Legal Process Outsourcing in its generic definition would refer to a firm availing legal support services from an outside law firm or from a legal support services company. While, the above definition, in its descriptive nature mentions law firms, it would, in its generic definition include companies, firms, individual practice lawyers, corporations, and any entity that would require legal support.
Under a typical Legal Outsourcing arrangement, a lawyer contracts, directly or through an intermediary, with an individual/firm domiciled abroad to perform legal support services, such as conducting legal research, reviewing document productions, or drafting due diligence reports, pleadings, and memoranda of law for remuneration.
The entity to which work is outsourced, then gathers the required infrastructure, skills, and expertise on the relevant area of outsourced work and caters to the work requirement.
Why Legal Process Outsourcing?
The recent trend of outsourcing legal work is advanced by firms and corporations that are realizing the benefits of good quality work being done in lesser time and at lower costs as compared to existing delivery mechanisms. However, this new trend has to be understood not only for the strengths but also for the challenges that entail such an initiative.
Legal work usually emanates from the legal department of several companies (in-house legal department), legal research firms, law firms, legal publishing companies, and attorneys-at-law. Due to the bulk of legal work generated, it becomes incumbent to take outside assistance for a time based and efficient completion of work. This help can be contributed by services providers within the country or possibly, from overseas outsourcing vendors who offer quality work at a lower cost as compared to the former.
The low cost emanates primarily due to the fact that outsourcing companies invest substantially in infrastructure and in setting up the business to cater to the needs and requirements of a number of clients. These investments are distributed among a number of clients, which automatically reduces the risk and investment borne by the outsourcing companies. This along with the economic disparities of countries and differential wage arbitrage help these vendors offer efficient and high quality services at a very competitive cost. Cost saving, though not solely, is definitely a propelling factor for growth of the legal outsourcing industry. With rates ranging from approximately $20 an hour at the low end of the service spectrum to $70 an hour at the high end, the savings can translate to as high as 60% percent for work traditionally handled by junior U.S. lawyers, who command rates close to $200 an hour.
This ratio lays emphasis on the fact that by off-shoring, law firms and companies stand to cut costs by a substantial amount of more than 40%, even after incorporating the cost of managing outsourcing as well as productivity gaps that may exist between an offshore worker and an in-house member of the firm. Another key factor is that, with the law firm outsourcing quantitative low skilled legal work that consumed hours of input, the in-house counsels or attorneys are now free to concentrate and focus on more qualitative, value added legal work, assisting clients with transactional negotiations and building a stronger client relationship. A typical example of saving costs and time on quantitative legal work will be outsourcing of litigation support services. By the very nature of its work, litigation is very complex and requires extensive research, documentation, data gathering and compilation. If this extensive documentation, part of the legal research and data compilation can be outsourced, it would save the law firm and the company time and money.
The work product delivered by the outsourcing company can be analyzed by the local attorney, making the final work product ready in quicker time with equivalent qualitative standards as before.
Few Other Factors That Facilitate The Flow Of Legal Outsourcing Work Are:
Why is India attractive for Legal Outsourcing?
- The successfully demonstrated past off-shoring activities
- Access to skilled managerial and technical resources at a significant wage differential.
- Operational costs saved
- Minimal training or managing manpower required
- Overhead costs and office maintenance costs saved
- Offload non-core functions like back-office work and data management.
- Improves speed and service
- Increase customer/client approval and satisfaction.
- Gain a more extensive research at a fixed cost.
- Professional efficiency with timely output
- Access to precisely and methodically arranged data files.
- Provider's expertise in solving problems for a variety of clients with similar challenges.
- Taking lead in a convergent economy.
India has, over the years, been a favorite, reliable and successfully tested option for various offshore works, namely, in areas relating to Information Technology, Call Centers, Finance, back office, etc. Because of the past proven success in off-shoring, India is once again a preferred destination for Legal Outsourcing by foreign countries like U.S.A., Canada and U.K. Zone advantage enables 24 x 7 operations, giving India a competitive edge in outsourcing. Today, Indian LPO vendors cater to the need of a number of law firms/in-house counsels/individual practitioners in U.S. and U.K. by rendering services in areas ranging from litigation support, document review, corporate maintenance, real estate among others. The growing trend of legal offshore outsourcing indicates a tremendous growth in the ambit of nature and scope of legal services offered by India in the coming years.
