DLA has outsourced its UK business support to Warsaw – KWM has gone under – Olswang, CMS Cameron McKenna and Nabbaro are merging – Although very different circumstances, each of these cuts the amount of Business Support roles in UK Law firms. The questions being asked are, who will be next, why and what is the future of the law firm business support model?
It is known that the brunt of the DLA cuts focused on the historic heart of Dub Lupton Allsop in Sheffield, where “DLA” traces its roots back to the early 1800’s. Andrew Darwin, chief operating officer at DLA Piper, said many of the firm’s systems and processes ‘reflect the history of the firm rather than its future’ and the firm is focusing on streamlining its business support processes and relocating roles to Warsaw, Poland.
With the British economy never fully recovering from the banking crisis and reduction in work, law firms have been keeping a close eye on the bottom line. With the fallout from Brexit, the UK services sector saw a sharp slowdown of business activity to its lowest level in three years recently. With FX currency losses already weighing heavy on international firms, clients vastly reducing panels and more closely scrutinising billing arrangements and pushing for more transparency on fees, times are tough for the legal sector.
So how are firms reacting to these pressures? Redundancies, Streamlining, Offshoring, Outsourcing and Northshoring
On the road to redundancy, DLA had already cut 69 document production roles after a consultation and closed its Glasgow office in 2013/14. Slater & Gordon recently consulted over 51 job roles and possible office closures after a heavy UK launch with mass takeovers and now undertaking a firm UK business review. In the past 12 months, KWM (prior to collapse), BLM, Reed Smith and Hill Dickinson have all launched redundancy consultations including support staff.
Ashurst has outsourced document production to South Africa and recently opened a low cost support base in Glasgow following discussions with Scottish Development International reportedly providing £2.4m of public funding while Sheffield City Council is trying to entice South East law firms to the city via its economic development arm, Creative Sheffield offering rental deals, a business investment fund and relocation support. This follows Allen and Overy launching a campaign to save £10m over five years by relocating as many as 300 support staff to Belfast with an investment of £2.5m from Invest NI. With public money being offered to incentivise the moves and reduction of rental and staff overheads, why wouldn’t a firm revise its business support strategy?
Freshfields also announced last year that it was launching a low cost service hub in Manchester following an announcement by Latham & Watkins of a business services office in the city.
In the past six months, Shearman & Sterling and Dentons have announced consultations or plans to launch remote or agile working projects alongside Olswang, DAC and Mischon De Reya to reduce the need for office space and make the workforce more flexible.
So what is the “future” for a firm’s systems and processes?
For business support, the future looks slimmed down, streamlined and more automated. With the first step in reduction of overheads by moving to low cost business hubs, technology is beginning to play its part in removing roles and slimming down processes.
With talk of Artificial Intelligence being developed to assist with checking and drafting legal documentation, cloud technology is also being developed to reduce the need for “human interaction” in business processes.
At the Legalex fair last year, the exhibitors were largely focused around Cloud technologies for Practice Management, Accounting, Document Management, CRM and other hosted IT platforms, reducing the need for business support staff. Using streamlined processes such as OCR scanning of accounts payable invoices which automatically recognises data fields and uploads into an accounting system, cloud based expense management systems, online document management and smartphone Apps for time recording, expense claim scanning of receipts and instant access to client data on the move, these all feed into the agile or remote working that law firms are realising the cost savings that they can tap into.
By reducing the paper trail and arranging electronic streamlined processes, the support needed by facilities, post room, finance, marketing and other support service staff is reduced. Companies like Leap Legal, Clio, Insight, DPS and Klyant are putting huge investment into Cloud technologies which further reduce the cost of having traditional software on a server onsite, which requires regular maintenance, hardware costs, software licensing and upgrades as well as oversight by IT staff. Cloud practice management solutions reduce these costs by hosting the system, providing support for system users and operating on a per user license in some cases.
So where does this leave business support? With UK regulatory compliance with Anti Money Laundering, the SRA Handbook and Solicitors Accounts Rules, there will always be a need for manual checking, manual intervention and some manual processing. But do you need full time staff, do they need to be onsite and do you need to employ them yourself?
With firms looking closer at the bottom line, outsourcing and reducing costs, a new generation of outsourcing and business support practices is growing, offering part time, temporary or hourly business support as and when required remotely over the Cloud. Even firms with server based practice management systems are benefiting from these cost reductions via remote working and Citrix solutions. In some cases, this raises issues of data security, possible conflicts of interest and confidentiality – Do your terms of business state who will be working with client data and detail any third party involvement? Have you fully checked your outsource provider with full NDA, KYC and confidentiality agreements? And where will that data be held and who has legal privilege? With DLA moving business support to Warsaw, what will happen when the UK finally leaves the EU? Will this affect data protection and outsourcing agreements where data is held outside of the UK?
The future looks uncertain for the legal sector with the effects of outcome focused regulation, government reforms and Brexit – But as for business support, the future points to lower cost, more automation and more outsourcing.
Ascentant provide Accountant and Bookkeeper services in Derby, London and across the UK. We specialise in Cloud Accounting and Outsourced Business Support including Legal Cashiering, HR Support and IT Support.