Are law firms getting cold feet on outsourcing?

There has been something of a trend towards outsourcing in the legal profession in recent years, mostly in relation to back office functions but sometimes also in relation to client work.  It is interesting therefore to see that two firms which have gone down that route, Osborne Clarke (“OC”) and CMS Cameron McKenna (“CMS”) have both decided to scale back part of their outsourcing agreements with Integreon.

OC set up its arrangements with Integreon in 2009, transferring a number of its back office staff to the outsourcer.  65 of those former OC employees will return to OC from Integreon following the changes to the outsourcing arrangements 4 years into the 7 year contract.  OC will bring back in-house client relationship management, IT, and events management.   OC is not cutting all ties with Integreon, which will continue a number of functions including information services and business intelligence.  It is not yet clear how many jobs will be lost in the process, but it is expected to be only a small number.

CMS, who have used Integreon since 2010 after agreeing one of the largest outsourcing contracts the legal market has ever seen (rumoured to be worth £600 million), have announced that they are looking for a different third-party provider to take over one element of the services currently provided by the outsourcer. They did not announce publicly which service this was.

So what should be deduce from all of this?  Is it a sign that law firms are having second thoughts about the outsourcing model?  Or is it that there are problems at Integreon which are unlikely to affect other providers?

OC are bringing a team of people back in house, but are also moving an element of their outsourced services to an alternative provider, Mitie, whereas CMS are simply looking for an alternative outsourcing provider.  This would seem to suggest that both firms still believe that outsourcing can be an effective solution, but that they are not happy with all of the elements currently serviced by Integreon.  It is clear that neither of the firms have lost faith in Integreon entirely – both were keen to stress that they would continue to work with the company, and indeed it appears that CMS are expanding the amount of legal process outsourcing that Integreon carries out on its behalf, so Integreon would seem to be getting something right.

What I suspect that is going on here is that firms are learning that outsourcing a huge range of functions, both back office and in some cases client facing work, to a single provider is a big ask.  There are very different skills sets required to provide an outsourced human resources function, or an IT help-desk, than to have teams of legal researchers.  Just because a business can run a top class out-sourced office management function, does that necessarily mean it is also well equipped to undertake client facing “KYC” requirements or document support?  Whilst it might be tempting to take the easy route of putting all out-sourcing requirements with one single provider, perhaps the experience of CMS and OC is showing us that firms need to be cautious about doing this if the range of services being out-sourced is particularly broad.