Financial Fallout: Ashurst Results, BLP Redundancies, Buss Murton CVA Success and Pinsents OUTSOURCING
Certain trends emerged in the profession as the economic downturn took hold – restructuring, redundancies and falling financial results to name a few. In recent news, Ahsurst’s financials have revealed a 40% drop in their corporate group’s results as compared to last year, BLP have laid off 85 following a consultation in May and one south-eastern firm, Buss Murton, has narrowly escaped total collapse having just emerged from Company Voluntary Arrangement (source ). The lasting effects of these factors …
Certain trends emerged in the profession as the economic downturn took hold – restructuring, redundancies and falling financial results to name a few. In recent news, Ahsurst’s financials have revealed a 40% drop in their corporate group’s results as compared to last year, BLP have laid off 85 following a consultation in May and one south-eastern firm, Buss Murton, has narrowly escaped total collapse having just emerged from Company Voluntary Arrangement (source ). The lasting effects of these factors will no doubt be felt in the individual firms but as things improve so should those trends. However, there is a more profound change that has been gathering momentum recently which could send shockwaves throughout the profession.
Outsourcing. The use of outsourcing is not entirely new – a number of firms have outsourced non-legal work for some time – Clifford Chance, Eversheds and Pinsents have all farmed back-office jobs such as typing, IT and paralegal work out to places like India and South Africa. However, this type of outsourcing has been limited only to high-volume, low-value legal work. Not any more – Pinsent Masons is set to become the first firm to offshore the work of qualified lawyers by outsourcing work to South Africa.
So the game has changed. Miner Rio Tinto announced last week that it would be outsourcing legal work directly to CPA lawyers in India and asking its advisers to do the same where possible. Such a client led change will be difficult to reverse and firms will now be feeling the pressure to make similarly bold moves to cut costs and add value for clients. Pinsents are likely to be the first of many.
Rio’s current legal advisers have welcomed the move in the open but lawyers everywhere will see this as the thin edge of the wedge. Although the pyramid structure of firms means that they will be reluctant to farm work out if their own, highly profitable, juniors have capacity, they may have little option if clients demand it. The long term implications are obvious. There are those that hope this will be a temporary threat to the law firm business model but even when the good times return, firms will have a hard time convincing businesses to pay for their own structural inefficiencies.
Which begs the question, what will juniors be left with? Or even, will we be left with any juniors?
More on outsourcing:
June 23, 2009
Outsourcing will put paid to the outrageous profit margins that partners have managed to protect for so long by using the leveraged pyramid model. The Earth really is Flat.
June 23, 2009
This just makes me depressed. It is bad enough having worked so hard through university and sucked up huge debts to see jobs disappearing before my eyes. The short-term prospects were terrible and now long-term prospects look shaky if other firms follow Pinsents lead.
June 23, 2009
Is this what you call a perfect storm? Economic crisis forces cost cutting, deregulation on the horizon spells new competition and the seal being broke on outsourcing…
June 23, 2009
Low cost will result in low quality. How can work be effectively monitored from a distance and how can quality issues arising from different cultures be controlled? Bad move by Pinsents. It might grab client pleasing headlines now but they will suffer in the long run.
June 23, 2009
heard of e-mail?
June 23, 2009
As my old man says of construction services, these days they do it for nothing and they do it badly. Law firms are just one in a long line of businesses to go down this road. Everything is cost driven now.
June 23, 2009
Low cost does not mean low quality. Look at the profit margins of firms – they are still pretty outrageous even in a recession. Outsourcing is just one of a number of things forcing a correction. These are the market forces that have been unleashed by globalisation and deregulation. Profit margins could suffer considerably before quality was reduced, it just means partners would have to get used to charging less to compete with foreign competition or, over time, be put out of business.
June 23, 2009
In the short term this will maintain profits by keeping the work flow. In the long run though there will be a smaller pool of junior lawyers from which firms can generate the current level of profits and from which to choose decent partners.