By Sal Mancuso and Jackie Flynn
Should Law Firms Seriously Consider Managed Services for Practice Support Departments?
In an effort to reduce law firm capital expenditures and relieve IT of unnecessary burdens, law firms nationwide are examining whether they should outsource their litigation support hardware and software infrastructure requirements. While some firms are making significant infrastructure investments to retain more eDiscovery and hosting services internally as a means to provide added value to their clients (think WilmerHale, Sidley Austin and Reed Smith), many are looking to offload the hardware and software headaches that arise when managing large volumes of data internally. In the below conversation, UHY Advisors’ Jackie Flynn speaks with Salvatore Mancuso, the past director of practice support at Proskauer Rose LLP, to explore the pros and cons of procuring managed services and when it may be a viable option for a law firm.
Q: What is your definition of managed services for a practice support department?
SM: Law firms who have in-sourced all or some of their eDiscovery services, that typically are available through service providers, now have the option to outsource different layers of their department. For me, a good starting option for a firm is to consider how best to manage its underlying eDiscovery infrastructure ‒ turning your software over to a provider who will supply the hardware is one such option. This mindset is not new for firms. In years past firms, through facility management services, have outsourced their mailroom, word processing and reproduction centers. Having a third-party provider manage back office support of eDiscovery services is an interesting solution as it allows a firm to take advantage of evolving technology without taking on the direct cost and management of new software and missing out on real-time software updates. The ideal solution that best fits each individual firm really depends on the firm’s value system and culture ‒ does it want its litigation/practice support department to be considered a cost of doing business or a potential revenue source?
Q: What services do you think make sense for a law firm to outsource?
SM: Firms should assess their needs by looking at their department at different cross sections: people (management, project management, project coordinators, technical analysts, systems analysts, etc.), type of litigation supported (large and slow-paced versus small and quick-paced), core software, support software (MS Access, text editors, utilities, etc.), hardware (file servers, SQL servers, virtual servers, etc.) and overall P&L. Is the department an operational cost or a source of revenue for the firm? Can you get any of the above layers at a lower cost and higher quality? Will outsourcing these services generate a better product, increase productivity or increase profitability while delivering high-quality client service?
Q: Do you think the quality of services you would receive from a third party could compare to an in-house employee?
SM: If we are talking about hardware and software services, then yes, I would be comfortable outsourcing to a third-party provider. In fact, the level of support they provide might be similar or even better. But outsourcing your in-house consultative staff to a third-party provider is not as straightforward. If we think back at the facility management example, the quality of staff is not always at the level one expects once the outsourced party takes over a department. In my experience, you tend to get inexperienced and junior staff to run the underlying services built into the contract. As a buyer of staffing services, you have to ask yourself, will you have control of the hiring process to ensure the experience and knowledge required to run an effective department?
For me, successful departments always come down to the quality of the personnel. Project management, as an example, is a key component to running a successful department – one that I would not recommend outsourcing. This position requires a thorough vetting process, looking at credentials, previous experience at law firms versus at a service provider and assessing the years of experience one has in a project management capacity in the industry. In fact, today there is a trend of service providers attracting project management personnel away from law firms. Why? Because there is not enough training and mentorship in the marketplace. I have learned that the best project managers are the ones that have been in the trenches and worked under proper mentorship and training.
Lastly, consider the firm’s perception of your department. How will the department be viewed if the staff is not at the level required or at the level the attorneys were accustomed to before the change? One should never undervalue the significance of using qualified and experienced staff.
Q: Why do you think outsourcing a firm’s practice support IT infrastructure is becoming an attractive alternative to law firms who currently manage client data internally?
SM: There are numerous reasons why a firm would and should consider outsourcing the IT infrastructure, including:
- Immediate scalability of software, hardware, storage and staff
- On-demand services and 24/7 support, particularly outside business hours
- Increased flexibility in procuring new technologies
- Dedicated qualified support resources
- Real-time upgrading of hardware and software
- Effective and straightforward budgeting of annual expenses
- Ability to effectively utilize cheaper storage and introduce an effective retention policy
Storage alone competes with other costs in the firm and is hard to budget for since case volumes are unknown at the start of a matter. For example, the average case size is quickly growing as new cases cost 20 times that of matters from five years ago.
Q: Do you think this type of service is geared toward large or small law firms?
SM: It depends on the model and culture of the firm as well as the type of litigation supported, not necessarily the number of attorneys a firm employs. A single plaintiff practitioner with a booming caseload may have just as much need for a managed services solution as a 500 litigation attorney law firm. There is no one size fits all answer for this service.
Q: Do you think outsourcing hardware and software infrastructure gives a firm the opportunity to upgrade to new technologies?
