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Elite Law Firms Are Quietly Outsourcing High-Value Functions

The American Lawyer: “Sullivan & Cromwell spends millions of dollars on technology, ensuring its equipment is accessible to its lawyers around the globe and that its digital security can keep clients safe. Chairman Joe Shenker, citing bank surveys, says the Wall Street firm’s tech costs per lawyer are higher than any of its peers. Still, Sullivan & Cromwell has managed to improve its profit margin while maintaining high-quality telecommunications, computers and servers. That financial success isn’t tied only to the firm’s lawyers. It’s partly a result of back-office decisions. Starting in 2017, the firm began outsourcing some of its technology functions and infrastructure. The change required about 30 high-level staffers, including engineers, to leave the firm and become employees of another business, HBR Consulting’s managed services division. It was a sea change in Sullivan & Cromwell’s evolution, Shenker says. “You can’t keep up doing state-of-the-art, best-of-the-best [in technology]—which is what we try to do—doing it yourself,” Shenker says. Law firms just can’t compete with big tech companies, he says. Instead, “Let’s focus on what we’re great at and let other people focus on what they’re great at.” Sullivan & Cromwell isn’t alone. Big Law is embracing outsourcing. Not only are more firms doing it, but the industry is outsourcing a growing number of high-value departments, often shedding administrative and operations employees in the process. The decisions carry some risk, but also big rewards. The outsourcing trend goes beyond law firms opening so-called “captive” operation centers, in which they move some back-office jobs to lower-cost locations with firm employees. More and more firms are moving departments and jobs outside the firm entirely…”

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