The compelling case for insourcing

Baker & McKenzie’s Global Services Manila (GSM) ‘insourcing’ operation accounts for five per cent of the firm’s global employees – a proportion that is only set to grow.

By Chris Pierce-Cooke, Paul Malliate and Martin Telfer, Baker & McKenzie

If this magazine were to ask managing partners at law firms worldwide what keeps them up at night, two particular issues would probably rise to the top of the list – maximising profitability and enhancing client service.

These twin pressures exist in virtually all firms, regardless of their size, scope or average profits per partner.

The pressures can even seem to be in conflict at times, as profitability depends partly on cost containment, while service enhancement often requires hefty investment in systems, processes, talent and training.

Nevertheless, that reality hasn’t deterred law firms from following the lead of their corporate clients, who have developed a range of operating practices to maximise profits, improve service and more. Outsourcing and offshoring are two related and recent operating practices that have migrated from the corporate to legal environments.

Corporate clients jumped on the outsourcing and offshoring bandwagons more than a decade ago. Today, large portions of their manufacturing, assembly, customer service and administrative work are done by third-party vendors (outsourcing), some of which may be based in a dozen time zones and several continents away from corporate headquarters (offshoring).

Law firms are finding they must adapt these practices to the unique characteristics of the legal business, where client confidentiality, privilege, partner performance and round-the-clock work, are just some of the special factors to be considered.

Limits

Outsourcing has assumed strongly negative connotations in certain circles. To some, outsourcing today means low-cost labour, performing low-value work in substandard or even exploitative conditions. When combined with offshoring, outsourcing – at least in the minds of some in America and other developed economies – has led to rising unemployment and other economic and social ills. Outsourcing and offshoring have become symbols of globalisation’s adverse side effects, and so both practices have become politically volatile.

Shared services model

Law firms have also tried another operating model – shared services – which involves the consolidation of certain types of work, often within regional or global headquarters.

Again, corporate clients have used shared services to minimise costs for common functions and work processes across their businesses. This has also helped to simplify and align work across larger, diversified enterprises.

Organisations with highly decentralised operating cultures may struggle with shared services though. This can include some international law firms, where financial and management systems are not fully integrated, and where local offices and practices operate in a more independent, rather than inter-dependent, manner.

Our approach: insourcing

After weighing all the options, in 2000 Baker & McKenzie chose a hybrid approach – what we call ‘insourcing’. That offers many of the same advantages as these other models, but fits best with the client and operating sensitivities of a large global firm such as ours. We remain one of the few firms to embrace insourcing.

Today we have an exceptional team of talented, highly-trained and fully dedicated employees in Manila, all part of Baker & McKenzie Global Services Manila (GSM).

GSM’s dramatic growth in such a short time is just one measure of its success. From just a handful of employees typing and editing dictated copy in 2000, we now have almost 400 GSM employees, providing those and other high-value services to the firm and our clients.

GSM employees are an integral and growing part of our firm. They account for more than five per cent of our global staff, a share that is certain to rise in coming years. Working from attractive, fully-outfitted offices, close to Manila’s main business district, our GSM team is connected to the rest of the firm through technology, firm culture and reporting lines.

In addition to basic document management services, GSM also provides a broad range of client and internal support in information technology, marketing, finance and communications. We’re so satisfied with the impact the decision has had on our business that we’re continuing to invest in the new services GSM can provide to our offices, practice and industry groups, and lawyers and
staff worldwide.

Substantial cost savings

There are cost benefits to insourcing, of course. Average salaries and benefits for qualified staff in Manila are about a third of market rates in other major cities throughout the world, and even lower than high-cost jurisdictions, such as London and New York.

Rents, utilities and other fixed costs are also more affordable in Manila, and they are expected to remain so for the foreseeable future.

As a result, the firm’s global marketing team saves more than half a million dollars annually by doing most of its graphic design and desktop publishing work in Manila. In addition, we have realised similar savings by consolidating much of our software-development work globally in GSM.

