In the Big Picture, Few Firms Since Orrick Have Started Back-Offices (Perspective)

Editor’s Note: The author of this post is a consultant to law firms.

Early this year, Hogan Lovells announced that it was opening a global business center in Louisville, its initial focus on billing, technology support, and conflict checks. The announcement got coverage in the legal press and sites. The Louisville center is the second business services center for Hogan Lovells, its first in Johannesburg supporting Europe and other markets. Since Hogan Lovells’ announcement, Norton Rose Fulbright announced it was launching a global service center in Manilla and other legacy-UK firms have announced moving European work to lower cost European locations.

Were these announcements each news because yet another Big Law firm opened a remote operations center? Or because such announcements are so few and far between? Given the size of the Big Law sector and the success of Orrick’s pioneering Wheeling center — and the 11 remote domestic centers that I count since it — I anticipated a far greater adoption of these centers by legacy-US Big Law firms by now.

There was a long pause in the US after Orrick’s 2002 center, but then a start of activity beginning in 2009 with Nixon Peabody, DLA Piper, Wilmer, Pillsbury, Bingham, Sedgwick, Kaye Scholer, White & Case, Fish & Richardson, and Littler following. After the first few of those centers, I thought that the light bulb had finally gone on for Big Law here. But it has been but a few firms making their way down this still relatively untraveled road for the industry.

Full disclosure, Deloitte served as the advisor to Orrick, to 6 of the 11 domestic remote centers since, including Hogan Lovell’s Louisville center, and on a number of Europe-based centers.

Orrick’s center was ahead of its time, and the company used it as the platform for significant transformation. With the next round, I expected there to be a great wave of these centers. This is standard operation for corporate America, from the pioneers over 20 years ago, including GE and P&G, today making its way into middle market companies. Across all industries. And through professional services (the Big 4, engineering & construction, consultancies, etc.). With IT, finance, and human resources long as a core, companies are integrating delivery into cross-functional global business services. Geographically, operations centers have progressed from the nearby suburbs, to domestic remote sites, and off-shore as part of global delivery models.

Well-executed remote centers can serve as efficient engines for service delivery transformation. Law firms are uniquely positioned as support functions report into the COO or executive director – a direct pathway to synergies, scale, and leadership. Transitioning legal process delivery, standardizing and improving processes, applying enabling technologies, realigning roles, revitalizing culture, and resetting human resource, workplace, and real estate models to better enable the work and workforce of the future. Savings and payback period for remote operations are generally very positive, reasonably $8-12 million a year and 2-4 years, respectively, for an AmLaw 25 with a representative US office footprint. And these initiatives send a highly regarded signal to the corporate marketplace that the firm is serious about cost-effective delivery.

While this is not for every firm, why not the huge wave of such centers? Is it because the overwhelming majority of Big Law firms are already operating effectively and efficiently? In my experience …

• … change and new ways do not come easy for law firms
• … the required transition is viewed as too distracting and disruptive to core activities
• … this is personal, with concerns about service levels in high touch service cultures
• … consensus can be a challenge at law firms — and volume and influence amplify when these centers are considered
• … the business case does not pencil (this more likely when a firm has a smaller geographic footprint, has offices in more moderate-cost locations, and is truly operating highly efficiently and effectively)
• … cash-based businesses and partnerships, law firms are accustomed to distributing all of their annual earnings each year and the one-time costs associated with the transition are daunting
• … biting this bullet is less preferable to waiting for the return to better times, when they will “revenue up” out of inefficiencies and cost issues

So what will it be? A trickle or a wave?