Thursday, December 18, 2008

LPOs in India march ahead

Richard Susskind, author of “The End of Lawyers?”, in his article “Turning to India at break-neck speed” talks about the research conducted by RSG Consulting and the reasons behind increasing business diverted to LPOs.

The report makes the following points:
1. 10 of England’s top 30 law firms have outsourced back office functions or legal work to India.
2. Although the legal market is evolving at break-neck speed there is a dearth of experience and attrition rates are high.
3. Purchasing power of general counsel in India has increased.
4. Shift in the attitude of top English firms with respect to outsourcing – resistance weakening considerably.
5. Huge difference in salaries meted out to Indian legal graduates by Indian LPO companies and to qualified associates by Wall Street firms.
6. Not only law firms but also the clients that they used to serve are outsourcing legal work.

Richard in the write-up attributes the change in attitude to the clients who are pressurizing in-house legal departments and law firms to cut costs and internal head counts. This has led to devising ways of reducing expenditure on back office and administration such as IT, finance and document production. Outsourcing, thus, becomes the most likeable option for reducing expenses on the infrastructure. Even when outsourcing legal work such as legal research, document review in litigation or due diligence for corporate work, LPO companies have proved to be a viable option. These companies rely on well-developed standards and systems and have reduced labor costs in delivering routine and repetitive legal work – resulting in cheaper legal services.

The author perceives the scene of legal support services to be positive for Indian LPO markets and a continuous increase in their revenues.

Legal outsourcing:a reliable answer to law firms and corporations

The article “India Work Grows, With Glitches” by Julie Kay gives an overview of the legal outsourcing industry in India and enumerates the concerns currently faced by law firms and companies worldwide.

According to Forrester research, legal outsourcing to India will reach $4bn by 2015. The figure summarizes the changes witnessed in the past couple of years. The market has grown phenomenally owing to pressure from corporate counsel on law firms to reduce costs. Also, the favorable bar opinions have encouraged corporations and law firms to explore the benefits of outsourcing some of the legal support work. Even the profile of work handled by LPOs has changed from “back-office work” to intellectual property, legal research, contract and conflict review and litigation support. Thus, it has now become imperative for law firms to address their respective interests and reexamine all aspects of outsourcing.

The write-up talks about firms such as Baker& McKenzie; Greenberg Traurig; Milbank, Tweed, Hadley & Mc Cloy; and Shapiro Sher Guinot & Sandler, which are plagued by questions related to legal outsourcing, things such as maintenance of quality control, confidential nature of client information, supervision of lawyers located at different geographical points and other difficulties such as terrorist attacks in Mumbai.

Terrorism has in today’s world become a rampant problem. No country is spared from its detrimental negative effects. “Terrorism can happen anywhere”, said Jeffrey Bailey, associate general counsel for Fresh Del Monte Produce Inc. Having said that, the article stresses on the point that outsourcing companies cannot ignore lingering apprehensions about “… not only whether their (our) information is secure but whether there could be disruption to their (our) service”.

Among the key benefits of legal outsourcing to an offshore location such as India are access to a huge talent base trained in common law, ability to scale up operations in a cost-effective manner, ability to benefit from principles of operations management such a ISO 9001 and Six Sigma when applied to legal support services, effecting a 24-hour work day and provisioning relatively simple legal tasks such as document or contract review from a willing workforce unlike new associates who perceive these tasks to be mundane. However, these advantages are desired only when accompanied with high quality services being offered.

Julie Kay gives the example of Greenberg Traurig that has recently outsourced a limited amount of IP work. Its focus is “to deliver the highest quality legal services as cost-effectively as possible” to its clients. In order to achieve this they have done some pilot projects using offshore resources.

Lately, outsourcing industry gained further momentum from recent favorable Bar ethics opinions, from the San Diego Bar Association in 2007, the Florida Bar in January 2008, the North Carolina State Bar in April 2008 and the American Bar Association in August 2008. All are in unison in the thought that outsourcing is allowed, provided certain pre-requisites are met, including notification to the client and supervision of the foreign lawyers by U.S. lawyers.

As a final comment to disquietude regarding offshoring, the article mentions step taken for its mitigation. People like William Byrnes, assistant dean at the Thomas Jefferson School of Law, are involved in developing an LPO certification program along with American Academy of Financial Management. This and more will help in answering the questions still in the minds of those deliberating about benefiting from legal outsourcing.

US LPO spending to be $2 bn in 2013

Ron Friedman on the basis of a survey, “The Change Agenda: Looking Ahead”, conducted by Rees Morrison and Aric Press has come to a deduction that U.S. LPO spending in 2013 will be almost $2bn.
Rees Morrison and Aric Press have in their analysis touched on various facets of changes seen in the legal spending departments of different firms. They surveyed in-house lawyers by a questionnaire posted on LegalOnRamp, a professional networking site. (The complete survey results can be found at 84 respondents were chosen who work in companies that have earnings of at least $1bn. The issues examined were varied in nature, such as hiring of new law firms, basis of law department’s spending on outside counsel, extent of law department’s spending on offshore service providers, location of internal headcount in lower cost geographies, spending on legal automation, e-discovery spending, extent of telecommuting and impact of social networking for selecting and communicating with outside lawyers and law firms. The survey though limited in its sample size did present ample evidence supporting that many clients are ready to make important shifts in their revenue allocation for various legal dealings.
Ron scrutinized the question “Between 2008 and 2013, __% of our law department’s spending will move to lower cost offshore service providers, whether directly or as a subcontractor to our in-country law firms” in detail. He calculated a weighted average by multiplying the spending shifted “by its weight”. The total of this average, 3.6% gives in the percentage of in-house counsel spending that will shift to legal outsourcing. After applying adjustment factor it was deduced that by 2013 2.9% of in-house counsel spending will shift to legal outsourcing.
To determine law department’s total spending, figures from AmmLaw 200 total revenue data were used. After adjustment, the revenue is $65bn and its 2.9% equals to $1.9bn. This deduction, thus, provides concrete facts to the ongoing discussion in the legal circles about the changes in the legal market.

Thursday, December 11, 2008

Despite "recession", LPO hiring continues

Mindcrest, in its attempt to keep up with burgeoning demand in legal services outsourcing has hired 4 experienced U.S. lawyers and a training specialist. This step works in line with their expansion endeavors and help Mindcrest get into new areas of work. Michelle Vega will provide expertise in general commercial litigation. Colleen McGill will expand the Regulatory and Compliance practice. Deirdre Byrne will oversee and expand the Corporate and Commercial Law practice. Mike Duffy will head Litigation Service line of business and will expand Mindcrest's litigation services on a worldwide basis. Rana Rosen will expand the company’s corporate training program.