and marketing and innovative approach. While they have added some recent law firms, it is still not their strong suit nor is providing lit support services or eDiscovery to the extent of some of the other players. They recently were awarded the Price Waterhouse Coopers national outsourcing contract which has FSO poised for a national thrust.

IST Management Services has recently made a push at being a national player with over a dozen offices now open throughout the country though legal is not their strength.

There are a few other largely regional players additionally such as MCS Management Solutions (based in Philadelphia) and the Millennium Group who now has a national presence and has typically targeted smaller mid-size markets and has done well there.

Most of the above players, especially DTI, Merrill, Novitex and Williams Lea offer an onsite/off site strategy for providing end to end litigation support services, for both paper and electronic discovery. However, in evaluating whether this program can be effective at your firm, there are several key discussion points:

1) There must be sufficient, detailed data on litigation support services and eDiscovery spend (both on and off site) so that a) the frequency, b) the volume, c) the nature of the work and d) the expected turnaround times can all be analyzed to determine what percentage of the work could be done on site, and what percentage off site by the outsourcing provider’s own off site lit shop. Even with this data, there is no guarantee that an onsite/off site program can be determined that can handle 100 % of the lit support work or eDiscovery going off site. The data is typically individual invoices that detail specific work.

The Firm and the vendor would come up with a profit/loss budget to determine a) how much lit support work could be done on site b) what the transaction/setup fees would be to the vendor c) savings to the customer vs. sending off site d) cost recovery rules (very often it is easier to get a standalone off site lit support invoice paid and rebilled to the customer than it is to present that same customer with an internal invoice/bill for those same services, even at a lower tariff, because clients tend to question external invoices less than internal ones). Don’t forget that in many cases, a key but often overlooked cost block in performing lit support services is not just the transactional costs such as blowbacks, coding, scanning, etc., but the setup or project management hours involved. Plan to include this in your pricing tariff.

2) In general, the rule of thumb at most major law firms re: lit support work has always been to give the onsite outsourcing provider all the paper-based lit support work but the electronic discovery work, which is more diversified and is typically fulfilled by a multitude of specialty vendors, is usually vended to each paralegal or lit support team member’s preferred vendor. Generally speaking it has neither been viewed as desirable nor effective to try to go the one-stop shopping direction on electronic discovery work due to the specialization of the work, even though this is what every office support services outsourcing provider craves—a chance at all your business.

3) One stumbling block at many law firms has always been the law firm’s reluctance to give all the lit support work to the onsite outsourcing provider or to any one vendor in general. Because the nature of this work is such that any mistake can be tantamount to a disaster, it remains difficult procedurally or by policy to enforce that all lit support personnel at a law firm must use only the onsite outsourcing provider as the single source for most/all lit support work.

Getting the buy-in from the lit support specialists at the Firm, plus litigation partners, associates and paralegals across the board to use predominant providers is challenging. Often, lit support vendors will be used until they make a mistake, then another vendor will be used on the next similar job to avoid a repeat.

4) When considering an on/off site lit support solution with your incumbent outsourcing provider, make sure your service provider has the ability to prepare an invoice and capture chargeback on all the on and off site lit support work so that it can be billed to the client in a format they won’t question, and can be integrated within the Firm’s client chargeback mechanism (usually at a profit as the Firm can typically negotiate far more aggressive rates to your onsite vendor, for on and off site lit support work than the street charges. It becomes a profile center).

 

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