Professional services jobs hit outsourcing

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Nasscom, the premier technology commerce body in India, has just released a report saying that 35,000 legal jobs will move overseas from the US by 2010, while Forrester Research says that 12,000 legal jobs had already gone overseas by last year. A wide variety of US and UK law firms in particular have gone down the route of outsourcing not just back office work, but also professional work. Last year Hildebrandt – a high-end legal consultancy – and Office Tiger – an Indian outsourcing company – launched a service offering business process outsourcing to law firms, helping make this a mainstream strategy. One of the seven drivers of professional services I described in Developing Knowledge-Based Client Relationships is Modularization. This describes how technologies such as web services enable business processes to be broken down into smaller modules, each of which can be performed inside or outside the firm. Professional firms must have more standardized work done by cheaper providers, or they simply will not be competitive. It will take some years, but starting from now low to medium-level professional work will increasingly be done outside professional firms, and often across national boundaries. The shift has begun.

The gang of four

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An article yesterday on Bloomberg News (not available on the web) confirmed what a PricewaterhouseCoopers executive told me last week: PwC, Deloitte, and Ernst & Young have all issued instructions to their partners and staff not to denigrate or poach the clients of KPMG. The Bush administration is seeking a settlement on charges related to KPMG’s sale of tax shelters, rather than seeking to press charges. Instead the individual partners are facing criminal charges. It was clear from the start that regulators such as the SEC had no interest in pursuing KPMG in the same way that they hounded Arthur Andersen. Moving from four to three top auditing firms would result in massive reputational damage for the audit profession, forcing clients and regulators to reassess the current cozy oligopoly. So the audit firms are acting extremely differently from when Arthur Andersen was in trouble, when the attitude – and actively encouraged behavior – was kick them when they were down. The question becomes, if neither regulators, clients, nor the Big Four themselves will allow any of them to disappear, what is the moral hazard? I believe the firms understand that they will do the best when their practices are pristine. But knowing you can get away with it is not the best foundation for good behavior.

Being a leader in the professions

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I changed the subtitle on the recent second edition of Developing Knowledge-Based Client Relationships to “Leadership in Professional Services” (from “The Future of Professional Services”), as leadership is the primary theme I developed in rewriting the book. Professionals must be leaders outside their firms, in showing their clients the value of collaborative relationships, and leaders inside their firms, in inspiring teams and collaboration that integrate the best resources of the organization to provide uniquely relevant solutions to their clients. Philip Agre of UCLA has just written an excellent article on the very similar theme of How to Be a Leader in Your Field. It provides clear and practical advice, which although aimed at students and younger professionals, is relevant to professionals at all levels. His stance ties in closely with the issues I often talk about of “knowledge specialization”. In a world based on specialist knowledge, our personal strategies for the domains of deep specialist knowledge we develop are at the heart of our careers. Philip Agre’s website provides many other great resources. I came across his work a number of years ago, as it crosses over extensively with my interests, including shifting information flows in society, identity and privacy, and networked education. Another article of interest to professionals is his piece Networking on the Network, a guide intended for PhD students, but relevant to all professionals.

Book Now Launched!

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The second edition of Developing Knowledge-Based Client Relationships is now out, with the Global Book Launch in New York in late June a big success, despite storms that evening. It will still take another couple of weeks before it’s in bookshops outside the US, but it’s available from online booksellers. Two free chapters are available from the book website. Chapter 1 provides the high-level treatment of the idea of knowledge-based relationships, and the critical new theme in the book of professional services leadership. Chapter 6 is entirely new to this edition, covering how to develop and implement key client programs. Further book launch events or workshops are scheduled or in planning in Sydney, London, Hong Kong, San Francisco and various other US cities in the fall – see my global schedule for details as these are finalized. Please let me know if you have any thoughts or feedback on the book, and in particular further examples of leading practice in the field – I’m very interested to hear from you.

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The evolution of legal services

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I gave the keynote address at LegalTech LA on Tuesday, conveying to the delegates my vision of “Leading Your Clients in the Connected Economy,” in the delightful retro-kitsch setting of the Westin Bonaventure in downtown Los Angeles. The legal community—at least recently—has being fairly good on implementing information technologies, which is only natural given how information and knowledge-centric they are. However it is another substantial leap for them to extend these kinds of systems to their clients. Encouragingly, several of the leading software platforms being touted at the exhibition offer capabilities to create client extranets easily and simply. These are often just ways of making documents and billing visible to clients—which is an important step—but are well shy of allowing workflow to be integrated into the clients’ processes—which is where this is all going. Ready-to-roll customized client extranets are now available in a number of firms. The Chief Technology Officer of one of the leading West Coast law firms told me he asked at an internal conference of all their litigation attorneys how many had created extranets for clients, and was amazed to find out that 85% had done so. No arm twisting involved.

One of the key questions is to what degree clients will drive the shift to providing online legal services and transparency. At the moment these demands are coming primarily from the most sophisticated Fortune 100 companies, however the scope is gradually broadening. There is a widely held view in the global legal community that the UK law firms—and in some cases even Australian ones—are ahead of US firms in implementing knowledge management and online services. My perception is that this is not because clients in these regions are more demanding, but that the law firms are being more innovative, and arguably the benefits of this can already be seen. Law is one of the most conservative professions, not least because the partnership structure (especially as implemented in law firms as opposed to the slightly more corporatized large audit firms) is very difficult to shift. I believe that the next 5-10 years will bring substantial change in the legal industry, and what clients expect in terms of service delivery. Those firms that do not fundamentally shift how they work with their clients will find it increasingly tough going.