Strategic Legal Technology

This is a live post form the International Legal Technology Association (ILTA) 2010 Conference. Session: “Outsourcing: Safety First”. Speakers: David Stanton, Partner, Pillsbury; Nathan Hayes, VP Technology & Infrastructure Services, Integreon. For additional session reports, see Twitter hashtag #ILTA10. This session is also Tweeted with the hash tag #INFO7.  

Agenda: what can law firms outsource, outsourcing issues and risks, outsourcing alternatives, and “safe outsourcing”.

WHAT LAW FIRMS CAN OUTSOURCE: Chart shows penetration curve of outsourcing across IT, banks, law firms, and law departments. IT started in 1990s, banks around 2000, law firms around 2004, corporate law departments a bit later. Segment outsourcing into “Legal Support” and “Middle Office”. Latter includes all the support services for lawyers and law firms; former helps lawyers directly in their practice. Document review is probably the most prominent example of an outsourced legal support service. Increasingly, Stanton says market is seeing more and more outsourcing of contract support services such as review; also legal research, due diligence.

Middle Office services inclcude document services, library/KM, business development support, CRM DB management, finance and accounting, procurement management, IT services, and HR administration. Hayes says law firms are particularly interested in library outsourcing because many feel they do not have adequate scale to offer internally. Law firms face cost / profit pressure that is forcing them to look at middle office outsourcing. “Law firms need to run as businesses - this is a new idea.” Middle office outsourcing allows lawyers to focus on practice rather than running firm.

Outsourcing Examples:
1. CRM database management: systems development, user support, report and analyze, data cleansing. Stanton emphasizes the importance of good CRM to law firm business development. In many law firms, ownership of CRM is not always clearly defined. The opportunity with outsourcing is to fix this problem. This is easier than cajoling multiple lawyers and staff to work on CRM.
2. IT Services: consulting and planning, governance, programs and projects, held desk, training.
3. Document Review in litigation: sample work flow diagram. Not clear that law firms, when they do doc review internally, how quality and process is defined and assured. With credible outsourcer, process is better defined with clear QC metrics. Law firm partners assume that associates do good job on doc review but TREC and other studies show that without a lot training, process control, and metrics, associate doc review is “horrible.” More rigor is required for doc review and outsourcing can achieve this. With a more controlled and documented process, productions are more defensible. Need to approach doc review in more business-like manner.

OUTSOURCING ISSUES AND RISKS. Lawyers have long delegated work to more junior lawyers and to staff. Lawyers ability to supervise is not that different based on location. As distance grows, however, supervision needs to be more formalized and tracked. Delegation outside the firm is not that different than delegation inside - it just needs a more formal process and rigor.

Issues include defining support lawyers need, appropriate supervision, which functions are strategically core, and whether the support model should be inhouse v outsourced, central or de-centralized, and onsite or offsite.

General outsourcing risks include loss of control or knowledge. In dealing with any vendor relationship, firms need to make sure provider is financially stable. Operationally, firms have to make careful transition plans if they outsource.

Additional considerations: location, shared v dedicated delivery, vendor selection, service level agreements (SLA), metrics and reporting, ramp-up time, business continuity, and regulatory compliance. Many firms are not accustomed to SLAs, so moving to outsourcing means that a firm has to develop these - this can add to ramp-up time.

OUTSOURCING ALTERNATIVES:
Start with a reality check. Outsourcers are measured against a theoretic standard rather than in comparison to how law firms actually perform today. Many firms don’t measure performance - other than financial - so have not basis of comparison. For example, many firms don’t have a measure of how often errors occur. Are costs reasonable now? With outsourcing? Where does management focus: on keeping trains on time or or strategy. What is sacred cow and how does that fit with professional management, whether outsourcing or upgrading internal firm services? You have to answer these questions before you can consider outsourcing.

Third Party v Captive. Examples of firms doing 3rd party and captives. About same number of each. Pros and cons of captive versus outsourced versus “build, operate, transfer” model.

Additional Issues with Alternatives: outsourcing does not equal offshore. Internal expectations versus formal provider SLA. Investment capabilities. Economies of scale and repitition. Ability to scale up or down.

SAFE OUTSOURCING:
Contracting is key. Need a master service agreement (MSA) with service level agreements (SLA). Need reporting to monitor delivery and compliance with SLAs.
Firms also have to consider insurance - what is the coverage, does the firm need a rider, and what are the risk management issues?
Protecting client information. To answer this, firms must assess whether their existing systems are robust.
What are the security measures, encryption, access controls, policies, etc.
Governance - set up a strong governance model

Will law firms embrace or resist outsourcing? Market will decide but seems like pressures will lead to more embracing and less resisting.

Innovators at the Barricades by Bruce MacEwen at Adam Smith, Esq. argues that legal process outsourcing (LPO) is a disruptive force for law firms, citing Clayton Christensen’s The Innovator’s Dilemma. 

“Outsourcing is here to stay” writes MacEwen. He describes different flavors using a 2 x 2 grid: location on the x-axis with offshore or onshore ("foreign” or “domestic"); ownership on the y-axis with captive or 3rd-party ("owned” or “rented"). MacEwen notes that this model is “by no means exhaustive; it’s merely indicative and representative”. This is a good model for thinking about centralizing support services.

LPO will have a big impact: “Once clients begin to get accustomed to the notion of being able to unbundle, or unchunk, legal engagements - be they disputed matters or transactional ones - there’s potentially little end to it.” MacEwen argues that LPOs are likely to go upmarket, meaning they perform higher value work, which will threaten law firms - and also force them to innovate and move up the value chain.

Working for an LPO, my view is that there is a clear line between legal support and law practice. An LPO cannot practice law so I think there is a clear limit to how far “up the value chain” an LPO can go.

