This is an older posting on the blog, but it is still relevant to any major firm or large GC operating in the US, UK, or beyond.
Let me start by deflating the deal a tiny bit and saying that it is certainly not an “Australian First” as the headline on the press release stated. A couple of my clients and a lot of suppliers provide testament to that fact. But it is a cracking deal, and one that sets Integreon as a leader in that extensive and growing region.
What is most interesting is the signal it sends to the major US and UK law firms. They remain very cautious and would rather build their own onshore or offshore captive delivery centre than actually use a commercial, 3rd party LPO service. Not only does their strategy eat up financial capital and executive time, but it is never going to get them to a level of efficiency that would be provided by the major LPOs. (Expect a number of them to come to that realisation in the coming years and start selling them off, but that’s another story).
The lack of appetite for radical change in the US and UK law firms was summed up by one comment about the Mallesons deal in the Australian press. It clearly explained the reason for the lack of appetite in one cryptic sentence. Chris Merrit, the Legal Affairs Editor with The Australian newspaper, wrote “law firms believe revenue growth over the next quarter will be slashed by almost 50 per cent”. Yes, GROWTH will drop by 50%, not incomes or profits, GROWTH!
That is exactly what we are seeing here. Despite the economy, no one is being driven to Legal Outsourcing in order to protect their take home pay. Profit per Equity Partner is not suffering, despite the economy, and is actually growing in most firms.
What is driving progressive firms to look at alternative delivery models is a realization that they need to prepare for the future, while offering some headline savings to clients now on low-level legal work. Even if they are building their own captive delivery center, they are taking crucial steps towards a more flexible delivery model that can more easily grow and shrink to meet whatever shape the future economy takes. Commercial outsourcing also transfers risk to the supplier, which is why the Mallesons deal should be lauded.