2018 Legal outsourcing trends & opportunities

March 28, 2019

The five key findings from this year’s survey indicate that law firms are trimming down back office costs to invest, so they can meet growing client demands and business growth necessities.

Our sixth Annual Trends and Opportunities in Law Firm Outsourcing Survey results are in, and they provide great insight into the investment priorities and changing expenditures of law firms throughout the US and UK. The survey highlights a number of client pressures altering firm behavior, as well as the shifting cost reduction landscape.

Here are our five key findings from our 2018 survey.

Data security is driving both savings and investment decisions

With cyber security, data security and confidentiality as the highest priorities, firms anticipate spending more and more on technology budgets. Heading the list for the back office is Data Security and Confidentiality (40%), which is up 17% from last year’s survey illustrating that in today’s data driven world security and privacy take precedence over reducing costs. Two-thirds of respondents (67%) say they will increase their technology budgets up to 10% due to cyber concerns while 33% say they will increase by at least 10%. Respondents cited cyber security (80%) as the top area where firms are making technology investments. Firms also say cyber security (88%) is the number one client issue, and this client pressure has the most significant impact on how they make decisions on their technology investments.

Technology (57%) is the highest rated area where firms are making staffing investments. According to two-thirds of respondents implementing more technology is the chief strategy to achieve savings. When asked in what areas firms will reduce administrative staff, IT/technology (13%) is one of the least cited areas. Not only do firms feel the pressure to invest in technology due to cyber concerns and data security, but they also say increasing the use of technology (64%) is one of the top strategies to achieve savings.

A vanishing breed: firms continue to reduce traditional secretaries and back office staff

A majority of firms are planning to reduce headcount in the next 12 months (59%). The top two areas of planned reduction by support function are secretarial staff (78%) and back office/administrative staff (74%). These two areas have consistently topped the list for the last three years. Also, high on firms’ lists for reduced cost is document processing; as 61% of survey respondents are focusing on this area. For 2018 it is the number one target for back office/administrative staff reductions. Records (52%) remains high on the radar for attorney support staff cost cutting.

Traditional secretarial roles are vanishing even more than past surveys reveal. The most favored current ratio of secretarial staff to attorneys is 1:3 (41%). For the first time in six years, none of the responding firms reported a targeted ratio of 1:2 (0%) and only 16% reported a targeted ratio of 1:3; which suggests that most firms are getting closer to the top target ratio of 1:4 (36%).

When it comes to support functions, clients are in the driver’s seat

Client pressure to reduce costs is the greatest challenge in back office/administrative functions. The top challenges that firms believe they are facing in the back office and administrative functions are centered on client pressures. More than half of respondents (59%) see client pressures to reduce costs as their biggest challenge followed by client pressures to assure data security and data protection (48%).

Digitization and paper reduction is moving ahead rapidly

Among the top client-centric benefits of digitization/paper reduction initiatives cited are enhanced data security (58%)—up 21% since last year’s survey. Resistance from partners and associates is still the overwhelming perceived barrier to reducing the reliance on paper (85%). This year’s Survey shows 10% of respondents see security risks as a barrier to implementation. Other barriers, such as cost (17%) and technology (23%), have decreased, which is a sign that the technology needed to implement digital workflows is becoming more accessible and cheaper. The leading driver of paper reduction initiatives is E-working—workstyles (63%) up 10% from last year’s survey. Paper, however, remains dominant. Nearly 80% of firms are still sending paper records to storage, a 6% drop from last year. The majority of firms are spending within the same range of money ($0–$250,000) on offsite storage (65%) as they are on electronic data storage (68%).

Increased competition is driving marketing spend

Overall 42% of firms are planning to increase their marketing spend in 2018, and more than two-thirds (75%) plan to increase spending by more than 5%. Almost all of the firms planning to increase spending will inject more dollars into the business development category (95%).

To gain more insight from the research, download the complete survey results.