Onshoring Back-Office Operations Has it Worked?

Transcription

1 Onshoring Back-Office Operations Has it Worked? September 2, 2015 Mark Klender, Principal, Deloitte Consulting Ash Banerjee, Chief Information Officer, Wilmer Hale Craig Dean, Chief Technology Officer, Orrick Tracy Emblad, formerly Bingham

2 The golden age of law firms has passed Though rebounding from the recession, growth in demand for legal services remains slow, in some cases, flat or declining Revenues have been challenged and the average collected realization rate has been flat Shift in the level and type of fees clients are willing to pay, with traditional rates card models scrutinized and challenged With revenue flat and profit margins squeezed, expenses have started to increase again after the rounds of cost cutting Mergers and acquisitions continue to create additional opportunities for market share, synergies and cost efficiencies In response, law firms restructuring how provide services to clients, how they are organized, and how to more cost-effectively operate 2

3 Beyond simply moving operations to a lower cost location, this is service delivery transformation. Base for shifting operating model & service delivery (admin & law) Foundation for more effective & efficient delivery -- and growth Platform for broader transformation (people, process, org, & technology) Typically a reaction to pressure on revenues and profits A signal to market that firm taking delivery, cost, & rates seriously For US firms, this has been an on-shoring play Proven effectiveness & economics 3

4 A number of US firms have opened remote centers Firm Operations IT Representative listing based on publically available information -- functions and FTE estimated Finance & Acctg. Center Functions Library & Research Mktg & Bus Dev. Location * Legal services include contract attorneys, litigation support (e.g. prosecution of IP patents, filing patent applications, client counseling), and e-discovery 4& document review HR Risk Mgmt. Baker & McKenzie Legal Srvs * Manila / Belfast FTE Year Opened /2015 Orrick Wheeling Nixon Peabody Rochester N/A 2009 DLA Piper Leeds / Tampa /2012 Wilmer Hale Dayton Pillsbury Nashville Bingham (Morgan) Lexington Sedgwick Kansas City Kaye Scholer Tallahassee Hogan Lovells Johannesburg / Birmingham /2015 White & Case Tampa Latham Watkins Manchester Fish & Richardson Minneapolis Littler Mendelson Kansas City

5 The activity of London-based firms has picked up, with center located in the UK Firm Operations IT Representative listing based on publically available information -- functions and FTE estimated Finance & Acctg Center Functions Library & Research Mktg & Bus Dev HR Risk Mgmt Legal Srvs * Location FTE Year Opened Clifford Chance New Delhi Osborne Clarke Bristol Allen & Overy Belfast CMS Cameron McKenna Herbert Smith Freehills London Belfast Irwin Mitchel UK Linklaters Warsaw, (previously UK) TBD 2014 Ashurst Glasgow 180 Planning Freshfields Manchester 330 Planning * Legal services include contract attorneys, litigation support (e.g. prosecution of IP patents, filing patent applications, client counseling), and e-discovery & document review 5

6 Law firms typically undertake service delivery transformation across operations Function Finance & Accounting Human Resources Information Technology Processes Accounts Payable Analysis & Reporting Billing Collections / Accounts Receivable General Ledger / Bookkeeping Attorney Development Attorney Recruiting Benefits Diversity & Inclusion Employee Separation HRIS Application Development & Support Core Enterprise Systems Desktop Support Financial Systems Help Desk IT Procurement Payroll Procurement Tax Treasury HR Strategy Labor & Employee Relations New Hire Integration & Onboarding Staff Development Staff Recruiting Litigation Technology Multimedia Support Network Operations Project Management Tech Support Technology Education 6

7 Candidate processes for alternative delivery (con t) Function Library & Research Marketing & Business Development Operations Processes Business Research Electronic Services Legal Research Communications (Internal & External) Events Marketing Conference & Events Management Conference Room Support Document Services Facilities Real Estate Library Procurement Library Support Technical Services Practice Development Public Relations Web & Creative Reception / Guest Services Reprographics Print / Mail Security Travel Risk Management Client Intake Conflicts IP Docketing Litigation Docketing Records Management 7

8 For law firms, about 45-55% of the functions are initially identified for alternative delivery 1 Overall Finance & Accounting Human Resources IT Knowledge & Research Marketing & Bus Dev. Operations 2 Compliance/ Risk Management 45-55% 55-65% 30-40% 60-70% 55-65% 40-50% 70-80% 35-45% Law firms considerably behind corporations and other professional services sectors in their adoption of alternative delivery White glove, anything, anytime, for anyone internal service orientation at most firms, often at 1:1 ratio of administrative resources to attorneys Functional centralization more common, within home office and 1-2 major offices Functions operate in process, organization, HR, and compensation silos Process standardization varies, process optimization & documentation less common Law firms just beginning to push into service delivery efficiency, application of self service, and enabling technologies 1) Average of five Deloitte clients 2) Includes outsourcing 8

9 Labor cost savings are the primary driver of the business case for remote siting Illustrative Business Case (for a 250 person center) Metric Business Case Percentage of Functions in Center 40 65% Annual Ongoing Savings ($M) $8 12 Labor $8 11 Facility $(0.7) - $2 Technology ($0.5+) 7 Year NPV Savings ($M) $25 30 Payback Period (yrs) One Time Costs ($M) $16 20 People Related * $13 17 Facility Fit Out (incl. Technology) $3 5 External Advisory $1 3+ Government Incentives ($3 6+) Other $1 3+ * Includes dual staffing, severance, recruiting, training, stay bonus, relocation and outplacement 9

10 Not right for all firms, but is the future. This is not easy... Change & new ways not come easy for law firms Law firms are highly political organizations Firms leery of taking one-time cost hit Culture, people impacts, & partner noise will kill at many firms Requires leadership & cojones. but will continue to advance Proven effectiveness & economics Competitive advantage for early & effective adaptors Once in -- legal services, up value chain, & outsourcing Not right for all firms -- small but growing percent to adopt 10

11 11 Wilmer Hale Business Services Center [Dayton]

12 Orrick Global Operations Center [Wheeling] 12

13 Bingham Global Services Center [Lexington] 13

14 14 Pillsbury Global Operations Center [Nashville]