Turning the “LPO moving up the value chain” idea on its head may well be a more helpful way to think about the legal market. The very forces that enabled the birth of the LPO industry - globalization, technology, and shifts in buyer attitudes - continue to push legal work toward standardization and systemization (as Richard Susskind discusses in The End of Lawyers?). That means work once done only by associates can be performed by more efficient operating models offered by alternative sources such as LPOs, contract attorneys, virtual law firms, online legal resource providers, and still-to-be-invented providers.

So it is likely that repetitive tasks once the exclusive domain of partner-track associates will continue to be unbundled and move to more cost-effective approaches. Document review in litigation is the classic example. Even without LPOs, law firms’ ability to offer this service at associate billing rates is already threatened by corporate clients contracting directly with contract lawyer staffing agencies. An innovative law firm might even decide it makes sense to partner with an LPO to do the high volume, routine work.

Given this shift, MacEwen questions the fundamental premise of large firms, citing Ronald Coase’s Nobel Prize winning The Nature of the Firm. He suggests that LPO-enabled unbundling calls into the question the “why” of law firms: “Why create the management overhead, bureaucracy, and administrative friction entailed in any firm of scale? Why not just purchase whatever is needed, when it’s needed, on the open market?”

That is a good question indeed, but LPO is symptom, not cause. The cause is corporate client price sensitivity and quest for value. These have changed buyer (general counsel) behavior, which in turn has propelled growth of law firm alternatives. Smart large firms can still profit from their scale. For example, they can

• Coordinate across practices and geographies to serve global clients. Cross-selling is not only a profit lever, done correctly, it is a service enhancer.
• Assemble large teams of highly skilled and experienced lawyers to work on tough, big cases or deals.
• Serve as expert general contractors with project management skills to ensure the swift and cost-effective resolution of client matters. Many general counsels will happily delegate that function.

MacEwen raises provocative questions that large firms need to consider carefully. I have never been persuaded that “big is better”. Big is only better if size really confers benefit and the organization actively takes advantage of its scale. Big firms that adopt sound strategies and execute effectively will continue to thrive. Those operating on auto-pilot may indeed lack a good answer to the question MacEwen / Coase asks.

[Note: above is a modified version of my Integreon blog post, LPO as a Driver of Law Firm Innovation]

With all the legal process outsourcing (LPO) news last week, law firms should consider their LPO strategy, including if they need to have one. 

My post last week, LPO Update: Microsoft, Rio Tinto, New LPO Ethics Article, Deals, reviewed recent LPO developments: Microsoft announced legal outsourcing, Leah Cooper of Rio Tinto moved to CPA Global, a new ethics articles was published, and two LPOs announced big deals.

With all the news about LPO, do US and UK law firms need a strategy or position on legal outsourcing? That’s the question I address in my 20 Feb 2010 article, Law Firms Now Outsourcers?, at LLRX.com. I examine a recent outsourcing announcement by Eversheds and a recent LPO article by Mayer Brown lawyers.

I conclude that “clients want lower legal costs and it’s clear that shifting work location and improving processes achieve that result…. Clients should be happy that they have a choice of providers.” In my view, that means firms should at least be receptive to working with legal outsourcers. I think US and UK firms are still working on their LPO strategies - or at least clients should hope so.

Legal process outsourcing is in the news again this week. For those whose eyes are not glued to Twitter, I thought it would be helpful to re-cap several unrelated events this week. 

First, on Monday, Leah Cooper, formerly inhouse counsel at Rio Tinto and avid LPO promoter, has changed hats. She now works for legal process outsourcer CPA Global. In 2009, I blogged about Rio Tinto outsourcing several times. Legal Week reported (on 15 Feb 2010) that Rio Tinto legal chief [Leah Cooper] quits for new role at outsourcing partner CPA.

Today, Legal Week reports that Microsoft outsources legal work to India with CPA Global deal. The article explains that “A team of between three and five qualified lawyers at CPA are handling multi-jurisdictional legal support work, including legal research, for Microsoft.” Not many US companies have gone public with using an LPO, so this is noteworthy.

Also of interest in this article: “In a separate move, CPA is set to launch an outsourcing centre in the UK. The centre, which will take on low-level legal tasks, will add to the company’s onshore outsourcing operations in the US.” I have frequently written that LPO is not the same as offshoring. As more LPOs develop US and UK domestic facilities, the legal market will, I hope, internalize this distinction.

Both these articles generated a lot of blog and Twitter buzz, as well as articles in main stream legal media. Here is a partial list of commentary I found interesting:

• Big Changes in Legal Outsourcing by practicing lawyer Simon Chester at slaw.ca
• Is Legal Offshoring Slowly Making Its Way Back “On Shore?” by blogger and EDD lawyer Gabe Acevedo
• Clients Focus on Process; Law Firms on Profits? by former inhouse lawyer, consultant, and blogger John Wallbillich

As outsourcing gain traction, some lawyers will undoubtedly raise questions about the ethics of outsourcing. To their rescue comes an in-depth article published on Feb 14, 2010. Ethics of Legal Outsourcing White Paper by my colleague Mark Ross at LLRX.com is the most comprehensive discussion of the ethics of legal outsourcing I recall seeing.

Deal making in LPO has also been in the news. My day-job company, Integreon, a knowledge process outsourcer (KPO) and legal process outsourcer, announced this week that it had raised $50 million in new capital (press release). And a couple of weeks ago, CPA Global announced that Intermediate Capital Group (“ICG”), a leading independent investor and fund manager, announces that it has acquired a significant minority stake in legal services firm CPA Global.

With all this news, LPO is beginning to feel like e-discovery in its heyday.

Update 19 Feb 2010: News begets editorials: Legal Week published today
Editor’s comment: Passage to India. Discussing the Microsoft outsourcing deal, the editors write “When a law firm does it, heads are turned - but when a company does it, people really sit up and take notice…. If firms aren’t coming up with [cost-cutting] solutions then clearly a client will.”

