In-house legal departments are stretched and struggling to keep up with the increasing volume and complexity of work, yet the logical fix of outsourcing to Legal Service Providers (LSPs) is frequently unexplored.
Some of this is down to a lack of awareness around the value-add benefits that specialist operators offer over traditional law firm service provision, particularly here in Ireland. Then there are perceived risks around outsourcing sensitive workloads, amplified in a sector where trust is paramount.
Another problem is departmental structures that are unconducive to engaging LSPs or leveraging technology to improve efficiencies. But the 2024 Deloitte survey of Chief Legal Officers suggests the tide may be turning. While only 22% of workloads in the United States were allocated to Alternative Legal Service Providers (ALSPs) last year, 86% of respondents expect to use more in the next 12 months. And 85% of Chief Legal Officers are planning for the increased use of technology.
Inefficiency at scale
Anyone familiar with the intricacies of legal work will know why progress has been slow. Teams operate in high-pressure environments, trying to mitigate the risk of exposure for their companies across a growing raft of legal requirements. It makes it hard to hand over responsibilities to anything shiny and new, whether it’s an LSP or the latest technology.
Meanwhile, other sectors have outsourced repetitive, high-volume tasks, freeing up in-house resources to focus on more strategic, high-value work that directly impacts the organisation's bottom line. They have used managed services and tech-enablement to fix inefficiencies around lower value tasks.
The opportunity for legal departments may not be so clear because they are victims of their company’s success. They have scaled fast and struggled to stay efficient because disparate teams handle different aspects of contracting, compliance or other legal needs, and end up working in silos. This makes it harder to centralise processes, which in turn makes it difficult to measure inefficiencies and identify metrics for improvement.
For multinationals with distributed legal teams the barriers are greater, even if they outsource. Having to manage multiple suppliers across different countries, or rely on temporary staff to handle spikes in workloads, is a clunky way to get business contracted, signed off and paid for, which impacts the bottom line. The result is that corporate legal departments end up as a cost base rather than value driver.
Appetite for innovation
Among the reasons why this is starting to change is an appetite for AI-powered innovation. In the Deloitte survey, 93% of respondents believe generative AI has the potential to bring value to their organisations over the next 12 months. Their plans for investment may be tempered, however, by not having the skills in place to make the most of the opportunity, but it shows an enthusiasm for new technology that can be rare in legal departments.
Whether it’s because of failed IT projects in the past or a general wariness of complex implementations, there is a fear of tech in many legal offices. But here too we are seeing a change. When they find a third party to deliver on the promise of technology, rather than the pain, there is a greater willingness to hand over processes to external service providers.
When a provider leverages data, automation and innovative processes to deliver legal services more efficiently and cost-effectively, it becomes a game-changer, and a crucial stepping stone towards operational transformation, the fastest way to replace fragmented silos with centralised control.
What legal departments really want – and this is reflected in their enthusiasm for AI – is process innovation, a way to squeeze greater efficiencies out of routine but time-consuming tasks. At the same time, it’s understood by both inhouse teams and outsource partners that AI is about augmenting lawyers, not replacing them. It’s an enabler for a digital transformation strategy that has eluded many law departments to date.
Real business transformation
When you combine operational and digital transformation, you take a significant step towards centralised data collection and analysis. The path to greater efficiencies becomes clearer when you have data at your fingertips. Further sweetening a partnership with a third party like Johnson Hana is that we make data and metrics a pillar of our proposition, accelerating the client journey to becoming data driven.
Processes are scrutinised for faster turnround times by project teams and technologists, free from internal pressures and the firefighting that makes it hard for inhouse legal teams to stay on top of their work. Parts of a legal department, like the contracting division, can be transformed into a revenue generation machine. Highly specialist areas, like data protection, benefit from expert insights from an external partner.
Momentum is building here in Ireland for this flavour of outsourcing, with particular traction in large finance institutions and big technology firms that run global legal workstreams. They can make a business case for getting non-core work off their desks, knowing that certain types of legal work are best handled by trustworthy LSPs who specialise in process change and innovative delivery methodologies.
We work with legal futurists in some of the world’s fastest growing companies; lawyers who care deeply about driving revenue in their businesses and look to Johnson Hana to unlock new efficiencies across their global territories. They know that their legal departments will be empowered with metrics and measurement, enabling them to make the biggest transition of all, to becoming a value driver rather than a cost base.