Outsourcing, Partner Profits

Baker McKenzie Profits Per Partner Tumble. More Outsourcing in the Future?

baker-logo.gifBaker & McKenzie, which held the #2 spot in terms of revenue for 2008, has taken a dip in 2009. The firm’s fiscal year ended on June 30, and AmLaw Daily reports that global revenue fell by 3% for the firm.
As noted in Morning Docket, profits per partner took a bigger hit, plummeting 17%, thanks to the recession:

Baker & McKenzie reported Friday that global revenue declined 3 percent to $2.11 billion and profits per partner fell a more significant 17 percent to $992,000 in fiscal year 2009, bringing an end to a four-year period over which the firm experienced consecutive double-digit revenue growth and an 85 percent increase in profits.
While Chicago-based Baker & McKenzie, which generated 66 percent of its fees outside the United States, highlighted the role currency exchange rates played in the falling benchmarks for fiscal year 2009, management admitted the economic downturn negatively impacted the firm’s financial performance.

As we’ve previously reported, Baker has been a leader in terms of outsourcing legal work. The new profit numbers should mean that the trend continues. More details after the jump.

outsourcing biglaw aba tsunami.gifIf outsourcing has been working for Baker & McKenzie so far, it makes sense that the firm would continue to move American legal jobs overseas in response to the new PPP numbers:

The search for cost reductions has led to more outsourcing. According to [executive committee chairman John Conroy], the firm expanded by 25 percent in what is now a 500-person facility in Manila that handles some of its word processing, client research and desktop publishing needs. “We have tried to be innovative in reducing cost by further developing what we can do in Manila,” Conroy says.
Baker & McKenzie’s growth hasn’t been limited to its Philippines outsourcing outpost. In late 2008 the firm opened an office in Abu Dhabi. To date, Baker & McKenzie has more than 3,900 lawyers practicing at 67 offices in 39 countries. Over the past year, the firm has added nine shareholders bringing principal head count to 720.

If Baker partners are really feeling squeezed by the new numbers, they could always move to Manila. I hear from Lat that $992,000 goes a long way over there.
The PPP numbers from Baker & McKenzie are probably just an early indication of what the ledger is going to look like at many firms once 2009 goes on the books.
Baker & McKenzie’s Profits Fall 17 Percent [Am Law Daily]
Earlier: 2008 Revenue Numbers
Despite Mumbai Tragedy, Outsourcing Continues

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