Economic hardship has forced general counsels to cut costs. Most large law firms have, in turn, laid-off lawyers and staff and acquiesced to demands for alternative fee arrangements. Smart firms are also trying to differentiate themselves. For example, many now aim to become end-to-end e-discovery providers. 

UPS Cuts Costs With E-Discovery Counsel (Corporate Counsel, 11 Nov 2009), describes King & Spalding’s “cradle-to-grave solution” for e-discovery at UPS. Separately, off-the-record reports suggest that many law firms want to provide an integrated, one-stop e-discovery solution for clients. This is a big change; previously, most firms were content merely to counsel clients on the law, rely on vendors to do the work, and supervise the overall process.

Firms likely will find it a challenge to be, on their own, the “go to party for complete e-discovery”. They will need to partner with one or more vendors. In January 2007 I wrote Coming E-Discovery Battle between Vendors and Firms. I noted that “law firms and EDD vendors may compete for e-discovery consulting business.” Now I can say the same about all of EDD. My opinion then re consulting applies equally to the rest of the EDRM model:

“Clients should consider carefully who offers the better set of skills and experiences. BigLaw brands may offer comfort, but some vendors have hired experienced lawyers and may offer the better bundle of skills and experiences.”

Law firms have the advantage in counseling clients on legal strategy and e-discovery issues (as I observed in my May 2007 white paper 4 Ways an eDiscovery Attorney Can Make Your Firm More Successful). When it comes to providing integrated e-discovery service, however, law firms have several disadvantages relative to vendors:

• Art vs. Industry. BigLaw has long asserted that “everything we do is art” and cannot be standardized. That mentality works against the industrial strength processes (e.g., rigorous metrics and QC) and disciplined project management that high-quality and cost-effective e-discovery service requires.
• Sub-scale. Most law firms simply do not have the necessary scale to flex up and down to manage the peaks and troughs of e-discovery processing / hosting and document review. Large vendors can better manage the fluctuations because they aggregate demand across multiple firms and clients. Scale also limits most firms’ ability to stay on the leading edge of EDD technology by developing proprietary technology and/or evaluating and running multiple third-party platforms.
• Declining Unit Pricing. E-discovery and document review is moving to unit pricing that is declining over time. Vendors don’t like falling prices but have mechanisms to cope. BigLaw partners, in contrast, have enough trouble moving beyond the billable hour much less lowering fees. Law firm DNA makes it hard to deal with the current EDD trends.
• Scarce Investment Capital. Exploding data volumes require ever more servers and software licenses. That means capital. Law firm investment has typically meant “any outlay that cannot be billed to to a client in the same month.” Law firms have never been well-capitalized and, in the current economic environment, loans are difficult to obtain and costly. So it’s not clear how firms will fund growing their EDD infrastructure and keeping it state of the art. Well-managed and well-capitalized vendors are accustomed to on-going investment to keep and grow business.

Nonetheless, I think that law firms will continue to play a critical role in managing clients’ EDD requirements. Their best path is to focus on their core legal strength and their deep relationship with clients. For the heavy lifting of e-discovery and document review, most firms will find it easiest and best to partner with vendors.

[I adapted this post from a similar one I wrote at Integreon.com, posted earlier this week.]

LegalWeek last week published a survey of UK partner views on LPO. Partners seek new models but wary of LPOs opens “City partners increasingly believe the law firm model will have to be overhauled but remain sceptical that legal process outsourcing (LPO) will be a major part of the revolution.” First the findings, then comments on the survey, and finally the implications. 

Key Findings:

• GROWTH. Asked about LPO growth prospects, 13% see “major prospects for growth” and 34% “considerable”. The remaining 53% expect little or no LPO growth.
• QUALITY. Over 50% think LPO work quality “could be better", 7% found it poor, 14% “good", and 27% “ok”.
• SERVICE LEVELS ONSHORE v OFFSHORE. 36% think service levels in the UK are “much better” than offshore; 38% “better"; 19% no difference among locations.

Comments on the Survey Instrument (or why you may not want to trust it)

This survey strikes me is yet another legal market survey of questionable validity:

• LegalWeek provides no breakdown of who responded, so readers cannot determine if the sample represents the market.
• Qualitative answers such as “considerable growth” and “major prospects for growth” are too open-ended. Respondents might, for example, have had in mind anywhere from 20% to 100% for either answer. It should have asked using numbers, for example, “More than 40% growth” and “Between 20% and 39% growth”.
• Without knowing how many respondents have used LPO services, the results may merely reflect what respondents think other people in the market think.

Analysis Assuming the Survey Results are Valid

Let’s assume the results accurately reflect the large law firm market sentiment. In the old normal, meaning pre-economic crash, I would have said the mixed results could not last long. Large law firms in the US, UK, Canada, and Australia followed similar strategies: open multiple offices, merge, invest in similar technologies, build marketing operations, increase leverage, etc.

So if past is prologue and the new normal is like the old normal, then I think these results suggest LPO is tipping toward fairly wide spread adoption. Answers here could easily, with a bit of language tweaking, have been applied at one time to use of e-mail, law firm marketing, and doing e-discovery. As each of those new approaches started, lawyers were widely resistant and skeptical (and like, with LPO, typically without any first-hand experience). My rule of thumb: once a new thing gets to the point that major legal publications run just this type of survey, it almost inevitably means wide-spread adoption cannot be that far off.

Past may not be prologue. In my Integreon blog post last week, Law Firms Differentiate in a New Era I suggested we may see large law firms following different strategies. If so, then the survey could mean that LPO will only be adopted by some of the market. Then I would guess ½ of firms would adopt LPO based on the answers to the growth question and the fact that availability of onshore services will grow, which will satisfy those who think onshore offers better quality.

Legal process outsourcing (LPO) has been in the news a lot in the last few months. And there have been some good blog posts too. Here’s a listing. 