Other advantages

Cost savings are just one of many positives to insourcing, however.

With a large percentage of our worldwide fees earned from client work in five or more jurisdictions, our people are working 24/7. Deadline pressure is unrelenting, especially on major transactions, litigation, disputes, and other matters where the stakes are high, speed is essential and top-notch work is vital.

Lawyers and staff in Europe and North America can e-mail draft briefs, client reports and other documents to Manila at the end of their business day and have finished, formatted work on their desktop in hours. Clients certainly value these quick turnarounds – and so do our people, who need to keep work flowing.

GSM work is done to a consistently high standard of quality. The Philippines has a large pool of highly educated, well trained and ambitious young professionals, fluent in English and highly motivated to
be part a large international firm. So it’s no surprise that the work output we see from GSM is world class in every sense.

Finally, because GSM people are Baker & McKenzie employees, not independent contractors and/or employees of third-party vendors, we retain optimal control over confidentiality, which is reassuring to clients.

Steady progress

We have taken an incremental approach to building our insourcing operations. We started small, with a limited number of processes, handled by a group of employees that had received extensive training in our firm practices and culture. Project by project, we built trust and confidence in our Manila resources. As a result, demand for those resources has grown steadily.

GSM today is organised around two primary roles: business processes and staff extensions.

Some business processes and some examples include:

Document services (desktop publishing);
Financial services (billing);
Technology services (network operations, systems development and global helpdesk);
Global intellectual property support (IP portfolio management), and program support (internal quality audits).

Staff extensions support our primary global departments, including finance, marketing, business development, communications, information technology and knowledge management. Manila staff in these roles are full members of our global teams. They conduct research, develop reports, manage projects, etc. E-mail, teleconferences and occasional travel keep them connected.

We have a growing number of practice-support lawyers in GSM. These lawyers don’t advise clients directly, but support the work of our global and regional practice groups.
We expect the volume of this sort of work to increase significantly in the next few years.

Finally, GSM provides a full range of paralegal services, such as support for intellectual property portfolio management and litigation document coding.

Lessons learned

We are delighted with our progress on insourcing over the past eight years and have learned some valuable lessons along the way.

At first, it took time and effort to get our lawyers and staff to give Manila a try. Old habits die hard, and it’s human nature to favour familiar resources over new ones – especially when those resources are just a few paces away.

There were also some initial questions as to whether GSM’s quality would consistently measure up. Here, our methodical approach to quality control and capability building has paid off. Good first experiences opened the door to repeat work, and our GSM employees have gone the extra mile to deliver.

Some managers had reservations about locating full-time members of their team thousands of miles away, but as our work has become more global in nature, and as technology
has shortened distances and compressed time, our staff have become more comfortable with the virtual-team concept. Indeed, in our passionately global culture, this geographic diversity has made work more interesting and fulfilling, on both professional and personal levels, for many of our leaders.

Through the substantial investment we’ve made in GSM over the past eight years, we’ve learned that insourcing’s full value can only be realized through a long-term commitment. Insourcing isn’t the best option for firms seeking to cut costs overnight.

What’s next?

We’re now looking at ways to insource work in other jurisdictions where it makes sense, either due to common languages (e.g., Spanish), narrower time differences or other factors. Having insource centres in other regions would also spread our risk.

We’re focused on becoming a recognised leader in client-service excellence, so we’re assessing opportunities to insource more high-value client-support activities. If this makes our lawyers and staff more efficient, it will be great. If it makes our clients more satisfied, so much the better.

Eight years in, we are just starting to unlock insourcing’s full potential. As we put it to greater use for the twin benefits of greater profitability and higher client satisfaction, our hope is that our managing partners around the world will soon have fewer things to lose sleep over.

Chris Pierce-Cooke is COO of Baker & McKenzie Global Services. Paul Malliate is Baker & McKenzie’s Asia-Pacific Regional Executive Officer and has overseen GSM since its founding in 2000. Martin Telfer, Baker & McKenzie’s Global Head of Insourcing, is based in Manila.