🎬 Big Law is outsourcing non-legal work. Is is it because of the pandemic?
As the pandemic continues, America’s biggest law firms are shifting more non-legal services to a centralized third party. These jobs are related to technology and infrastructure (not like the legal services of Lawtrades, Axiom etc..).
Outsourcing was happening before the pandemic: Law.com had a trend piece on the subject in January, highlighting how Sullivan & Cromwell was moving technology and infrastructure jobs to an outside company. Somewhere around 25% of the AmLaw 100 has used the same firm to help with outsourcing initiatives.
The benefit is clear: Technology costs can be as high as $20 million to $30 million a year. Outsourcing comes with an expected savings of 20%, or ~$5 million. With the pandemic causing financial issues, partners still want high payouts, and they want to minimize layoffs and furloughs.
But are there issues?
UnitedLex, a third party company that had assumed work for the now-bankrupt law firm LeClairRyan, is being sued for allegedly sucking money out of the firm. Legal analysts question whether the risk of placing trust in a third party is worth the expected savings.
The increase in outsourcing is expected to continue through the pandemic. It would take a few more conflicts and bankruptcies to change law firms’ outsourcing trajectory.