For a November 9th presentation on Legal Process Outsourcing: Opportunities and Challenges to the Palo Alto Area Bar Association (PDF of program) I assembled a list of recent legal press LPO coverage. I was surprised at the extent and nature of the coverage. That list appears at the end of this post.

I also want to call out a few blog posts of interest:

• Wearing my day job hat at Integreon, I posted today Law Firms Differentiate in a New Era at the Integreon blog. I suggest that law firms will follow different strategies in the future (picking up on Law Firm Business Models: A New Series at Adam Smith, Esq.) and that going public on initiatives brings benefit, illustrating with of examples two UK firms that recently publicized their legal outsourcing.
• Matthew Sullivan of RedBridge Strategy explains at his blog in Working with LPO Vendors: Relationship or Transaction? the pros and cons of forming a long term relationship with an outsourcing vendor. This is a good blog to read.
• Michael D. Bell of Fronterion, Inc. writes in his blog post Quantity vs. Quality that lawyers need to focus on quality and other factors in outsourcing as much as on cost savings. Another good blog.
• My colleague Matthew Bank’s writes in What’s in a Name? “Legal” + “Process” + “Outsourcing” that LPO means more than offshore, it’s all about process and outsourcing to any destination.

Legal Outsourcing in the News - Recent Articles, Jun - Oct 2009

• Legal process outsourcing is ‘here to stay’ (Law Society Gazette, October)
• “Out, out damn source” (The Lawyer, October)
• Xerox GC says LPO is a $4bil industry (Rees Morrison blog post, citing book, October)
• “Simmons goes live with outsourcing project” (The Lawyer, October)
• Gibson Dunn acknowledges going offshore for doc review (Denver Post, October)
• “Slaughters in talks over outsourcing plans” (The Lawyer, October)
• “Demystifying Outsourcing for Corporate Counsel” (The Legal Intelligencer, September)
• “Offshoring legal work.. at a lower cost requires even more stringent management, but the savings seen could prove increasingly persuasive..” (Managing Partner, September)
• “Will Increased Compliance Burdens Lead to Legal Process Outsourcing?” (NLJ, August)
• “ Offshoring firms: the day has come” (The Lawyers Weekly (Canada), August)
• “Aussie firms embrace LPO” (Lawyers Weekly (Australia), July)
• GC attitudes to LPO changing gradually (Int’l Bar Assoc article )
• Rio Tinto hires team of lawyers in India (Times Online, June)

I read with interest the National Law Journal article Will Increased Compliance Burdens Lead to Legal Process Outsourcing? (12 August 2009) about using legal outsourcing to help meet new compliance requirements. 

In my June post Legal Outsourcing Tipping Point? I suggested that the publicity surrounding Rio Tinto’s legal outsourcing reflected a tipping point for the legal process outsourcing (LPO) market. The NLJ article puts more weight on the scale to tip the market.

For years (literally) most legal media articles about LPO questioned outsourcing and raised caution flags. Many quoted large law firm partners as skeptics. While I’m sure these views were honestly held, I never saw facts or analysis to back them up. Then came recent articles about Rio Tinto merely reporting the facts of an outsourcing deal. This week’s NLJ article may represent a further shift: from skeptics, the legal media are now virtually advocates.

The article explains the proposed federal Financial Regulatory Reform, that it would increase corporate compliance cost, and that general counsels should consider using offshore lawyers to do some of the work. The article is by an executive at an LPO so the advocacy is perhaps not surprising. The surprise, if any, is that the legal media published it as a news story.

Going beyond editorial decisions, the logic in the article applies equally to any heavily regulated area. That is, there is a lot of relatively routine legal work associated with many regs and such work is in the sweet spot of legal outsourcing.

In my pre-crash May 2008 post The Right Resources to Solve Legal Problems, I suggested that clients think systematically about their portfolio of legal problems and the optimal resource mix where the resources include inhouse counsel, outside counsel, contract lawyers, paralegals, automation, and offshore lawyers. What logic and good business practice could not force, perhaps economic crisis will. With luck, the economic crisis will also help break down lawyer caste mentality, though I don’t hold my breath on that.

The shift in thinking by both lawyers and the media does not surprise me. Beyond the passage of time, which helps the legal market digest all things new, the economic crisis has forced corporations to reduce costs. Legal outsourcing is a lower cost resource for a range of work GCs must do.

[This was adapted from my Legal Media Shift on Outsourcing? at the Integreon blog.]

A new article nicely explains how law firms should think about the use of technology when outsourcing. 

Technology and Outsourcing (Texas Bar Journal, July 2009, PDF) is by Michael Bell, founder and managing principal in Fronterion, L.L.C., a legal outsourcing advisory firm. It’s a good discussion of why “[t]echnology plays a central role in an outsourcing engagement” and how a law firm can “leverage technology advantages through outsourcing.”

[I’m not entirely unbiased in commenting on this article since I’m quoted in it.]

A recently released report by ValueNotes, a respected analyst firm, sheds light on what US and UK law firms think about legal outsourcing. 

Over at my employer’s blog, I co-authored a post, What Law Firms Think about Legal Outsourcing. It summarizes key findings of ValueNotes’ Legal Services Outsourcing: What Do Law Firms Think? and comments on them. Here is a summary of that post.

Many VN findings match the market assessment of Integreon as an LPO provider; there are some differences however from the supplier perspective…

LPO Penetration is Low. VN found that offshoring still has fairly low penetration among law firms; less than 3% of firms in a random sample had tried offshoring. Prior surveys and Integreon experience suggest it is much higher. VN surveyed lawyers, not firms, which may account for the lower finding.

Onshore Outsourcing is More Common. The total volume of outsourcing is higher if you take into account onshore outsourcing, which is more common than offshoring (especially in document review). In Integreon’s experience, only a small portion of the market is dogmatic about location; the vast majority let business requirements drive the location decision.

Cost Savings is the Main Driver. VN found that cost savings is the main driver but Integreon also sees that many customers, both law firms and law departments, also focus on satisfying client pressure and improving turnaround time. I know that other outsourcing providers share this view.

