Guest post: The State of Legal Outsourcing c. 2012

The state of the LPO market in mid/late 2012 is fascinating. The missing component is a credible reaction to the threat of LPO by US Law Firms in particular.

Here are 10 Key Facts that should wake up any Law Firm, wherever they are in the world.

1. 10%. This is the percentage of the AmLaw 100 that have taken strategic steps to address the threats posed by the arrival of LPO Suppliers. Those 10% have set up onshore, slightly lower cost options, which come at a price. (See Key Fact 2.)

2. $23 million. This is the cost of implementing an onshore, lower cost delivery centre. Post-Dewey, I’m surprised that any Law Firm sees the value of investing that level of resources in transactional, lower value legal services, but it is exactly the approach that Bingham McCutcheon announced recently.

3. 24 Months. This is the time it takes to establish your own LPO delivery service – 6 months to assess your firm’s options, 12 months to build it, and a further 6 months to get to anything like a stable operating environment.

4. 0. This is the chance that you will achieve the same price, service, and quality levels that the specialist LPO suppliers.

5. 0% This is the percentage of Law Firms who have a strategic offshore options across their firm. Tactically they can offer it via the LPOs they engage, but strategically, most Law Firms have limited options to discuss with their clients

6. 75%. Over 75% of all LPO business cases show saving of over 30%. In my experience 50-60% is not uncommon depending on scope. Regardless, the business case is a no-brainer.

7. 75% (again). This is the average amount of time that LPOs are spending on business development to General Counsel. This means that LPOs are spending three quarters of their time stealing work that would previously have gone to law firms automatically.

8. 32%. This is average annual growth of the LPO market in the last 3 years. This is not new legal work – this is legal work that was, but is no longer, going to Law Firms.
8a. 35% is the forecast annual growth of the LPO sector over the next three years, meaning that a growing drift of work from Law Firms to the LPOs.

9. (Close to) 0% (my estimate). This is the percentage of work that has already gone to the LPOs that will return to the Law Firms. There are always horror stories in outsourcing, but my experience in the market is that buyers are hooked on the concept (quality, service, speed) and pricing of LPO. So they take any bad experience and learn from it with another LPO supplier. They don’t take it back to their Law Firm

10. 100%. The number of General Counsel in medium-large corporations who will look at Legal Outsourcing in the next few years. Strangely, this is the glimmer of hope for forward thinking Law Firms. If they can create a compelling, strategic and flexible offering in this market then they can look sharp against the competition and win more business as a result.

Ed Brooks is the founder of The LPO Program, designed to give General Counsel and Law Firms all the tools and data to take strategic advantage of Legal Outsourcing. www.thelpoprogram.com

Sources:

1.    Research by The LPO Program, not published

2.    Bingham press release

3.    My experience

4.    Based on general experience in 12 years on both sides of the outsourcing fence

5.    As with Point 1

6.    Our 2012 Global LPO Study

7.    Based on interviews with the LPO Suppliers (touched on slightly in the 2012 Study)

8.    And 8a Global LPO Study

9.    This is the hardest one to prove, but it is based on my experience, and I am open to being proven wrong

10.  A reasonably safe bet!