Wednesday, June 24, 2009

Guest article: Legal Outsourcing Management Strategies 2009

Rajiv Dogra

Various stakeholders of the LPO business convened at Legal Outsourcing Management Strategies (LOMS) 2009 conference to look at today and tomorrow of the industry.

Mark Ross, VP Global Marketing & Sales, Lawscribe spoke about ‘Thomas Friedman’s ‘World is flat’. He was of the opinion that with the impact of recession, client pressure on law firms, proposed deregulation of Legal services (in UK) even ‘legal profession flattens’ and ‘recession (is) acting as a catalyst.’

Vishal Aggarwal, Sr Manager at Wipro (LPO) recommended ‘Hold their hands’ approach to manage the perception problem faced from client side. He said ‘being factual & transparent’ is best medicine for LPO industry which is having ‘no single matured model’ so far. He added that quality, efficiency, TAT etc. are good to achieve results, however, more is needed to derive VALUE for the client.

Abhi Shah, CEO Clutch Group when asked about the trend of decreasing hourly rates of Indian LPO providers, stressed on the value of Quality to tackle this commoditization. Talking about talent, he was of view that apart from legal skills (a pre-requisite) employees should have US specific, service specific, client specific and project/case specific trainings.

For industry, the major concerns in term of quality is ‘acceptability of measuring metrics (by client)’ as law firms are not used to it and has been handled subjectively so far. Those who don’t agree would get client side feel from sentence “I know the Quality, when I see it”, which Michel quoted from his experiences with his client. On security front, Michel was of the view “Security has to be in the DNA of company”. He didn’t miss the opportunity to deepen the client fear, when he said “God may forgive you, client will not”.

In his presentation on ethics Mark Ross threw eye openers ‘Outsourcing in legal profession is delegation’ which is quite old & ‘What is new, where we outsource to’. He then dwelled in detail about ABA opinion on outsourcing of legal work. Mark said that law firms engaging in outsourcing should follow 3 simple rules in its communication to corporate client about LPO engagement and these three rules are DISCLOSE!, DISCLOSE! & DISCLOSE!

Taking Mark’s advice about disclosure in true spirit, David Hickey, Partner, Winston & Strawn LLP began disclosing the myths of legal outsourcing as the next speaker. One of the interesting realities presented by him was that ESI is expected to grow in big way, for which technology won’t be enough and there would be no substitute for having documents reviewed by human eye. I could not agree more with him when he said that even in the same team (under same roof) people communicate electronically.
Taking a dig at the misconception of LPO doing low-end work, he shared plethora of high-end activities done by LPOs such as:
Drafting & correcting privilege logs
Putting together contract database and identifying control weakness
Drafting case chronologies
Putting together witness binders
Conducting contract analysis
Compliance/regulatory work
Conducted research
Drafting head notes & case summaries

On the myth of high-security risk associated with LPOs, he was of the view that well-established LPOs have security systems in place that have standards higher than even the magic circle firms. His experience about LPO security has come from the fact that he has visited more than dozen LPOs in India & Philippines, which according to him are two leading legal outsourcing destinations.
Three important things for an LPO in his mind are QUALITY!, QUALITY ! & QUALITY!
However, he cautioned LPOs and said ‘Measure (quality) by the rule of reason’ and don’t use statistics to hide the facts. Looking at the issue of price wars he said “Industry should strongly resist the race to bottom”.

Michael Ford, EVP – American Discovery, took us through the drivers for corporate counsel and law firms to embrace LPO. He also dug at the real world LPO concerns and their possible solutions. The crux of his solution was for LPO providers to assume leadership and knowledge resource role and be an advisor to client, instead of being just another vendor/processor. If I have to use one phrase as I understood his point, ‘become an irreplaceable partner’ for client by playing on your strength areas.

Day 2 began with a talk from Michael Ford, the Chairperson. Michael shared his thoughts on industry – stressing on topics such as commoditization diluting the value, addressable market for LPOs, scope for new players, and lack of industry standards and collaborations. Analyzing further into the missing industry standards, he suggested LPO industry to have self governance model based on P2P defined standards. He advocated creation of an industry body, which he mandated is good in the evolutionary phase of industry heading towards maturity.

Dr. Akhil Prasad, VP & Head of legal at Fidelity Business services (India) provided an in-house counsels view to the audience. Looking at the cost-cutting challenges faced by in-house counsels, he was optimistic that LPO can be helpful in containing the costs. Optimism apart, he also shared some of the concerns that are important before in-house counsels can make a decision to outsource to any LPO. According to him technology is one of the key enablers for LPO.

Tariq Akbar, CEO - LegalEase Solutions, was of the view that consolidation, captive units and scaling for high-end work are the trends. Tariq also talked about the three models that are currently employed by the in-house counsels in engaging LPOs. Sharing his ideas on VC interest in the industry, he agreed that startup money is hard to get, though there had been interest of VC’s like IAN, Sequoia Capital, Canaan Partners, Helion Venture Partners, Glenrock etc.

The next presentation was on the ‘Future of Legal Outsourcing’ by Ritvik Lucose, VP Rainmaker. He was of the view that talent is and will be the challenge for the industry where quite a chunk of graduates passing out every year are unemployable and should be addressed at the earliest.
I feel that with the advent of LPO, where you can mark your way regardless of whether you have a godfather or not (take away of one of the discussion), the serious employable talent may be around the corner. LPOs can also prompt people who wanted to pursue law, but were scared of facing the courts, as a reason to go ahead and still not compromise on their earning ability. This may be an overtly optimistic view, but even if this doesn’t happen this way, industry is gearing itself to work with legal education institutes to increase the employable talent. This was the consensus area. Some of them like Cobra Legal are already working with law schools to enhance the curriculum.

Next session ‘Opportunities of Legal Outsourcing in the Indian Domestic market from a banking perspective’ was presented by B. Gopalakrishnan, President & Head Legal Department, Axis Bank, wherein Mr. Gopalakrishnan presented the idea that Indian entities are also looking at opportunities to work with LPOs that can help them in reducing mundane work and look at the concerns of the banking industry. Though, he also stressed upon the importance of quality.

Over all two key themes emerged in the conference - quality and security, as they are the key challenges as well as hygiene factors for this industry. Training and grooming of right talent is must for the LPO growth. Though recession has provided the opportunity for selling LPO concept, it has also created challenges to scale-up by drying investment capital. As rightly said by Abhi Shah, ‘Current market gonna separate men from boys’
Over all conference spilled lot of enthusiasm for the LPO industry, for all the representatives coming from various locations across the globe. It would be very appropriate to mention the final words of conference from Michael Ford, ‘Phir Milenge - Alwida - Jai Hind’.

Rajiv Dogra, analyses markets for CPA Global's different business units including Legal Support Services.