What Customers Seek in an LPO. VN found that customers of offshore services seek a provider with deep management and domain expertise, good references, end-to-end services, the ability to scale, and onshore/ global delivery capability. This is consistent with Integreon’s own experiences and what I hear from my peers in other LPOs.

Lack of Awareness is Biggest Reason Not to Offshore. The biggest reason law firms cite for not offshoring – 85% of firms – is lack of awareness of offshoring or no perceived need to do so. I was quite surprised since LPO has been around for 5 years and there’s been plenty of hype. Regular readers of this blog may recall I’ve been reporting on legal outsourcing since 2003!

Security Concerns. Firms cite security as a reason not to offshore. Firms can easily allay these concerns by assessing a provider’s facilities, security, and procedures. VN notes that firms with more extensive offshoring experience say that “client confidentiality and client conflict are not major concerns.” My own view is that the security I’ve seen at Integreon’s facilities exceeds that of any law firm’s I’ve seen.

Quality Concerns. Some firms that tried offshoring were not satisfied with the quality. These instances were likely ad hoc projects that were not properly planned or executed. A reputable LPO should be able to demonstrate understanding of the components of quality and a customer due diligence should reveal whether it’s real.

Document Review Dominates Offshore Work. For firms that do offshore, VN found that document review is the most popular function to send offshore. This is consistent with LPO industry experience.

Conclusions. It is certainly true that many lawyers are skeptical about both offshoring and outsourcing. We think this will change. My colleagues and I know that in the legal market, any new way of working takes years to penetrate. Firms take time to gain comfort with new ways of working; indeed, it takes time to use those ways effectively and achieve the desired quality. The legal market is slow to “tip” to a new way of working. But when it does, it tips quickly. We think in the current environment, the tipping point is upon us.

[Integreon has a free offer for the report - details at that blog post, What Law Firms Think about Legal Outsourcing. See where they agree and disagree with above observations.]

Update 26 June 2009 @ 830. The PosseList blog commented on above post. PosseList is a thoughtful and insightful blog focusing on contract lawyers in US and often comments on broader legal market trends.]

Legal outsourcing has made mainstream and legal media news for years. After blogging on legal process outsourcing (LPO) articles regularly I stopped because there were so many. Two articles in the Times Online today, however, caught my eye. A major multi-national has gone public about legal process outsourcing to slash its legal spend by 20%. 

Rio Tinto’s legal switch puts pressure on London by Alex Spence reports on the fact. Rio Tinto deal heralds huge changes by well-known commentator and author Richard Susskind discusses the ramifications.

Spence reports that “Rio Tinto has hired a team of lawyers in India to try to reduce its annual £60 million legal bill by 20 per cent.” It is working with an LPO to recruit a team of 12 lawyers in India to “work for it on tasks such as reviewing documents and drafting contracts.” Rio expects to have 24 Indian lawyers within one year.

Susskind writes “the Rio Tinto deal suggests that imaginative pricing may not fully fix the more-for-less dilemma. Lawyers will need to go further and source their work differently, often by using less costly labour to do routine legal work…. People often assume that outsourcing and the options are applicable only to high-volume, low-value legal work. The Rio Tinto deal confirms this is wrong.”

For me, the Rio deal just adds to the list - literally - of corporations that offshore or outsource work. The list Outsourced Legal Services on this site shows 15 companies that offshore work to outsourcers or to their own offshore operations. So Rio is just one more company offshoring. Or is it? Specifically, this deal is announced with the intent of significant cost cutting and that feels new.

More generally, markets tip where the new and exotic become accepted and common. Geoffrey Moore’s Crossing the Chasm provides one framework for thinking about new approaches. Well before his work, however, you could see and model adoption of new high tech products (e.g., Polaroid cameras or Xerox-brand copiers) with S-shaped curves: slow ramp up followed by sudden acceleration.

The continuous (smooth) S-curve may not be a good fit for legal. Instead, a discontinuous step-shaped function may apply. Consider adoption in the legal market of e-mail, document management, marketing, lateral moves, or mergers. For each, there seemed to be only a few firms doing it and then, quite suddenly, many or all were. The “step function” reflects lawyer decision making: the first few adopters change slowly, gingerly, and quietly. Everyone wants to follow so once you have a dozen adopters, “the coast is clear” and the rest rush in.

Unfortunately, like calling the bottom of a recession (or the top of the market), it’s much easier to recognize the tipping point after the fact. Working at an LPO my view may be distorted, but it feels like legal outsourcing is at a tipping point. Of course, we won’t know for some time. Whether it is this year or beyond though, I am confident that, as with e-mail, marketing, etc., we will look at outsourcing and offshoring and try to remember what all the fuss was about.

“Be careful of what you ask for you, you might get it.” In response to lawyer concern about the ethics of outsourcing; the ABA issued in August 2008 an ethics opinion. Does it implicitly set a new, higher standard for lawyers who delegate work, irrespective of to whom they delegate? 

EDD consultant and author Conrad Jacoby wrote ABA Outsourcing Opinion - What it means to You as a Litigation Support Professional in Litigation Support Today (Feb/Apr 09). He analyzes the American Bar Association (“ABA”) formal opinion 08-451 regarding outsourcing legal and ancillary services. [See my blog post on ABA 08-451 or buy it from the ABA. I won’t link to the ABA because I am outraged that an organization charged with protecting consumers and promoting lawyers’ professionals values charges for ethics opinions.] Jacoby writes

“ABA’s opinion was driven by the need to clarify the role of third party document review services, the language of the opinion is much broader, serving as a yardstick to measure any outsourced service provided to a legal team….. the Opinion makes it clear that blaming performance issues entirely on a vendor is no longer a winning defense inside a litigation matter.”

