Wednesday, October 24, 2012

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

Parsley Sage Rosemary & Ginsburg llp
“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.


[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.”

7 comments:

  1. I think the table already shows how vital it is for some companies to outsource their back office operations. It lets them flourish and have a greater opportunity on widening their services because they were able to acquire more employees than before. How else can outsourcing help companies like you? Any more ideas?
    -Infinit-O Accounting Outsourcing

    ReplyDelete
  2. I also read that article and i loved the points provided by them.
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