Outsourcing for the right reasons

The world of IT tends to experience a reasonably large change in some form every few years. In the consulting world, we tend to look at technology in the form of people, processes and tools, and examples of key recent changes in these areas might be people (outsourcing), processes (big data),
tools (virtualisation).

Outsourcing technology functions is no longer quite
the hot topic it was a few years ago, but it is still relevant for today’s law firm.

However, cloud computing, and in particular the provision
of utility IT services, has grown and matured quickly. This
may have had an impact on
the necessity of outsourcing
for some. There are good reasons for considering outsourcing
an IT function:

• Size. If you are below a certain threshold, yo may find it cheaper to run an external contract rather than internal staff.
• Specialist requirements. There may be a requirement for a specialist skill or service that is difficult to bring in-house.
• Concentration on core business. Law firms practise law, and concentrating on that rather than other functions may garner improvements generally.

Strategic goals

Whatever the reason for considering outsourcing, there are advantages and disadvantages to consider,
and these should be addressed alongside the firm’s strategic goals so that the decision to outsource, or not, is taken using the most pertinent information, and not treated as a panacea.

Outsourcing technology
can mean anything from a single technical function to a wholesale shift or moving an entire department to a third-party contractor. There are advantages.

First, there is access to a wider pool of resources. Third-party suppliers of technology services are likely to have a larger
number of staff a potentially wider range of skills, greater prospective for cover and a
more mobile workforce.

Second, you have service
level guarantees. Most, if not all third-party suppliers of services will provide a service-level agreement (SLA) with their contract, and this will give a minimum level of service, response time, functionality, etc. These are backed by service credits for failing to meet targets.

Third, there is slimmer administration. Removing part of all of a support service theoretically enables the firm
to concentrate on what it does best, rather than having to manage a function that is not native to its core service delivery.

Of course, there is also the other side of outsourcing.

First is the lack of flexibility. Outsourced technical work relies on agreed service specifications, and suppliers will adhere to them rigidly, or charge for additional work outside its scope. This amount can accrue over the course of a contract. The lack of flexibility can also manifest itself in a vanilla service. In an age of increased reliance on technology to deliver a competitive advantage, this could slow down a firm.

Second, there is no overall quality guarantee. While outsourced contracts will have service specifications and SLAs, the general quality of service may not be as high as can be achieved from an internal team. This could be for a number of reasons, but one that many complain about is huge turnovers of low-paid staff
from suppliers.

Third, remedies for service issue are not commensurate with associated losses. In other words, the credit you receive for an outage, or target shortfall will be a long way short of the amount you can potentially
lose from a system issue.

Larger liability

These are just a snapshot of
the pros and cons, and each
firm should take its own circumstances into account when looking at outsourcing.

Other factors for consideration include the length of contract with third-party suppliers.
Longer contracts offer less flexibility, and the longer a function is outsourced, the harder it may be to change or insource, and the larger the liability in
the event of the unthinkable.

While outsourcing can
reduce administration, it
doesn’t absolve the purchaser from monitoring the contract and the services, or producing
a coherent technology strategy as part of the overall one.

Moreover, the availability
of an increasing number of cloud-based services is likely
to persuade some firms that
they can handle their own technology without too
much specialist expertise.

 

POCKET NOTES Analyse reasons for outsourcing carefully. Look at your own strategy for clues when considering outsourcing. Make sure you understand what will go in the service specification. Understand how the SLA will work, and how you will monitor them. Understand the pitfalls as well as the advantages. Make sure the length of contract suits the business.

 

SJ

Damian Blackburn is director of legal IT consultancy firm SLFtech