SM: Yes. The largest upside to exploring a managed services solution is the opportunity to upgrade and/or introduce new technologies to the firm without the upfront capital costs. The practice support desktop environment is different than most user groups within the firm. Using an outsourced solution provides greater flexibility to install third-party applications and better support of the user’s needs. Outsourcing the IT infrastructure also avoids potential security issues and political headaches that may occur within the firm with new software installations.
Q: Does outsourcing provide an opportunity to “clean up” old cases?
SM: Yes. Most of the managed services models I have assessed use a per-GB/month pricing scheme. Even those that use a subscription model base the recurring cost on GBs. Using the GB model, a firm may elect to keep inactive cases in-house and move active billable cases over to the outsourced provider. This alone should prompt a firm to clean up its practice support data storage. Since you need to account for each GB, there is an opportunity for case remediation. A good portion of data that takes up space on our servers is residual data that dates back since the inception of the department. There is also a possibility for cases to exist in more than one environment. For example, think of a firm that migrated from Concordance or Summation to Relativity. A firm may elect to keep all Concordance legacy databases in-house but use the outsourced provider to host data for new matters in Relativity. It will be important to define at the onset of the transition period what is currently active and stays internal versus new matters.
Q: Does outsourcing provide an opportunity to develop a better data management policy or case archiving protocol?
SM: Yes, since we are faced with the challenge of finally dealing with dormant data and determining if we should move it to a different environment. This process will require hard decisions on how to manage the data as well as an opportunity to create a starting point for new policies going forward. The cost for outsourcing should motivate a firm to better handle data for closed matters as do service providers.
Q: What happens to the software already purchased by the firm, should outsourcing become a reality?
SM: Some software can be transferred with no problem, and some will have to be renewed after they lapse or run out, either by the firm or the new provider. One important consideration is the need to build in maintenance contracts as the new provider takes over your prepurchased technologies. For example, if a firm has already purchased Relativity, the firm can opt to maintain ownership of its Relativity licenses with maintenance fees and licensing as the software is still owned by the firm. However, it will be hosted on the provider’s servers. Also, some third-party applications – such as LAW Pre-Discovery Processing and text editors – may already be a part of the providers’ tool kit and will not need to be purchased or renewed. Finally, some licenses may never be outsourced as they are best used when locally installed by the firm. It is extremely important to involve the firm’s IT resources in determining which practice support systems work with the current firm’s environment. For example, transcript management databases that allow for streaming video may not work properly when hosted by an outside provider.
Q: Can an outsourced solution increase a practice support department’s billable hours? How so?
SM: I believe it can increase a department’s billable hours. Currently, a practice support professional may spend time focused on managing the current database environment which cannot be billed back to clients. If that task is removed, the project manager may be able to use the newly available hours for billable tasks. Today, a limit exists for what in-house project managers can do based on time constraints. If a team can quickly scale up and down based on its caseload, it can offer additional consultative work that would traditionally be outsourced based on team’s overall bandwidth.
Q: Some firms are interested in outsourcing their infrastructure as well as the people to a third-party provider. What are the challenges one should consider with choosing a fully outsourced approach? What about the concern of losing legacy knowledge on existing long-term cases?
SM: Well, by outsourcing people, I think of the services that once were internalized now being handled by staff that is no longer on the law firm’s payroll. The first challenge is in maintaining a certain level of quality and consistency in the service offering. Another challenge to be concerned with is the inherited knowledge one gains by working on the same client-related cases or with the same case teams that would otherwise be compromised if the staff were outsourced. You will most likely see turnover right from the start as most staff would be reluctant to stay with the absorbing company. The other such style would be to simply bring in new staff as part of the service offering as law firms have done in facility management solutions for their reproduction and mailroom centers. Since experienced project managers and analysts are highly sought after in the market, I am not convinced the law firm would get a good return on its investment by outsourcing staff.
Q: Can a managed services model provide firms the cost savings they think it will?
SM: I truly believe it can. As mentioned earlier, it depends on the value system of the law firm. If the law firm recognizes the value of the services its litigation/practice support department renders is the same or better than the value of the services provided by an external service provider, then it is a no-brainer. Regardless of how the law firm chooses to deal with the costs associated with managed services, the savings can be measured in dollars, overhead, risk associated with managing client data and the burden it has on the internal IT department.
Q: Can you provide a few tangible examples of where cost savings can be seen?
SM: Yes, in areas such as storage fees (live, offline, disaster recovery systems and backups), labor (personnel, database administrators [DBAs], IT hours), maintenance and upgrades of storage fees and maintenance and upgrades of hardware fees.
Q: Can you predict the IT departments’ reaction to a decision to utilize a managed services provider to take over the infrastructure and storage needs of a practice support department?
