outsourcing tech

For better or worse, everyone today is all too familiar with the concept of outsourcing. For many, outsourcing has acquired a stigma, and the legal industry is certainly no exception.

Many law firms have come to view outsourcing or managed services in a negative light due to the detrimental effects it can create within a law practice. Firms that opt to outsource frequently see reductions in their employee headcount, losses of their in-house knowledge base, reductions in control and governance over important firm matters, and, perhaps most importantly, degradation in the overall user experience, which is integral to the productivity and success of the firm.

The combination of losing loyal, knowledgeable staff and seeing a decline in user experience has led several firms to do an about-face on outsourcing, bringing their outsourced work back in-house. The obvious problem with this is that the firms still need to find a solution to the practice challenges that necessitated outsourcing in the first place.

Thankfully, there's an easy answer to the problem, and it's called smart-sourcing. Simply put, smart-sourcing is a smarter way of doing outsourcing that keeps high-value work in-house, while outsourcing commodity work without losing governance or control over it.

How Is Smart-Sourcing Different from Traditional Outsourcing?

At its core, smart-sourcing involves using an external platform to provide a better user experience for lawyers. The idea is to take the commodity work that's overburdening your staff and delegate it to the platform for third party providers to handle, so your internal people can instead focus their time and energy on high-value work.

There are several benefits to smart-sourcing that remove the downsides of traditional outsourcing. First and foremost, smart-sourcing is not about headcount reduction. Unlike with traditional outsourcing, where you see staff reductions when work is sent outside, smart-sourcing allows you to keep your current staff. They simply focus on more critical work, using the knowledge and skills that they've cultivated over time. It's not the high-value work that's being outsourced.

What smart-sourcing does is delegate the commodity work. Because that work is outsourced to a platform, you don't lose control or governance over it like you typically do when outsourcing. Instead, the commodity functions are performed by outside parties, but remain under the guidance and management of the firm.

Another huge benefit of smart-sourcing your commodity work while retaining your higher value-add work is that you avoid the employee burnout that's becoming increasingly prevalent in legal IT departments. Whether your IT department has three or fifty people, they're constantly being asked to do more with less. Not only are they being overburdened with operational tasks and details, they're also expected to keep on top of complying with outside counsel guidelines and create innovative new technologies to keep clients happy. When all of these tasks are viewed as equal priorities, the only realistic outcome is employee burnout. However, when you smart-source the operational burdens, you avoid that burnout and get better outcomes on the high-value work you need to run your firm.

Smart-sourcing also leads to cost savings. Chances are, your IT staff is currently employing dozens of different tools to handle all their tasks. By smart-sourcing to a platform, you centralize everything in one tool, eliminating not only the logistics and confusion of juggling an arsenal of technology, but also the costs of maintaining each of those numerous tools.

Developing the Best Smart-Sourcing Strategy

Once you've decided to go the smart-sourcing route, the question is how best to do it. Unlike traditional outsourcing, smart-sourcing isn't an all-or-nothing strategy.

The first step is analyzing your entire portfolio of IT support functions and dividing those tasks into two piles—high-value work and commodity work. High-value work includes things like choosing the firm's next document management system or migrating to cloud-based solutions. Commodity work, in contrast, consists of tasks like patching systems or conducting routine maintenance. Your IT staff often works all night doing the latter, burning them out before they handle the important work the next day.

Smart-sourcing is the key to avoiding that burnout without incurring the expense of hiring additional employees. With patching, for example, you can set the parameters and deadlines, assign the task to a vendor to complete overnight, and return to work the next morning to see it completed according to your specifications. In the meantime, your IT staff can focus on strategic projects that will help grow your practice.

Recent Smart-Sourcing Trends and What to Expect in 2018

While nearly any task can be smart-sourced to meet your firm's individual needs, there are a few areas where smart-sourcing has seen the most traction. The first is security. Given the recent prevalence of threats and attacks, cybersecurity is growing at a faster pace than firms can meet, outstripping firms' ability to handle all their security needs in-house. Between installing firewalls, developing countermeasures, and complying with outside counsel guidelines, it's simply impossible for firms to keep up using the staff they have on hand. Compounding the problem is the fact that there simply isn't enough talent for firms to hire and retain, because the demand of this hot field has exceeded the number of people trained to meet it. Therefore, firms are increasingly looking outside to meet their needs.

With clients constantly demanding more innovation, law firm IT departments can't keep up and need help from third parties. And, of course, there are the tasks that are the very definition of commodity work—the day-to-day functions that make up your lights-on infrastructure. Things like phones, networks, storage, and data centers are becoming more complex. Internal teams are struggling to handle all the necessary upgrades, patches, and maintenance without costly headcount increases. Accordingly, infrastructure is a prime area for smart-sourcing.

Another smart-sourcing hotbed is application development. And going forward, we can expect to see other areas joining the smart-sourcing ranks. The biggest is data sciences and artificial intelligence (AI). Every law firm wants to get into AI, but there's a severe shortage of talent on the market. In order to meet their goals, firms will need to work with third-party vendors who have data scientists on staff.

Another role ripe for smart-sourcing is business process architects. In order to meet client demands, firms need people who can come in and become innovation experts. Few firms to date have invested in such roles, and until firms find the right senior-level non-lawyers who can truly innovate the firm, the solution will to be to turn to third parties to fill the gap.

The combination of a lack of qualified talent and increased client demands has created a perfect storm that has left law firm IT departments struggling to do more with less and facing a serious risk of burnout. Under present conditions, firms are poised to see an exodus of talented IT professionals. Smart-sourcing is critical to preventing that. By strategically outsourcing certain tasks but retaining governance and control, you can keep your team engaged and not lose critical knowledge base, all while making your clients happy and keeping the lights on for the foreseeable future.

 

Arup Das is CEO of Alphaserve Technologies. He is an expert in institutional level technology governance and operational risk management standards that are prevalent in hedge funds, private equity funds, venture capital funds and global law firms. Mr. Das holds an MBA from Cornell University and sits on its Board of Entrepreneurship; he also has a Masters degree in Computer Engineering from the State University of New York at Stony Brook and a Masters in Analytics from Villanova University where he is an advisor for their Center of Business Intelligence.