LEGAL OUTSOURCING - Advantages & Benefits

Advantages of Legal Outsourcing, Benefits of Legal Outsourcing, Reasons for Legal Outsourcing

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Advantages of Legal Outsourcing

Reduce & Save Operating Costs
Quantifiable costs
Improve company focus
Freeing capital
Handle functions that are difficult to manage or are out of control.
Accelerate Growth & re-engineering
Get Latest technology and expertise
Gain access to resources that are not available internally.
Give Competitive edge
Gain access to world class capabilities
Free internal resources for other purposes
Share risks.

Other Reasons for Outsourcing

Reason #10: Function Difficult to Manage or Out of Control

Outsourcing is certainly one option for addressing these types of problems. Outsourcing does not, however, mean abdication of management responsibility nor does it work well as a knee-jerk reaction by companies in trouble.

For example, in the Institute's 1995 Trends Report, 'better operating controls' rated no higher than 4.9 on a scale of one to ten as a reason for outsourcing. Companies that did rate 'better control' as an important reason for outsourcing were more likely to be dissatisfied with the results. Why?

The reality is that when a function is viewed as 'difficult to manage' or 'out of control' the organization needs to examine the underlying causes. If, for example, the reason is that the requirements, expectations, or needed resources are not clearly understood, then outsourcing won't improve the situation -- it may, in fact, exacerbate it.

If the real problem is that the organization doesn't understand its requirements then it certainly won't be able to communicate them to an outside provider either.

Reason #9: Resources Not Available Internally

Companies outsource because they do not have access to the required resources within the company. For example, if an organization is expanding its operations, especially into a new geography, outsourcing is a viable and important alternative to building the needed capability from the ground up.

Or, perhaps a major reorganization has divested the company of the resource, or a subsidiary was spun-off but a needed functional area such as logistics or computer data center remained with the parent company.

In these types of situations, where the required resources would otherwise need to be built from scratch, outsourcing becomes a viable and attractive alternative. Similarly, rapid growth or expansion of operations is a strong indicator that outsourcing may be right for a company.

Reason #8: Reduce and Control Operating Costs

The single most important tactical reason for outsourcing is to reduce and control operating costs.

Access to the outside provider's lower cost structure, which may be the result of a greater economy of scale or some other advantage based on specialization, is clearly and simply one of the most compelling tactical reasons for outsourcing.

Additionally, companies that try to do everything themselves may incur vastly higher research, development, marketing and deployment expenses -- expenses that have to be passed onto the ultimate customer. Today's customers are too sophisticated to accept the costs associated with an organization's attempt to maintain singular control over all its resources.

Reason #7: Cash Infusion

Outsourcing often involves the transfer of assets from the customer to the provider. Equipment, facilities, vehicles, and licenses used in the current operations all have a value and are, in fact, sold to the vendor.

The vendor then uses these assets to provide services back to the client and, frequently, to other clients. Depending on the value of the assets involved, this sale may result in a significant cash payment to the customer.

There is one subtlety of this transaction which needs to be pointed out, however. When these assets are sold to the vendor they are typically sold at book value. The book value can be higher than the market value. In these cases, the difference between the two actually represents a loan from the vendor to the client which is repaid in the price of the services over the life of the contract That is, part of the cash is income from the sale of the assets and part is a loan to be repaid.

Reason #6: Make Capital Funds Available

Outsourcing is a way to reduce the need to invest capital funds in non-core business functions. Instead of acquiring the resources through capital expenditures, they are contracted for on an 'as used,' operational expense basis.

Outsourcing makes capital funds more available for core areas. It can also improve certain financial measurements of the firm by eliminating the need to show return on equity from capital investments in non-core areas.

There is tremendous competition within most organizations for capital funds. Deciding where to invest these funds is probably one of the most important decisions that an organization's senior management is called upon to make.

For example, when a firms outsources its fleet vehicles, buildings, or computers these areas no longer compete for the company's capital. Often, these types of investments have been difficult to justify when compared to areas more directly related to producing product or serving the customer.

Reason #5: Free Resources for Other Purposes

Every organization has limits on the resources available to it. The constant challenge is to ensure that its limited resources are expended in the most valuable areas.

