LPO Conference: The Future of Legal Outsourcing
Live from the ACI Legal Process Outsourcing conference in NYC. Session (8:45am): Capitalizing on the Growing Trend of Outsourcing Legal Services Offshore. Speakers: Robert Glennie, Co-Founder and CEO, New Galexy Partners Limited; Russell Smith, Chairman, SDD Global Solutions PVT LTD. Bolded text reflects what I found most interesting.
– The idea of legal outsourcing was unthinkable a few years ago but is now widely accepted. “Futurologists” should not listen just to customers, they need to think of new ideas. Before the advent of Model T, customers would have said they wanted a faster horse.
– Corporations seek to manage risk and reduce cost. They want to manage “hidden costs,” for example, the cost of training new lawyers.
– Benefits of Offshoring: Free highly paid lawyers to work on higher value matters.
– Whereas law firm lawyers often feel threatened by offshoring, inhouse lawyers don’t. But lawyers should not feel threatened because the work going offshore is work domestic lawyers don’t want to do.
– Reviews European work that New Galexy does: purchasing contracts for Dutch manufacturer; risk management of contracts for a global professional services company; commercial contracts and software licenses for the UK Head Office of a US-based global insurer; media and commercial contracts for a UK media company. LPO lawyers negotiated contracts for corporations. Offshore lawyers spend 2 to 3 weeks domestically at office of general counsel for one client.
– The Future: Most of our growth has come from existing clients. Thinks law firms will become customers as well (cites that Clifford Chance is already outsourcing back office work).
– Asked ValueNotes (analyst company) to interview customers and do market research. Highlights of an interim report: more complex tasks are being offshored as comfort level increases; LPO market will grow to $640 million (US) in 2010;
– Volume of judgment-based work is increasing
– One corporate GC heard from his management that he HAD to outsource because legal was only function in the bank that was not using outsourced services.
– Believes that LPO work will move from on-off projects to constant stream of work.
Smith presents (without slides!):
– Will talk about own personal experience with legal outsourcing.
– Has worked for 4 law firms, from very large to solo. I became disillusioned with the practice of law. As a partner, I was less happy than as associate. There was a low level war between partners and clients on billing. Took one year off. Missed law practice itself; realized the problem was HOW law was practiced. Started a solo firm and it grew – it was a very low overhead operation. Focused on media and entertainment.
– As a tourist in India, found it easy to do legal work from there. Read the ValueNotes report and found it eye-opening – thought that “I can do that.” Decided to open an Indian office. Started with 5 and now has 50 workers in Mysore.
– Four myths of outsourcing: (1) Indian lawyers don’t have the skills or aptitude to do high level work such as drafting pleadings, legal research. (2) There has to be a compromise in quality for low cost. (3) Ethics is a constraint. (4) Legal outsourcing is a threat to law firms.
- 1. Re skills and aptitudes: there is a high and improving level of skill in India. Law schools in India do not prepare graduates for law practice but the same is true in the US. My company provides a lot of training.
- 2. Cost – quality issues: Rent cost in Mysore is 1/43rd that of mid-town Manhattan. Clients are paying a lot for space, for training associates, for inflated hours (“let’s face it, there is inflated hours in time sheets”). The work we do in India is flat fee so time padding does not occur and clients don’t pay for training.
- 3. Ethics and confidentiality: Security in India is much higher than in most US law firms. “We have a Microsoft-free environment that is more hack proof.” The idea of unauthorized practice of law is a red herring. Most firms have lawyers who are not licensed in a particular jurisdiction. It’s all about supervision.
- 4. Not bad for law firms: LPOs are doing work that would not otherwise be done because it would be too expensive. My firm did a script review and multi-state analysis to determine shooting locations that would not have been affordable onshore. We had 20 Indian lawyers on project. The client would not have accepted 20 US lawyers doing the work. Another example: set a flat fee for litigation; could not have done this without Indian lawyers, who did most of the heavy lifting of drafting motions. A partner from a very big law firm called me about a pitch to a Fortune 30 company. A pre-meeting question asked about legal offshoring capability. This partner was forced to offshore but he was enthusiastic because he saw opportunity to use offshoring as marketing differentiator.
– Is recruiting from the top dozen or so law schools. Also sees Pangea3 at these schools but not many other LPOs. Not sure how LPOs can do high end work without high-end graduates.
– Corporate counsel will lead the push for LPO work.
– Finds an increasing amount of cross-referral work among LPOs.
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