Outsourcing is one of the major trends in the legal industry at the moment. Whether it is moving peripheral administrative tasks to a third-party provider or moving your entire IT department to a subsidiary in India, accessing low-cost workforces is the flavour of the month for the legal manager.

However, the legal industry is not the first to discover this new approach – other industries, in particular the investment banks, have gone before us.

So what can we learn from them? By looking at their experiences, is there anything that we can learn from their successes and mistakes that we can try and replicate or avoid?

Much of the success of an outsourcing project comes from the structure that is put in place early on. In the early stages of the investment banks' fever for outsourcing it was generally seen as a 'rip and replace' deal. Entire IT departments, for example, would effectively be hived off to a large third-party vendor who would then be responsible for all areas of IT.

This approach was quickly and fundamentally proven not to be the best. By removing the responsibility for IT lock, stock and barrel, the client organisation suddenly experiences a massive loss of control. The outsourcing operator will inevitably be on a constant hunt to save costs and will also not be tied into an organisation in the same way that an in-house department once was.

As is so often the case, these mistakes were eventually rectified through the adoption of a compromise stance. Rather than outsourcing entire departments, a more nuanced approach was taken whereby different functional aspects of a unit could be moved overseas or to a third party, but the central strategic and control aspect of the function would remain in-house. For example, you could move application development to an offshore service provider, but keep an IT manager in-house to lead the project management and business analysis aspects of the development projects.

Another learning that was seen time and time again in the investment banking world was the nature of the relationship that you put in place between client and outsourced service providers. The investment banks, like law firms, are great believers in water-tight contracts, and so they should be. However, when these contracts get in the way of a fully-functioning working relationship, it is clear that they are damaging rather than enhancing the end they are intended to serve.

Yes, a framework of service level agreements (SLAs) and delivery commitments must be put in place, but these need to be supporting rather than defining the working relationship. From early on in the engagement it is hugely important that the outsourced team is seen as an integral part of the business rather than a remote, outside body that is simply there to cut costs. By treating an engagement with an outsourcer as a relationship, rather than a legal interaction, it is possible to generate the sort of symbiotic, effective working partnership that underlies all successful outsourcing activities. Building a performance management framework that focuses on a more holistic set of measures including management is key to fully capitalising on the strengths of the service provider.

Another area where law firms can learn from their financial services cousins is in how the outsourcing relationship is developed. As suggested above, the early outsourcers went in hard and fast, moving huge swathes of business to service providers with little consideration of anything but cost. This sort of shock can not only cause significant business disruption in the transition phase, but also does not give the opportunity for a process to build the solid foundations that it needs. Furthermore, and perhaps most importantly, this approach can cause huge change management problems for the remaining internal teams. If a major outsourcing project is foisted upon an in-house team without their 100% buy-in, failure is pretty much pre-determined.

What the banks learnt, and what law firms can take on board, is that outsourcing needs to be a developmental process rather than a one-off deal. Once you have chosen your outsourcing provider you should initially engage by outsourcing non-customer (e.g. fee earner) facing functions of the business to an offshore service centre. Once these functions are bedded in, you can think about bringing more and more business processes into the purview of the outsourcing relationship.

In this way you not only avoid the 'big bang' shock of a major shift, but you also create a 'case study' to which you can point when trying to justify your reasoning behind further outsourcing activities. Indeed, in many engagements where I have adopted this approach, once you have managed to demonstrate the benefits of outsourcing in one area of the business, you will find departmental heads actively approaching you, seeking to take advantage of the benefits that you have so clearly demonstrated.

The main and some would say only significant argument against outsourcing is the perceived risk that the process entails. Opponents will point to concerns over compliance, security and data protection as reasons to stay away from the outsourced approach. However, each of these issues is surmountable and avoidable if the correct players are involved from the earliest stages of the process. If you are aware of the risks, and take the appropriate steps to mitigate them, then they are no longer risks.

Getting the right people and processes, such as business continuity, compliance, legal due diligence, tax, data protection and risk management, in place as early as possible means that not only can you create a risk-adjusted framework, but you can also secure a level of buy-in from the relevant individuals early on. If you can show from the first stages of your process that you have all the bases covered then you can quickly silence the critics as well as protecting yourself from future threats through adequate preparation.

The final aspect of the outsourcing game that we can learn from investment banks' experience is only now coming to the fore even in that market. Outsourcing has traditionally been seen purely as a cost-cutting measure – by moving administrative tasks to low-cost areas you can reduce your wage bill and thus enhance profits. However, investment banks are now beginning to realise that there is more to it than this – viewed correctly, you can use outsourcing to actually enhance income as well as reduce costs.

The most obvious area where this is true is in staff retention. If you can remove the laborious administrative tasks from your fee earning staff, you can allow them to focus on the more satisfying (and profitable) aspects of the job and therefore enhance their overall job satisfaction. Additionally, the service level enhancements offered by an outsourced operation can further contribute towards revenue gains.

Much of what can be learnt is little more than common sense – take the process gradually and ensure you have support each step of the way. That does not mean, however, that these lessons are not worth learning. By looking at where the investment banks got it right and got it wrong, it should be possible for the legal manager to get the most out of outsourcing without falling prey to the traps that lie by the wayside.

Ian Prince is the CEO of outsourcing consultancy Prince OMC.