The opinion suggests specific due diligence steps for offshore work but the implicit standard it sets apply to any outsourcing, including domestic. Jacoby writes “the burden on law firms has shifted from demonstrating that they outsourced a project (and its liability) to demonstrating the reasonableness of their oversight of an outsourced project.” He presents good practical advice for legal assistants and litigation support professionals, especially concerning keeping records of their interactions with vendors. He also notes that the opinion makes “clear that a legal team that elects to outsource work still retains full responsibility for the quality of the work, just as if the work had been performed directly by members of the legal team.”

Have lawyers, by shining the spotlight on outsourcing and raising the specter of quality fears, inadvertently illuminated the dark corners of their own firms? Would the due diligence steps, when applied to in-house practices, pass the ethics opinion standard? My friends in BigLaw frequently tell me about poorly supervised document reviews in-house. Applying the duty of care implied by the opinion, would law firms pass the same tests to which they must subject vendors?

The legal press loves to pit US and UK firms against one another. This week, evidence of another dimension in that competition. 

Large UK law firms have embraced low cost, offshore operations more enthusiastically than US firms. View from the Top - David Childs, global managing partner of Clifford Chance (FT, 13 Feb 2009, free registration required) today is worth reading entirely; one Q&A pair caught my eye:

“Q: Is the recession giving you a boost by encouraging clients to move their work to a single, bigger law firm?

A: Not yet. What we are seeing, though, is clients wanting to discuss with us how they take cost out of their [internal] legal function, as well as how we can help them reduce the cost of what we do for them. So, for example, we have a centre in India that provides us with paralegal services as well as accounting and IT services and we’ve asked them to talk with some of our clients as to whether we can give them a paralegal service through London using paralegals in India.”

With law departments increasingly cost conscious, firms that can offer lower cost options have a competitive advantage. Will US firms be at a disadvantage not having similar low cost options?

Top UK law firm Osborne Clarke has outsourced a significant portion of its support services ("Middle Office") to Integreon. 

The Osborne Clarke press release explains

“Osborne Clarke (OC) today announced a unique and innovative response to client demands for greater efficiency from the legal industry with a £50 million deal with Integreon to create the UK legal sector’s first onshore shared services centre. The seven year deal will see approximately 75 of OC’s business services employees transferred to Integreon.
Client demands led OC to look at the way law firms buy and use support services. Over the last 12 months, the firm has put its own working practices under the microscope as well as those of competitors. It concluded that the legal industry would move to focus on core legal services in future. Support services would be provided by a new generation of businesses focused on high end multiple service provision to the professional services community.”

I now work for Integreon and strive to maintain my objectivity. In May 2003, one of my first blog posts was Central Back Offices and Outsourcing. In it, I reported on Orrick building it shared services center in Wheeling, WV. I wrote

“It’s surprising that more firms are not moving in this direction. More and more law firms have multiple offices across many time zones, domestic and international. Housing a significant number of staff in downtown real estate is expensive. Moreover, the argument that staff need to have access to lawyers loses weight as the percent of lawyers located in the “home” office declines. And with the increasing use of e-mail, instant messaging, and video conferencing, the need for physical proximity diminishes.”

As I suggested a couple of weeks ago in The Crisis Goes to Waste as BigLaw Muddles Through, law firms can hardly argue that they have rationalized or optimized how they deliver support. Shared services certainly seems a big step in the right direction. Some other firms have created shared centers: White & Case, Baker McKenzie, Reed Smith, and Clifford Chance.

Is the shared services approach (outsourced or not) trickle now becoming a trend? I’ve long thought shared services makes economic, operational, and strategic sense for law firms. It will be interesting to see what impact the economic crisis has on how law firms provide critical support services.

Earlier this month I wrote a post Taking the LPO Temperature: Warm, Getting Hot, But Doubts. A new article in Corporate Counsel about legal process outsourcing deserves its own discussion. 

Will Tough Economy Push Companies to Outsource Legal Work? (Corporate Counsel, 22 Dec 2008) by David Hechler is a detailed, well-written article that provides a balanced view of legal outsourcing. Rather than summarizing it, I will call out and comment on a few points that I find most interesting.

The Pot Calling the Kettle Black? I was glad to see in print a point I often make. Quoting Susan Hackett, ACC’s general counsel, ” ‘For me,’ she says, ‘offshoring is just another kind of outsourcing.’ And after all, sending work to outside firms is outsourcing.” In my experience, many BigLaw lawyers fail to recognize that their firms are outsourcing service providers. The irony of protesting outsourcing appears lost on them.

The Chefs Have Not Visited Their Own Kitchens Lately BigLaw partners express concern about the quality and process of working offshore. So I was glad to read: “It would be interesting, Rowe [of Huron Consulting] responds, to take the processes the Indian companies use and apply them to U.S. firms. It isn’t outsourcing that’s costing legal jobs in the U.S., adds his fellow Huron exec, Shahzad Bashir. ‘Poor business models are losing jobs.’ ” In my experience, the processes, especially quality control (QC), of reputable LPOs are better than in US law firms. I wonder if US lawyers who question LPOs have ever spent time in the trenches of a big onshore document review.

Low Cost Ingredients are More Flavorful. Microsoft moved patent application work to India. It has saved money and improved quality. The savings can be as high as 90% compared to the US and are never less than 60%. The article also reports, however, that Intel tried offshoring patent work and stopped because it could not get the quality it wanted.

There’s More than One Way to Slice This This article addresses some important legal outsourcing points I’ve rarely seen covered in the legal press:

• Offshore services can be provided by “captives” or third-parties. A captive is an offshore operation owned and operated by an onshore company. The article notes that captives are more expensive than third party operations and that many are being sold by their corporate owners.
• Dual- or multi-shore services are important: “more ambitious vendors have looked to provide services onshore and off because that’s what their clients want”

Don’t Look behind the Refrigerator - You Might be Disgusted Some law firms may get themselves in trouble when it comes to outsourcing. The article relates a story about a BigLaw visit by an LPO executive. BigLaw firm

“thought offshoring was a terrible idea, until Reed [a United Lex executive] mentioned that his company also does accounting – and can reduce a company’s costs by 30 percent to 50 percent. Suddenly, Reed says, the lawyer was very interested in outsourcing.”

