Tuesday, October 16, 2012

Outsourcing Trends for Businesses in 2012

Outsourcing of IT work is increasing considerably in 2012, but that may be the only outsourcing that will increase by a substantial amount. The expansive outsourcing of legal work in the past may have come to a screeching halt, at least temporarily.

The Outsourcing Pace for Legal Work in 2012
Outsourcing of legal work is continuing at a slower pace in 2012, however, many experts believe that business conditions in the law business will prompt an increase. Last month a report from Citi Private Bank’s Law Firm Group said the following about the bottom line for law firms: “With weak demand growth and the continuation of expense growth, it is likely that expenses will continue to grow at a faster pace than revenue, squeezing margins and making it tricky to achieve even low single-digit profit growth.”

Large Law Firms are STILL Looking to Outsource
In light of the possible trouble that may lie ahead for large law firms, many are preparing for the worse. One way to prepare for a tough economic climate is to reduce one’s expenses.

It has been properly noted by David Lat on October 3, 2012 at www.abovethe law.com that the work that generates revenue for firms, still needs to get done. “One way of reducing expenses while still getting all the work done is to outsource certain functions to an outside service provider. This effectively gets job positions ‘off the books’ of the law firm, which no longer has to pay salaries or benefits for the lawyers or staffers in question; the law firm just has to pay the vendor.”

The Canadian Law Firms are Looking at the Reality of Outsourcing
In the September 26, 2012 Toronto Globe and Mail, it was reported that Christopher Sweeney, a co-founder of ZSA and the president of LexLocom, said the Canadian legal market “…has been reluctant to embrace outsourcing.” He says, however, “… the sector is growing, and a future of more outsourcing, and considerably fewer junior lawyers at the big firms, is inevitable.” “I don’t see any way around it,” Mr. Sweeney said. “It is the future.”

There is Still a Negative Outsourcing Growth in 2012
The negative outsourcing growth in 2012 is found in the US associate lateral hiring market in Asia for US and UK firms which are in a severe down cycle, at least when compared to the recent boom hiring periods (mid ’06 – mid ’08; mid ’10 to mid ’11), according to a report in Asian Chronicles published this week.

The Prospects for the Future
The remainder of 2012 will continue to see a slowdown in outsourcing, but the slowdown in revenue and the rise in expenses will ensure that outsourcing will rise again and perhaps to new highs.

Bio: Jacob Taylor, a finance writer for AnyLawsuits Settlement Loans, is an under-graduate writer who enjoys writing financial articles around business and personal finance.