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Friday, May 30, 2003

Central Back Offices and Outsourcing

You may recall Orrick's decision to re-locate information technology, HR, and other functions to a central location in Wheeling, WV. See Almost Heaven: Orrick Relocates Tech Operations to West Virginia (law.com, October 2002). Yesterday I was reminded of this when I read Center of Support, an article by Orrick Chairman Ralph H. Baxter, Jr. that appears in the Winter 2003 issue of Chief Legal Executive. According to Baxter, the move to centralize "back office" functions in a single, low cost location has both improved firm wide service and reduced costs.

It's surprising that more firms are not moving in this direction. More and more law firms have multiple offices across many time zones, domestic and international. Housing a significant number of staff in downtown real estate is expensive. Moreover, the argument that staff need to have access to lawyers loses weight as the percent of lawyers located in the "home" office declines. And with the increasing use of e-mail, instant messaging, and video conferencing, the need for physical proximity diminishes.

But you do lose something with a remote location. I worked "virtually" for one dot-com, with no two people in one location. And for a second dot-com, I worked in DC with one colleague when the rest of the company located in Utah. It's easy to feel isolated - proximity still counts, maybe for a lot. But as firms need to control costs and serve professionals in multiple offices, the trade-offs become closer calls.

Law firms have other options for centralizing and reducing costs. A Business Week cover story of February 3, 2003 called The New Global Job Shift examined this trend in detail. It reports that "[n]ow, all kinds of knowledge work can be done almost anywhere.... The driving forces are digitization, the Internet, and high-speed data networks that girdle the globe. These days, tasks such as drawing up detailed architectural blueprints, slicing and dicing a company's financial disclosures, or designing a revolutionary microprocessor can easily be performed overseas."

So, can law firm back office functions be outsourced to India? Can aspects of law practice be outsourced to India?!? I have had occasion recently to consider this question. A company based in India approached me to see if it could provide certain offshore outsourced services for law firms, including possibly legal research or knowledge management meta-tagging. In my discussions with several law firms, no one jumped up and said "of course, let's do it," but no one dismissed it out of hand either. In fact, one firm has already experimented with outsourcing word processing offshore. Moreover, GE is using lawyers in India for some of its legal work. (See Cracking the Whip in Corporate Counsel Magazine (Feb 03).)

As Baxter points out, it is not just a matter of cost. A central location allows staffing to provide 24x7 coverage worldwide. As the legal market becomes more competitive and as law firms grow, it will be interesting to see if others follow Orrick's lead or go further and outsource to offshore locations.

Thursday, May 29, 2003

Digital Signature Update

The June 2, 2003 issue of Business Week, in the Technology & You column titled Just Click on the Dotted Line by Stephen H. Wildstrom, reports on the current state of digital signatures. The column points out that in the dot-com boom, the focus was on using the Public Key Infrastructure (PKI) for online signing. That approach never took off because the PKI is complex to manage. Instead, the "digital signature most likely to dominate will strongly resemble the pen-and-ink kind." The column reports that notaries will endorse a system that uses computer files instead of logbooks to witness signings. The combined hardware-software package will also save a digital version of the ink signature.

I spent 5 months working for a dot-com, iLumin, that provided an online signing solution. At the time (early 2001), it seemed to make so much sense that traditional signatures would be replaced by online signing. The failure of the PKI-based approach to catch on was a good lesson in why not all promising new technologies are adopted. Among the lessons: a new approach has to have compelling benefits over existing ones - for everyone affected by the changes - to be adopted.

Wednesday, May 28, 2003

Law Departments Reluctant to Invest in KM

The June 2003 issue of Corporate Legal Times, in an article titled Legal Departments Struggle to Harvest Internal Knowledge (p. 12), reports on a knowledge management study conducted by the Legal Technology Institute at the University of Florida School of Law. Only 48% of 130 law departments responding have initiated KM programs and less than 20% have KM budgets. Of those departments with KM initiatives, only 18% think there are sufficient resources to achieve KM goals.

In my opinion, law departments would benefit by investing more in KM. The economics of the billable hour mean that law firms have limited incentives to improve effectiveness and efficiency. Law departments, however, have incentives to do more with less. In all likelihood, investing in KM would pay off for corporate counsel. [I confess that I am not disinterested. I have teamed with the Legal Research Center to offer a KM Assessment for in-house counsel.]

I've now read enough about Blogs that I decided I would try my hand at one. For now, I'm using a free product, just to get a feel for how posting works and how I feel about Blogs. If I like the medium, I'll upgrade to the paid product, which will give me more flexibility and eliminate ads.

Who am I? I'm Ron Friedmann of Prism Legal Consulting, Inc.. Prism Legal offers strategic technology advice for law firms and departments and software vendors in the legal market. Click the Prism link for more info about what I do.

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