If I were a general counsel reading this, it would confirm my worst fears about outside counsel. This puts BigLaw in the light of wanting to reduce its own, non-billable expenses but dead-set against lowering client charges by using more cost-effective resources.

Update (21 Dec 2008) || Who’s Ordering these Meals and How Much Do They Really Cost? Just came across ANALYSIS: Legal Process Outsourcing: just hot air? (ALB, 18 Dec 2008). Author Joshua Scott questions whether law firms will purchase much LPO services. He suggests multi-nationals will be the buyers. He also questions the savings, citing the added cost of managing the provider. Personally, I believe that argument is weak: lawyers do have to manage LPO services. The real problem and “added” cost is that many do NOT manage their own internal processes.

What’s the current state of legal outsourcing? Depends on what factors you give the most weight to. Four items came together this week to provide excellent perspective on legal process outsourcing (LPO).  

US Legal Outsourcing $2 billion by 2013. Over at Integreon.com (my employer), I wrote a blog post yesterday, Survey Suggests US LPO Spending of $2 Billion by 2013. Based on a recent survey and “some conservative assumptions, we estimate that U.S. corporate law departments will spend about 3% of their budget on legal outsourcing. This translates to US legal process outsourcing (LPO) spending in 2013 of almost $2 billion.” You can read in gory detail exactly how I derive the market size estimate. I think that represents a very high growth rate.

LPO Doubt Continues. India Work Grows, With Glitches (The National Law Journal, 9 Dec 2008) is a “on the one hand, on the other hand” story. It suggests a growing market and that cost pressures bode well but reports concerns about outsourcing management challenges and ethics. And it focuses a bit heavily in my view on the recent Mumbai attack. Legal outsourcing is about how lawyers can delegate work to appropriate resources, not where. There are many LPO destinations; India happens to be the one getting the most press. In a future post, I will discuss in more detail how the reaction to LPO mirrors legal market adoption of many other new ways in the last two decades.

Cost Pressure is Up - Which Way Does That Cut? At the risk of stating the obvious, the need for cost savings is growing. According the just released (9 Dec 2008) Altman Weil Flash Survey on Law Department Cost Control, “75% of responding General Counsel indicated that their law departments are facing budget cuts averaging 11.5% for 2009. An additional 15.6% reported that their budgets would increase by a smaller percentage than in prior years.” How many ways beyond outsourcing can the typical GC name to do more with less?

Is the Usual Approach Really So Great? The NLJ article and many others report on concern about quality offshore. Yes, lawyers need to perform due diligence on any resource they use. So too should they on the typical contract lawyer approach. Read Down in the Data Mines in the December ABA Journal. This is a sobering first person account of a well-trained lawyer doing doc review. I’ve read other similar accounts. Assuming this is representative (my friends who manage BigLaw reviews suggest it is), how any lawyer can read this and still assume onshore=good and offshore=bad takes logical power and/or facts I lack. Or perhaps they have not visited the well-run, process-driven, spirited, and highly secure review center of a reputable LPO (like the one for which I now work).

Update (11 Dec 2008) Turning to India at break-neck speed by Richard Susskind in the TimesOnline reports on the rise of LPO in the UK, based on an RSG Consulting report. Factoid: 10 of the top 30 firms in England have “outsourced back office functions or legal work to India.”

Updated (13 Dec 2008) Blogger Adam Smith, Esq. writes a very thoughtful, in-depth analysis of the current crisis, “Structural Breaks” and Other Timely Phenomena. He provides a great historical perspective on past crises and the response of government and business. At the end, he draws the lessons law firms can learn; among them:

“Just because you’ve “always” done something, do you need to? … Have you outsourced your cafeteria? (I hope so!) Your mail room and your 401(k) administration? (Ditto.) Your word-processing? (On-deck circle.) Your document review? (Time to think about it.)”

Updated (13 Dec 2008) An older item but a good in depth article on legal outsourcing: Offshoring legal work: do lawyers risk outsourcing themselves? (Law Society Gazette, 27 Nov 2008). This is a nice analytic piece with good examples from UK, especially Eversheds. Hat tip to Mark Ross of LawScribe, who is also quoted in the article

Update (22 Dec 2008) Barrons has a short item, Exported Expertise, Lawyering Long-Distance (22 Dec 2008) quoting one vendor saying LPO growth prospects are hot.

[Hat tips to The Common Scold and complexd at http://twitter.com/wrrobinson for the Altman Weil study and to Legal Blog Watch, The Disturbing Side of Life as a Contract Attorney - a blog post on this article worth reading.]

American Lawyer magazine published in its December issue a survey of law firm leaders. Some interesting results on legal process outsourcing (LPO) and client interviews. 

For AmLaw’s take on their own survey, read Annual Survey Shows Law Firm Leaders Wary but Confident. I found two question in the underlying survey at Law Firm Leaders Survey 2008 of particular interest.

Legal Process Outsourcing (LPO). Asked “Over the next ten years, do you think your firm will outsource more of its legal work to lower-cost jurisdictions either offshore or within the U.S.?” 38% said yes and 62% no. Given some of the prior BigLaw partner comments about LPO, I am pleasantly surprised that the 1/3 of firms expect to outsource.

Client Relations Asked “In the last 12 months, how many of the firm’s 20 top billing clients have you met with to discuss the client’s satisfaction with your firm’s performance?” 54% met with fewer than five clients. Only 18% met with more than half. With the plethora of articles about the importance of client feedback over the last 15 years, I am shocked by these results.

Perhaps if firms engaged their clients more, they would decide to outsource as a way to deliver higher value. Of course, the fact that the clients don’t insist on meeting with their outside counsel to discuss the relationship supports my view that buyers are meek and unwilling to exercise their market power.

