WSJ: Big Firm's Outsource Back Office Work to Reduce Costs

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“always a reasonable result for a reasonable fee, always”

MEMORANDUM

To:	All Partners
From:	Mike Marget
Date:	October 24, 2012
Re:	WSJ: "Law Firms Wring Costs from Back Office Tasks"

Amonth ago, I commented on two articles from Law.com reporting declining profits among Legal Industrial Complex law firms due to rising operating costs.  The website cited a couple surveys published by big banks who lend to the largest US firms.  The Wall Street Journal jumped on the story on Oct. 7, publishing its own piece describing strategies[i] adopted by 5 big firms to stem the tide of rising operating costs and bolster PPP.[ii]  The two strategies:

·         Relocating back office jobs to less expensive cities; and/or

·         Outsourcing administrative tasks to third party providers capable of performing the tasks just as well (if not better), faster and cheaper.

I’m usually critical of the Journal for its eponymous, laser-like focus on Wall Street – and consequently Wall Street law firms – while feigning interest in Main Street, the middle class and the small/midsize firms who serve them.  However, Rupert gets a pass this time.  Admittedly, a 15-lawyer firm in Atlanta is unlikely to reap any significant savings by moving its 1.8 FTE accounting and billing staff[iii] to Tampa.  However, [BSP alert][iv] the same 15-lawyer firm will be able to reduce its operating costs and realize other benefits by outsourcing those  accounting and billing tasks to an experienced service provider like Tampa-based 4L Law Firm Services LLC.

My next two memos/postings will deal with how outsourcing works in theory and in practice.

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[i] I haven’t really been tracking these developments, but here is a partial list of firms who have made significant changes to their back office operations:

 

Firm	# attys	date	action
Akin Gump	791	1999	Outsourced most accounting tasks to Deloitte
Baker & McKenzie	3,805	2001	Established back office center in Manila, PI
Orrick Herrington	1,049	2002	Set up back office center in Wheeling, WV; 350 employed there, some outsourced to Williams Lea
CMS Cameron McKenna (London)	2,800	2010	Outsourced all back office jobs to Integreon; 10-year contract valued at $933 million
Wilmer Hale	884	2011	Moved 187 accounting, HR jobs to Dayton, OH
O’Melveny & Myers	766	2011	Outsourced 75 admin jobs to Williams Lea
Pillsbury Winthrop	700	2012	Moving 160 accounting and other jobs to Nashville, TN
Bingham McCutchen	855	2012	Budgeting $22.5 million to relocate 250 jobs to Lexington, KY
Foley Lardner	874	2012	Outsourced 37 records mgmt. jobs to Williams Lea

 

[ii] PPP is short for “Profits per Partner.”

[iii]According to the Small Law Firm Economic Survey, 2011 Edition (ALM Intelligence and The National Law Journal), p. 179, a firm with 11-15 lawyers will employ .12 “finance/accounting” staffers per lawyer: 15 lawyers x .12 = 1.8 FTE.

[iv] BPS is short for “Blatant Self Promotion.”