I see a fair amount of debate around the merits of IT outsourcing in the legal sector. I also see regular updates detailing how this firm or that has outsourced part or all of its IT to a third party.
But for all of the writing and discussing I see full or partial IT outsourcing in the legal sector as pretty simple – and, as described in earlier posts, to a large extent inevitable.
Demand for IT skill is growing fast, supply is increasingly restricted and third parties can offer that skill more cost effectively, deliver much better IT services and take away the key man dependency risk that all but the very largest firms suffer from today.
Demand for IT
It used to be just back office financial systems. Then email, PMS and DMS became essential. Today legal services are offered through technology with mobile working and client collaboration part of the ‘product’ that a law firm sells. Technology is broader and deeper than ever.
Supply
I have worked with many law firms. They pretty much work along the Gartner guideline of 4.2% of revenue on IT with around 40% of that on staff costs.
A medium sized firm turning over c. £20M will spend c. £320K on staff – and will have a headcount of around seven or eight.
Demand vs. Supply
So just quickly, that eight must do server management, network management, desktop, mobile working including laptop, tablet, smartphone, databases, spreadsheets, handle around 100 Help Desk calls each week as well as maintain email, PMS, CMS, DMS, financial dashboards, mobile time recording, dictation, social media, big data and then get to start on the growing list of projects that Partners want and need.
The eight just can’t do it.
The Sell
It should be cheaper for a managed service provider to do any of this than an in house team. Take server management. A £40M turnover firm may have three staff managing the server estate including the operating systems; databases and the key applications covering the 24*7 uptime through on call rotas. The staff costs may be £100-£120K p.a. A third party who already has an established base of, say, 1000 servers under management can add the thirty or forty additional law firm servers at a marginal cost.
The quality of service from a third party is underwritten by service level agreements but more than that they have a greater technical depth, properly established support procedures and up to date tools – of course they can deliver better production service. Further, project work can be switched on and off with access to skills provided as and when required – flexibility and scalability is all part of a better IT service that a third party can offer and that an in-house team struggles with.
Stories of how the firm “just cant afford to lose Jimmy” abound. Where the skills are stretched thin across an increasingly broad technology estate there is inevitable a real key man dependency risk. Of course this risk is quickly removed with a third party managed service.
Summary
Of course you need to select third parties wisely ad establish an effective contractual and working relationship – see other posts for my views on this – but this is the sell.
Lower and predictable costs, better service and lower risk.
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