New Areas Must Open to Outsourcing

RESEARCH TRIANGLE PARK, N.C. (TheStreet) -- Organizations have been under pressure for decades to reduce costs, and the pressure has been increasing steadily as the economy struggles and worldwide competition increases. It is no longer enough to examine "traditional" sources for performance improvement. To be competitive, companies must also think differently to change how they work.

Businesses used to paring costs by outsourcing functions such as manufacturing should consider looking at less traditional areas as well, including legal support.

For most organizations the opportunity to improve performance is associated with:
  • Business processes
  • Core competencies
  • Cost structure
  • Investment in resources, projects and people
  • Strategic relationships
  • Vendor and supply-chain management
  • Customer-related activities

Each category can be pursued individually or with a linked strategy that affects multiple facets of operations. For instance, outsourcing can be based upon a decision to focus on product or technology development, customer experience or other proprietary processes that create the opportunity to use external resources whose own core competencies are in "operational" areas such as finance or customer call centers.

While outsourcing as been accepted for decades in finance, accounting and other back office activities, some areas of business have been shielded from the pressures to become more efficient, cost effective and process focused. Legal services, in particular, have often been accepted as an area that "costs what it costs" and is expected to rise as regulatory complexity and litigation rates continue to increase." That may no longer be the case, because organizations are finding it much harder to afford the rising costs of necessary and crucial legal services.

In 2001, Mindcrest was founded with the belief that the traditional model for legal services could be improved upon by combining best practices from industries that have already been successfully outsourcing by leveraging technology and global labor markets. Mindcrest designed a legal services model that combines local legal expertise with an offshore talent pool of well-educated legal minds to offer a range of legal services including litigation support, contracts management, compliance and legal research to customers that include several Fortune 500 organizations. According to Mindcrest, they can often reduce the cost of legal services by 50% to 70% and sometimes as much as 90%. They said one client calculated the cost savings -- on the document review phase alone -- at $12 million!

What Mindcrest founders Ganesh Natarajan and George Hefferan understood from their years of experience in large law firms was their customers' need for lower cost, high quality and timely legal services. Legal firms and in-house departments were under growing pressure to handle more and more complex legal issues, larger volumes of material and have a broader and deeper range of knowledge. As complexity and volume increased, so did the costs.

"The biggest issue for our customers is getting them over the hurdle of having people at remote locations and outside facilities doing this work. Historically, they have experience with other sectors that have been outsourced, like IT or BPO activity. The law is still something reasonably new in the outsourced services," Natarajan said. With that in mind, here are some lessons they've learned while changing customers' attitudes toward their services:
  • Change the way the customer thinks about business processes; management, control and oversight; cost control; use of technology; and business models.
  • Learn from others' success via best practices; technology improvements; and business process assessments.
  • Identify opposition points to outsourcing, such as the traditional "We've always done it this way"; entrenched "Our expertise is too important to be external"; attitude that internal equals safe, as in "If it is in-house, it is less risky"; and control issues such as "We need to see it getting done."
  • Understand that increasing costs come from: the addition of more resources to the same processes instead of evaluating current processes to look for better, more efficient ways to do things; assumptions on what can be done based on historic perspectives, not current options; and failure to examine business processes to gain deeper understanding of what is important.

Ultimately, customers are concerned with quality, cost and control. They do not want to be constrained by the outsourced service; it should be seamless and decrease their risk. The goal is to not only save time and money, but also to maintain or surpass the quality level of current operations. For many organizations, the outsourcing decision rests on their own capability to manage the outsourced relationship.

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Lea Strickland, M.B.A., is the founder of Technovation Entrepreneur , a program that helps entrepreneurs turn their ideas into businesses. Strickland is the author of "Out of the Cubicle and Into Business" and "One Great Idea!" She has more than 20 years of experience in operational leadership in Fortune 500 and Global 100 companies, including Ford, Solectron and Newell.

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