1. What should my LPO strategy be?
We ran our successful “LPO?- yes or no?” campaign at the end of 2010 to make one single point: there is no “one size fits all” LPO strategy. Every client has its own needs, starting point, objectives, assets etc. In fact, for many organizations, LPO is not what they need.
Our core recommendation is to:
- Go through an LPO Evaluation Study
- Determine the pros/cons of each LPO delivery model (see below)
- Build the business case for each option
- Use the results to determine the best strategy for you
From that process you will have a clearly articulated strategy that can be shared within the organization and in conversations with internal and external clients. Even if that Evaluation Study rejects LPO, at least you will have a well thought through explanation for it – and clients will value that.
2. Does LPO Mean Offshoring?
One of the major myths about LPO is that it means that all work will be carried out in India or elsewhere outside this country. This is not the case. As a buyer of services you are in control of where you want the work carried out.
Even the leading Indian-based suppliers have on-shore delivery capability. It is estimated that 50% of LPO will be delivered from onshore locations. We recommend that offshore delivery is investigated, but only as part of a review of all delivery location options.
3. What LPO Delivery Models Work?
Again, there is no single answer, and each organization has to determine the right model for its own current and future requirements.
We emphasize that LPO can cover the following scenarios, so should be thought of as a broad way of delivering services efficiently, rather than any one kind of delivery model.
Overall we define LPO as being “the delivery of legal processes from a centralized, optimized delivery location”. That can be carried out from any single one or combination of the following
- Internally owned, onshore location, potentially in a lower cost part of the country
- Internally owned, offshore location (often referred to as a “Captive”), that leverages lower overseas labour costs
- Externally owned and managed onshore location, where a third party supplier is responsible for the delivery of services
- Externally owned and managed offshore location, where there are further benefits from lower labour costs.
However, location is not the only driver of value, as explained below.
4. What Do I Get From LPO?
The opening attraction of LPO is cost savings. Ranges of 43-90% savings have been quoted and we have never seen an LPO service that offers less than 20% savings.
However, we emphasize to clients that this is attractive but should not be the only reason for valuing LPO. As part of a portfolio of benefits you have to value:
- Flexibility of costs, moving to a variable cost model
- Flexibility of labour supply, being able quickly add or remove staff to meet changes in demand levels
- Access to new skills – key to process efficiency is optimization, not just accessing lower cost labour. LPO should bring you Six Sigma and Lean Manufacturing skills to ensure genuine process optimization
- New technologies – this is a wide topic, but the key thing to note is that process improvement, performance monitoring, and service management will be enabled by technologies that LPO can bring.
5. Are There Any Ethical Considerations?
The answer is “Absolutely”. Not only are there general ethical issues, there are also huge day to day challenges around data security, the location of services and ownership of outcomes, among other things.
However, it has to be noted, that these are almost exactly the same issues that are faced by any law firm or internal legal function on a day to day basis. When you visit LPO suppliers or internal LPO operations the one thing you will notice is the high level of security in place and the intense focus on adhering to tight procedures. In fact, they are probably tighter than in the offices of their client.
In 2011 the US and UK legal authorities issued guidance on LPO, however their lack of formal guidance so far has not stopped the creation of a $1bn market. The one thing that is very clear so far, in particular from the ABA, is the fact that the buyer of LPO services still has responsibility for the quality and validity of the outputs. That thinking should be at the forefront of all governance models.
6. What is critical to the success of LPO Project?
It is important to differentiate between a successful LPO Project and successful LPO service delivery. The five key factors that will help you successfully deliver your LPO Evaluation Study are:
- Executive sponsorship and oversight
- The right stakeholders involved and engaged throughout
- Clear strategic objectives
- Communication or over-communication with all stakeholders and relevant parties
- Experience – work with a project director or anyone who has done this before
In addition, concentrate on the numbers and the risks to build a rounded picture of the options.
7. What is critical to the success of LPO?
How do you get a successful LPO service? This is the easiest question to answer but hardest to implement. It builds on Question 6, and relies on the organization being led through that project effectively and reaching consensus on the way forward.
After that, it is about selecting the right strategic partner or supplier to work with and creating a governance function that manages the transition and drives the ongoing delivery towards world class quality and efficiency levels. The effective RFP and selection process will significantly de-risk this, but governance is the key.
8. Should I Wait, and Look at LPO Later?
There is no easy answer to this, as it depends on the competing priorities within your organization. With access to the right data and experience, an effective Evaluation Study should only take 8 weeks, after which you can decide if you want to move forward and how, with more information, LPO ranks in relation to other priorities.
9. Is There A Way To Test The Concept of LPO?
Absolutely! Many LPO relationships are built up after working together on a specific, one-off project. Supplier/partner selection is crucial in this situation but is also lower risk. LPO is not a one way street, so outsourced services can be brought back in house. Project based work is a great way to test the water.
10. Why Now?
There are few times in a market’s evolution that you can really get a service that meets your exact needs. The growing maturity of the LPO market means that suppliers and onshore delivery locations are interested in deals that expand their footprint to have a capability that will meet their needs for the coming 5+ years. Get involved in that kind of conversation and you will be able to shape the deal around your exact needs.