SM: You would be surprised as most IT departments I know would welcome the solution. It means one less headache for IT to manage and certainly one less set of data to ensure is available should a disaster occur.
Q: Would a managed services contract start at a certain point in time or would the plan include an option to offload all data currently being stored and hosted by the firm?
SM: I envision the plan starting on a go-forward basis at the outset and include legacy data as time and case milestones permit. It would be very difficult to move all data in one fell swoop. Prioritizing the data by most-active to least-active cases, and certainly by data types, such as client original data versus the underlying processed data or hosted data, is the way to approach the challenge. So, a contract can start at any time as long as it speaks to the classifications of data and builds in tiers based on aged data.
Q: Do you believe a managed services model can create an opportunity for a data remediation exercise for dormant data?
SM: Absolutely. After all, as with any data migration, it is an opportunity to perform some spring cleaning. I recommend, if a data disposition plan is not already in place, formalizing one that distinguishes data between dormancy and a closed state. The latter should involve the three options that most vendors will provide to a client. One: destroy. Two: return. Three: maintain at some recurring monthly cost. For the former, this is a good time to look into tiered storage where the secondary storage facility can be used to house dormant data that can be easily restored within a reasonable time.
Q: How will these services be billed back to a client?
SM: The recovery of costs is dependent on the value system each law firm places on its internal eDiscovery services. Some firms build in the cost as a value-add to other billing elements already in place, and yet other law firms have attempted to create a fee arrangement that mimics the service provider industry.
Q: Do you envision a managed services contract including after-hours support?
SM: For me, that would entail another level of service that one could tack on to the contract depending on the resources the solution provider has in place. If a law firm is looking to achieve a 24/7 service level operation and costs are an issue, one way to deal with this issue is to identify a managed services solution that can support overflow of an existing in-sourcing solution. The first thing to do is decide on which cross section to extend through the managed services solution: administrative/technical support, transactional services or project management. I can see relying on an outside entity to provide after-hours support on the technical support and transactional services end; however, project management is not a service I am willing to outsource.
Q: Do you think a managed services provider should include a clause for a first right of refusal on new matters requiring external processing or hosting services? Why or why not?
SM: That aspect of the service line is for the law firm to define as part of the Service Level Agreement. Personally, that would not work for me as my organization is currently supporting an in-sourced model. The main driver of outsourcing is the need for infrastructure and services, not necessarily as an overflow support solution.
Q: Security is a major concern when contemplating a managed services solution. What concerns do you have about data breaches and protecting client confidentiality?
SM: Security is a very important part of the assessment process. Some clients require a certain level of certification, penetration testing and auditing before they would even contemplate sending over their data. If the solution is one that is solely based on infrastructure and is intended to be the environment where all client data will reside, the security of the managed services solution should be assessed and tested by the law firm’s IT personnel as well as tested against one or two of your corporate clients’ security protocols. Clients will need to be reassured that their data will remain secure, restricted on the matter level, accessed by law firm members only and not on a multitenant network environment. For some law firms, hosting data through a managed services provider that uses a top-tier and fully vetted and tested storage and security solution could provide them favorable feedback in attracting business.
Q: How will the transmission of data be affected?
SM: The speed by which data travels to and from the managed services environment is critical. Depending on your current environment, you may see slower or faster speeds. For instance, if your law firm centrally deploys its network via a data center, your data may already be slower than what you would be experiencing if it were local to the office. That said, assessment of transmitting data should be added to your checklist of items to vet when using a managed services provider. I recommend including your IT department during the vetting process. You should also find out if the managed services provider will allow for delivery and loading of data at its location instead of having data being copied from your location, which can make uploading and production deliveries more efficient.
Managed services can allow law firms to get back to doing what they do best – practicing law, not managing and storing data. In the end, the opportunity to increase profitability, utilize labor productivity and reduce the overall cost of eDiscovery expenditures will result in many firms deciding to move some, if not all, of their practice support infrastructure to a third-party provider.
This article was published in ILTA’s October 2013 white paper titled “Risks and Rewards: The Good, The Bad and The Revered”
About the Authors
Sal Mancuso has 25 years of experience in providing litigation and practice support, stemming from both the law and the service provider side of the industry. He is currently the Director of Client Services at RVM, Inc. NYC. Prior to RVM, Sal was the director of practice support for Proskauer Rose LLP and the litigation technology services manager at Willkie Farr & Gallagher LLP. Contact him at firstname.lastname@example.org.
Jackie Flynn is the Mid-Atlantic business development manager for the UHY Advisors eDiscovery and digital forensics practice. Flynn routinely consults with large domestic and international clients in the health care, telecommunications, technology, government contracting, energy and education industries with regard to formulating defensible collection plans, preservation strategies, data extraction, forensic analysis, targeted culling and document review. She can be reached at email@example.com.