India is viewed as a potential t place for outsourcing legal services mainly because of the availability of English speaking lawyers, trained in common law system. British colonization resulted in spread of western education in India and also parliamentary form of government in India. Indian legal system is broadly based in British tradition of common law systems. It can be emphatically stated that due to the common law systems prevalent in India, U.S.A. and U.K., the Indian law graduates who are trained in English are well equipped to understand the U.S. legal system and provide able legal support.
The time zone difference of 12 hours between India and U.S.A. gives the attorneys in U.S.A. the advantage of getting trained lawyers working throughout the night to prepare a complete and high quality work product by the next morning. This ensures that the attorneys now have more time to concentrate in developing client relationships and improving revenue streams. Another key factor for choosing India as an ultimate outsourcing destination can be attributed to the remarkable measures taken by the Indian government towards liberalization and deregulation. Recent reforms have visibly reduced licensing requirements, and made foreign investments simpler and more attractive.
The Indian government has collaborated with NASSCOM (India’s nodal body that is benchmarking best practices across the IT and IT enabled services industry) to ensure that India’s data privacy legislation is aligned with those of the .S.A. All these factors attract and maintain a steady inflow of legal outsourcing work to India. Establishment of a national body of legal services vendors in the form of National Association of Legal Process Off-shoring Companies (NALPOC) has been a key step in establishing best practices and benchmarks in delivery, ethics, promotion and collective initiatives to align the industry with the needs of the firms outsourcing. Among its charter, is an effort to standardize training procedures for lawyers who intend to join LPO companies, which would definitely assist in maintaining minimum deliverable standards for legal services.
Evolution Of The Legal Outsourcing Industry:
As observers and media debate on the future of the industry, one sees a remarkable growth in the industry, which is currently estimated to be a $30-50 million market, and it is further expected to grow $5 billion by 2015, a 100-fold expansion in the next 8 years.
While global awareness of the potential of offshore legal outsourcing is increasing, it is not a recent phenomenon. The first legal outsourcing to India started back in 1995, when the 34-lawyer Dallas based litigation firm of Bickel & Brewer opened an office in Hyderabad. The next thing to trigger an impetus to the industry was when General Electric, in 2001, added a legal division to their currently existing base of operations in India. This legal cell was specifically started to handle legal compliance and research for GE plastics and GE consumer finance (Divisions of GE capital). Thereafter, the industry witnessed a steady upswing in demand for outsourced legal services from India. Today, in 2007, the estimated number of people serving this industry is around 6,000 but is projected to increase to 40,000 within the next 3 years. The U.S. legal industry, according to government data, is a $184 billion behemoth with roughly a million trained attorneys and about 800,000 support personnel such as paralegals and legal assistants. U.S. firms outsourced an estimated $5 billion in litigation support in 2006. According to Forrester Research, a Cambridge, Mass.-based market research firm, this year 12,000 legal jobs moved offshore -- less than one percent of the total jobs that will be eventually off-shored. This clearly outlines the percentage of untapped potential of the legal market. Forrester estimates this number to triple by 2010, and further double by 2015, thus leading to more than 80,000 jobs added in India by 2015 to support the U.S. legal industry alone.
Many of the leading law firms have displayed confidence and comfort in off-shoring their work. For example, the world’s largest firm Clifford Chance has begun outsourcing much of its administrative work to India. This could be the biggest offshore move ever undertaken in the legal profession. This decision will factor in more than $18m (9.5 m) in annual savings for the law firm. The very nature and expertise skills required for transacting legal work indicates that there has to be selective screening of work that can be outsourced. Legal services can successfully be provided in quantitative low skilled work as well as areas of high skilled qualitative works. One can outsource work depending upon the clients requirements and nature of legal services required.
Quantitative Or Low Skilled Work Includes:
Qualitative Work Includes:
- Data management
- Word Processing
- Data creation and file maintenance
- Litigation support
- Book-keeping and reconciliations
- Document review
- Summary preparation
- Due diligence reports research
- Corporate transactions
- Patent and trademark research
- Drafting motions, contracts, pleadings, briefs
- Reviewing litigation documents and agreements
- Fifty state surveys