Outsourcing permits an organization to redirect its resources from non-core activities toward activities which have the greater return in serving the customer.

Most often, the resources redirected through outsourcing are people resources. By outsourcing non-core functions, the organization can redirect these people, or at least the staff slots they represent, onto greater value-adding activities. People whose energies are currently focused internally can now be focused externally -- on the customer.

Reason #4: Share Risks

There are tremendous risks associated with the investments an organization makes. When companies outsource they become more flexible, more dynamic, and better able to change themselves to meet the changing opportunities.

Markets, competition, government regulations, financial conditions, and technologies all change extremely quickly.

Keeping up with these changes, especially where each next generation requires a significant investment of resources and dollars, is very difficult and 'bet your company' types of investments are all too common.

Outsourcing is a vehicle for sharing these risks across many companies. Outsourcing providers make investments not on behalf of just one company, but on behalf of their many clients. By sharing these investments, the risks born by any single company are significantly reduced.

The result is that when companies outsource they become more flexible, more dynamic, and better able to change themselves to meet the changing opportunities.

Outsourcing is, in effect, the management tool for becoming what is popularly called the 'modular company,' the 'virtual corporation,' or the 'agile competitor.'

Reason #3: Accelerate Reengineering Benefits

Outsourcing is often a byproduct of another powerful management tool -- business process reengineering. It allows an organization to immediately realize the anticipated benefits of reengineering by having an outside organization -- one that is already reengineered to world-class standards -- take over the process.

Reengineering is the fundamental rethinking of business processes, with the aim of seeing dramatic improvements in critical measures of performance, such as, cost, quality, service, and speed. But how are the benefits of reengineering to be realized? And when?

Outsourcing allows an organization to immediately realize the anticipated benefits of reengineering by having an outside organization -- one that is already reengineered to world-class standards -- take over the process. There can be a lot of executive time invested in taking an internal function to world-class standards. More and more frequently, organizations are deciding to outsource the function to an organization that can immediately guarantee the improvements offered by reengineering and assume the risks.

Outsourcing becomes a way to realize the benefits of reengineering today as opposed to tomorrow.

Reason #2: Access to World-Class Capabilities

By the very nature of their specialization, outsourcing providers can bring extensive world-wide, world-class capabilities to meeting the needs of their customers. Just as their clients are outsourcing to improve their focus, these vendors have honed their skills at providing the services in which they specialize.

Often these vendor capabilities are the results of extensive investments in technology, methodologies, and people -- investments made over a considerable period of time. In many cases, the vendor's capabilities include specialized industry expertise gained through working with many clients facing similar challenges. This expertise may be translated in skills, processes, or technologies uniquely capable of meeting these needs.

Partnering with a world-class provider can offer the following advantages:

Access to new technology, tools, and techniques that the organization may not currently possess;
Avoidance of the cost of chasing technology and the training costs associated with each new generation;
Better career opportunities for personnel who transition to the outsourcing provider;
Enable the client's staff to concentrate on building new and improved capabilities that meet business requirements rather than managing current operations;
Outsourcing providers typically have more structured methodologies, procedures, and documentation -- as well as larger, more experienced staff -- this can result in fewer operational problems;
Competitive advantage through expanded skills;
A better price/value mix on investments;
The provider's primary business is delivering world-class support to clients and partners. These companies have a track record of proven experience and leadership in the application of their specialty to business processes;
Access to better tools for estimating the costs of new solutions;
Access to industry knowledge and expertise the provider has gained from other clients/partners;
On-site staff to support the client's needs.

Reason #1: Improve Company Focus

Outsourcing lets the company focus on broader business issues while having operational details assumed by an outside expert. Outsourcing is an organization-shaping management tool which can lead to a clearer more effective focus on meeting the customers' needs. For many companies, the single most compelling reason for outsourcing is that several of the 'how' type of issues are siphoning off huge amounts of management's time and attention. Too often, the resolution of these issues are stuck in middle management 'decision gridlock.' This creates financial and opportunity costs that affect the organization's future.

Outsourcing can enable an organization to accelerate its growth and success through expanded investment in the areas which offer it the greatest competitive advantage.

LEGAL OUTSOURCING AREAS

Legal Support to attorneys and corporations is available in all areas of law and all paralegal areas including but not limited to the following areas: