By almost any measure, David Galbenski's company was a success. Contract Counsel, which Galbenski and a law school buddy, Mark Adams, started in 1993 from Galbenski's parents' basement in Royal Oak, Mich., helps companies find lawyers on a temporary contract basis. The growth over the past five years had been furious. Revenue went from less than $200,000 to some $6.5 million at the end of 2003, and the company was placing thousands of lawyers a year.
And then the revenue growth began to flatten--the company grew just 8% in 2004--despite a robust market for legal services estimated at about $250 billion in the United States alone. Frustrated and concerned, Galbenski stepped back and began taking a hard look at his business. Could he get it back on the fast track? "Most business books say that the hardest threshold to cross is that $10 million sales mark," he says. "I knew we couldn't afford to grow only 10% a year. We needed to blow right through that number."
For that to happen, Galbenski knew he had to expand his customer base beyond the Midwest into large legal supermarkets such as Boston, New York, and Washington, D.C. He also knew that in doing so, he'd run into stiff competition from larger publicly traded rivals. Contract Counsel's edge had always been its low price. Clients called when dealing with large-scale litigation or complicated merger-and-acquisition deals, either of which can require as many as 100 lawyers to manage the discovery process and the piles of documents associated with it. Contract Counsel's temps cost about $75 an hour, roughly half of what a law firm would charge, which allowed the company to be competitive despite its relatively small size. Galbenski was counting on using the same strategy as he expanded into new cities. But would that be enough to spur the hypergrowth that he craved?
At the time, Galbenski had been reading quite a bit about the growing use of offshore employees. He knew companies like General Electric, Microsoft, and Cisco were saving bundles by setting up call and data centers in India. But it was an article in the November 2004 American Lawyer--titled "Briefed in Bangalore: Will India's Lawyers Help Re-shape the U.S. Legal Market?"--that really opened his eyes. Law firms could offshore their work? Galbenski's mind raced with possibilities. He imagined tapping into an army of discount-priced legal minds that would mesh with his existing talent pool in the U.S. The two work forces could collaborate over the Web and be productive on a 24-7 basis. And the cost savings could be massive.
Of course, there were big questions. Could he count on the quality of the work that came from overseas? Would language and cultural differences be a problem when it came to reviewing and coding documents for an upcoming trial? Would licensing be an issue? Using offshore workers was a risk, but the payoff was potentially huge.
It so happened that Galbenski and his eight-person management team were preparing to meet for their semiannual strategic review meeting. The purpose of the two-day event was to decide the company's goals for the coming year. The meeting was being held at the Thomas Edison Inn in Port Huron, about an hour from the company's office. Driving to the meeting, Galbenski struggled to figure out exactly what he was going to say. He was still undecided about whether to pursue an incremental and conservative national expansion or take a big gamble on overseas contractors. Could the company really afford to go global? Could it afford not to?
The next morning, Galbenski kicked off the management meeting. Marc Blessing, the company's chief operations officer, had come prepared to talk about his role in expanding Contract Counsel's client roster in the U.S. When he saw the usually easygoing Galbenski pacing back and forth nonstop, he thought something was up. "And that's when he dropped the bomb on us," he says.
Like Blessing, Mark Adams was expecting a discussion about sparking U.S. growth. He and Galbenski had chatted briefly about the prospect of outsourcing to India, but never very seriously. So when Galbenski launched into a passionate talk about his vision for transforming Contract Counsel, and doing so immediately, Adams was stunned. "He changed the agenda on us 180 degrees and it was hard to digest at first," says Adams. "He said we had to pursue bigger things and we couldn't afford to wait."
Galbenski laid out the facts as he saw them. Rather than look at just the next five years of growth, look at the next 20, he said. He cited a Forrester Research prediction that some 79,000 legal jobs, totaling $5.8 billion in wages, would be sent offshore by 2015. He challenged his team to be pioneers in creating a new industry, rather than stragglers racing to catch up. His team applauded.
Returning to the Royal Oak office after the meeting, Galbenski announced the change in strategy to his 20 full-timers. Then he and his team began plotting a global action plan. The first step was to hire a company out of Indianapolis, Analysts International, to start compiling a list of the best legal services providers in countries where people had comparatively strong English skills. The next phase was vetting the companies in person. In February 2005, just three months after the meeting in Port Huron, Galbenski found himself jetting off on a three-month trip to scout potential contractors in India, Dubai, and Sri Lanka. Traveling to cities like Bangalore, Chennai, and Hyderabad, he interviewed executives from more than a dozen companies, investigating their day-to-day operations firsthand.
India seemed like the best bet. With more than 500 law schools and about 200,000 law students graduating each year, it had no shortage of attorneys. What amazed Galbenski, however, was that thanks to the Web, lawyers in India had access to the same research tools and case summaries as any associate in the U.S. Sure, they didn't speak American English. "But they were highly motivated, highly intelligent, and extremely process-oriented," he says. "They were also eager to tackle the kinds of tasks that most new associates at law firms look down upon"--such as poring over and coding thousands of documents in advance of a trial. In other words, they were perfect for the kind of document-review work he had in mind.
After a return visit to India in August 2005, Galbenski signed a contract with two legal services companies: QuisLex, in Hyderabad, and Manthan Services, in Bangalore. Using their lawyers and paralegals, Galbenski figured he could cut his document-review rates to $50 an hour. He also outsourced the maintenance of the database used to store the contact information for his thousands of contractors. In all, he spent about 12 months and $250,000 readying his newly global company.
Convincing U.S.-based clients to take a chance on the new service hasn't been easy. In November, Galbenski lined up pilot programs with four clients (none of which are ready to publicize their use of offshore resources). To help get the word out, he launched a website (offshore-legal-services.com), which includes a cache of white papers and case studies to serve as a resource guide for companies interested in outsourcing. And in February, Galbenski will sponsor a legal outsourcing summit in India that will bring both resource providers and their potential clients together.
February will also mark another big change for Contract Counsel: its name. Though Galbenski has spent the past decade building the Contract Counsel brand, he thinks the name feels stale. A new name, Galbenski hopes, will help inject new energy into his company. For a while, the favorite was Offshore Legal Services. But Galbenski wound up taking a different route. One of his heroes is Thomas Edison; he even gives his top performing employee an "Eddie" award at the end of every year. Why not incorporate the concept of his hero's greatest invention--the light bulb--into the company's new name? He decided to rebrand his company Lumen Legal. "We're shining light on a new way to do business," he says.
Still, much at the company remains the same. The service is brand new, and only about 5% of its work is being handled overseas. There's a lot at stake and Galbenski admits that 2006 could be a make-or-break year. After launching the new brand, the next step will be trying to line up some $4 million in angel financing. Negotiations are already under way, and Galbenski plans to use the cash to invest in new full-time staff and search for new sources of legal talent; Israel looks promising, he says. He also expects the February conference in India to generate a lot more business. The changes, Galbenski admits, are as frightening as they are exciting. But in his mind, he had no choice. "It's always been about going big or going home," he says.
The experts weigh in
Too Much Too Soon
Galbenski is clearly a maverick bold enough to lead a whole new industry. But his new brand won't be able to survive many mistakes. By making the simultaneous switch from the Contract Counsel brand while moving offshore, Galbenski is taking on a big educational challenge. Clients want to know that they can trust their attorneys, so the company is going to have to figure out how to translate the message that cheap prices also mean high quality. There could be a disconnect there. Customers need to get the same quality of service they are used to--even if they are paying less.
It's All in the Training
We're using a similar business model--only instead of lawyers, we use offshore accountants to help process tax returns. On paper, the opportunities are obvious: lower labor costs and better turnaround times because of the difference in time zones. But it's something you can't just rush into. We started by taking accountants from India and bringing them to the U.S. for training. Galbenski is trying to develop an emerging market that doesn't exist yet; he needs to be patient and develop talented workers. There is no substitute for experience.
I Wouldn't Do It
There have been some disputes within the American Bar Association about whether document review and legal research constitutes the practice of law. We have decided that if we bill people out as lawyers, they need to be licensed in the state they are working in. There are plenty of phenomenal lawyers here in the U.S. that you don't have to gamble on. You can screen who is doing the work; you have access to where they went to law school, where they clerked. That's something you might not get from lawyers in India.
Successful Case Studies in Business Process Outsourcing Event
Successful Case Studies in Business Process Outsourcing
14th March 2012
In the early days, Business Process Outsourcing (BPO) usually consisted of particular outsourcing processes such as payroll. It has now grown to encompass a number of functions that are considered ‘non-core’ to the primary business strategy.
The NOA seminar for Successful Case Studies in Business Process Outsourcing took place on 14th March at Eversheds, Manchester. The aim of the seminar was to highlight recent NOA successes and share best practice
From Transaction to Transformation: KPMG and EquaTerra
KPMG EquaTerra is the largest independent third-party Sourcing advisor in the UK with over 150 dedicated sourcing professionals in the UK and Europe.
Jonathan Howgate, Principal Consultant, KPMG Sourcing Ltd, outlined the organisation’s value assurance policy, highlighting the importance of holistically reviewing all outsourcing arrangements.
Recommendations from the review help move contracts to an optimal state.
• The review policy looked at the methods, benefits and negatives of analysing performance, process, potential and other aspects of outsourcing contracts
• As an outsourcing contract reaches maturity, the continuous review process can help deliver further value to service providers and clients
Successful outsourcing case study: Rail Settlement Plan
Stephen Green, Head of Operations, Rail Settlement Plan Ltd, introduced the successful outsourcing case study of the Rail Settlement Plan. British Rail goal was to enable passengers to use the national railway network seamlessly, and found that outsourcing may be the most efficient way of doing so.
• Business operations division British Rail Business Systems was sold to a major outsourcer
• The services provided needed managing on behalf of Train Operating Companies so the Rail Settlement Plan was created
• It has proven to be the right model – RSP concentrates on understanding business needs and translating them into programmes and managing resulting services
• Green also made observations on the links between risk transfer and influence on technology and influence.
Tom Bridgford, Partner and Head of Commercial and Outsourcing, Evershed, gave a general insight into BPO as well as defining successful BPO and the problems and pitfalls that may arise in any process.
• Business Process Outsourcing includes services such as procurement, finance and accounting, HR and facilities management. The benefits can include lower costs, budget control and a better quality of service
• However, defining ‘good’ BPO can be problematic. Lack of clarity in the ITT or difficulties in measuring current success can lead to outsourcers finding it difficult to define whether BPO has been successful. This highlights the need for a robust negotiation process between supplier and client and clearly defined work-streams for each schedule
• Problems will often occur in BPO, but relevant steps should be taken to minimise damage. These include reporting to the client in advance, discussing how to prevent future occurrences and identify future damages
BPO in India
Bhupendra Mistry, Alliance Manager and Statistical Programming & Analysis at Hoffman la Roche took us through the successful case of Roche Holdings who outsourced their business processes to India.
At the 2006 Global Capacity Building Initiative, Roche identified their long term strategic goals, and it was decided that in order to achieve them, BPO was a suitable solution.
Firstly a rigorous selection process ensued that the most appropriate outsourcer was selected.
• Several country and model choices. India proved most suitable
• All relevant vendors in India were considered. Researched vendors to evaluate overall capabilities, presence in India, experience in pharmaceutical development
• Presentations, proposals and vendor visits helped to determine final vendor
Once the vendor was selected, Roche’s Indian BPO began to operate, and over a period of time, built a professional relationship and increased operations, all whilst ensuring excellent quality.
The breakout sessions were focused on BPO hot topics such as the mapping of business functions and the security of outsourced data. Questions posed included:
• Is mapping always fundamental and needs board approval?
• What can go wrong during mapping?
• Should you always have a backup?
• How can you guarantee continuity if you terminate the contract?
• What are the impacts on other parts of an organisation?
• Do your existing providers offer the complete service offering?
• Who deals with your process mapping internal, consultant (external) or CSP/intern?
Two particular questions that were raised were:
• What three things have gone wrong in your deal?
• How would you have done it differently?
When addressing these questions, three main areas were covered:
1. Scope & relationships
a. Scoping - Failures by customers to properly scope their requirements and include these in the formal contract inevitably leads to problems. The parties do not have matched expectations at the outset and customer expectations do not necessarily materialise into the service they ultimately receive.
b. Due diligence - Difficulties with due diligence exercises from a supplier perspective, often caused by scoping issues (as in (a) above) and difficulties in obtaining the required information (from either the client or an incumbent provider), resulting in a lack of understanding by the supplier of the required services and difficulties with pricing an uncertain scope.
c. Delivery – Failure by supplier operational teams (the ‘B Team’) to deliver on promises made by supplier sales teams (the ‘A Team’).
d. Third parties – Problems with third party providers (for example, sub-contractors of the customer on which some of a supplier’s activities are dependent, or a supplier’s own sub-contractors) can create tension between customers and a lead supplier. Ensuring that there is a process for identifying responsibilities, defining roles and ensuing appropriate controls are in place help to lessen any impact.
e. Trust – A key element of any successful outsourcing. A poorly scoped outsourcing (particularly on a first generation outsourcing) may lead to disagreements very early on in the most fragile stages of the relationship.
2. Pricing flexibility and changing business needs of customers
a. Evolving customer businesses requires a flexible and accommodating contractual relationship, including flexible pricing mechanisms (for example, indexed charges). Provider innovation (in 3 below) is also required to tackle these changes.
b. Gain-share mechanisms – These mechanisms can be difficult to draft, but problematic if not properly agreed at the outset. An unsuspecting customer may receive an unexpected invoice from a supplier demonstrating savings achieved, with little or no clarity around the required process. It was generally agreed that other mechanisms are, however, well received by both customers and suppliers to recognise efficiencies / performance, including service credits and bonuses (i.e. risk / reward).
3. Continuous improvement & innovation
a. Customers will expect continuous improvement of service delivery and quality throughout. Incentivisation (e.g. gain share, risk/reward etc) is often key to successfully implementing any such contractual obligations, and (as mentioned in 2 above) innovative suppliers will develop successful relationships with customers where they can identify innovative solutions as the customer’s business develops/changes.
In summary, when mapping - objectives need to be clear and consistent throughout the whole process. It is crucial that your supplier is validated and services are well defined in terms of supplier fit and flexibility.
The seminar concluded with networking drinks. To view the full set of slides please visit the members’ area of http://www.noa.co.uk
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