A crucial debate that has been raging on since the advent of outsourcing has been the one on the job loss and unemployment that outsourcing causes in developed countries. While one set of believers advocate the practice on the basis that outsourcing will have an overall positive effect on developed economies, since
a) it saves money for companies,
b) enhances opportunities for greater entrepreneurship,
c) and leads to higher level jobs for natives.
Critics, on the other hand, suggest that hiring foreign workers has an immediate effect on developed economies as it strips natives of jobs that otherwise would have been performed by them.
The LPO landscape is no different with most companies and law firms apprehensive of sending their legal work off shore for many reasons, one of them being the negative impact that this decision would have on the morale of their in house counsels/law firm attorneys. In a traditional profession such as law, where normal corporate decorum and growth path do not always apply, neither companies nor law firms want to be perceived as shipping jobs to cheaper destinations at the cost of work quality. However, the off shoring industry is facing many more issues besides this scepticism.
A while ago, Intel Corporation, for example, had a batch of patent applications the lawyers were handling in-house. They noted common issues, and decided these could be bundled and assigned out in common packages. So they put the jobs up for bid in an online auction. Among the firms Intel selected, one was in Australia and another in India. They did the work, but the quality was lower than what they were willing to put up with. An experience such as Intel’s is not an isolated one, and although the LPO industry is witnessing a forward momentum, it is essential that such experiences are weeded out and analyzed to ensure that such failures are not repeated. A quick glance at other outsourcing arrangements that have failed reveal the following main causes:
1. The buyer's unclear expectations up front as to its objectives
2. The parties' interests are aligned up front but become misaligned as the buyer's business environment or needs change
3. The provider's poor performance against service level agreements
4. The parties do not consider each other's interests to ensure their relationship is mutually beneficial
5. Poor governance structure for managing the ongoing relationship
6. Poor cultural fit compatibility of the parties
7. Poor communication; the parties do not proactively share necessary information with each other
8. Challenges arising because of the buyer's multi-supplier environment
9. The tendency of the buyer to back away from the solution it bought as the relationship builds. Buyers that are not committed to the full change management effort necessary for success end up wanting the provider to adjust the solution rather than pushing forward through the changes. (buyer response)
10. Some failures result not because interests fall out of alignment but, rather, because they were never aligned to begin with. Then when the parties manage the relationship and contract to the achievement of those interests, the relationship is doomed.
Despite the doubts about offshoring, however, there's a sense of inevitability about it. In fact, some law firms have embraced what they can't prevent. The most notable example is the British firm Clifford Chance. 2010 seems sure to bring more growth for LPO firms but ignoring failures or reasons thereof would be foolhardy for buyers and vendors alike.
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