The punchline of a new electronic discovery (EDD) brouhaha confirms an argument I’ve long advanced with which lawyers and judges seem to struggle. Quality legal work can only be measured relative to an alternative approach. 

Many a post here has criticized lawyers and judges for assuming that whatever they do now is right. I try to counter knee-jerk reactions such as “We can’t use software to review documents, it might make a mistake” or “We can’t use offshore lawyers to review documents, it might make a mistake”. True, but hardly helpful unless you know how mistake-prone your current approach is.

The lead sentence of a Recorder article (19 Sep 08):

“Two critical e-mails in a stock option prosecution against McAfee’s former general counsel weren’t turned over sooner because contract lawyers at Howrey had marked them ‘not relevant,’ a Howrey partner explained in a federal court in San Francisco Thursday. ” (Trial of McAfee Former GC Begins, Delay in Disclosing Critical E-Mails Explained)

For further commentary on the mistakes of the contract lawyers, see Dumping on Contract Attorneys at Legal Blog Watch.

Personally, I’m not dumping on contract lawyers. It’s natural that in any high volume operation, mistakes will happen. My concern is that when software or offshore lawyers make a mistake the legal profession will “run for the hills” and use that as a reason to exclude those approaches. If we apply that logic to the circumstances of this case, then BigLaw can no longer use contract lawyers.

This is your wake up call legal profession: unless you can quantify, using empirically sound methods, the quality of your work, you cannot begin to assess alternative approaches. Moreover, without that quantification, you too at risk for judges saying that heads will role.

Three recent items about legal outsourcing caught my eye. 

Prediction: LPO Market Will Be $2B in Four Years
Infosys, a major Indian outsourcing company, entered the legal process outsourcing market recently. The director and head of human resources is quoted in Infy to add 13,000 staff in Pune in 2 yrs (The Times of India, 9 Sept 2008) as saying “We estimate the current market size of LPO segment at $ 200 million and expect it to rise to $ 2 billion in four years’ time”. I do think the market is growing quickly but that seems high. ValueNotes, a Pune-based analyst outfit, predicts an LPO market of $640mil by the end of 2011.

Outsourcing: ABA Annual Conference Panel
The legal process outsourcing panel presentation on which I participated at the ABA Annual Meeting is featured in the “Your ABA” Newsletter, Outsourcing legal services overseas, August 2008. Blogger Adam Smith, Esq. (aka Bruce MacEwen) attended and wrote a perceptive post about outsourcing in his 12 August 2008 blog post, London and New York, Meet Mumbai and Delhi.

Outsourcing: Microsoft Saves on Patent Work
Law department management consultant and blogger Rees Morrison, in Microsoft’s savings from using offshore patent support, quotes Marty Shively, Associate General Counsel and Director of Worldwide IP Operations. Shively reports that MS is spending $3 million on offshore patent support services, saving $6.5 in comparison to what the same services would cost domestically.

For those interested in legal outsourcing, you may find helpful my outsourcing article on LLRX.com from earlier this week. 

Why and What Lawyers Should Consider Outsourcing (LLRX.com, 1 Sep 2008) is an overview of legal process outsourcing. I was flattered to receive the ”Above the Law treatment” of my article at Outsourcing: Here’s the Pitch.

The ABA yesterday released Ethics Opinion 08-451 on legal outsourcing. It’s substantively important. And separately, it illustrates, in my opinion, systemic issues with how the ABA conducts important business. 

The ABA Ethics Committee Issues Opinion Detailing Lawyer Responsibilities When Outsourcing Legal Work Domestically or Internationally press release make several important points:

• “U.S. lawyers are free to outsource legal work, including to lawyers or nonlawyers outside the country, if they adhere to ethics rules requiring competence, supervision, protection of confidential information, reasonable fees and not assisting unauthorized practice of law.”
• “Outsourcing can reduce client costs and enable small firms to provide labor intensive services such as large, discovery intense litigation, even though the firms might not maintain sufficient ongoing staff to handle the work, according to a new ethics opinion issued today.”
• “Depending on the level of supervision contemplated by the outsourcing lawyer, it might be necessary to obtain informed client consent before engaging outside assistance.”

Unfortunately, I cannot report on the text of the opinion itself. Though the press release links to another ABA web page to download the opinion, the opinion is not on that page. I was not able to find a link to the opinion on the ABA website as of 1050am EDT. I placed three calls to the ABA and none of them yielded the opinion.

I also noticed that the ABA charges non-members for ethics opinions. In my opinion, this is an outrage. I would have thought that a key mission of the ABA is to encourage ethical behavior by lawyers and that, as part of that mission, the ABA would make ethics materials freely available. It is not clear to me what philosophy - other than avarice (aka revenue generation) - supports the idea that ethics opinions should cost to read.

My experience today trying to find this opinion and then learning, even once a link becomes available, I will have to pay to read the opinion, confirms my long-held views that the ABA: (1) is hopelessly bureaucratic and inept at the most basic functions such as actually making available a document referenced by a live press release and (2) out to protect its own interests rather than that of clients and consumers or even its lawyer members.

Update, 515pm EDT A staff member of the ABA has posted the following comment:

The ABA Center For Professional Responsibility’s home page link, “What’s New,” has been changed to allow anyone to access the outsourcing opinion. The Media Relations Department was asked to make changes to the ABA’s homepage to make the opinion easier to find and download. In the future, newsworthy opinions will be available for anyone to download gratis from the Center’s homepage for a limited period.

To download the ABA Opinion 08-451. Formal Lawyer’s Obligations When Outsourcing Legal and Nonlegal Support Services, go to http://www.abanet.org/cpr/ and look for a link at the top right corner of page.

Update, 11:15PM EDT The ABA ethics opinion is the lead story on law.com now: ABA Gives Thumbs Up to Legal Outsourcing by Anthony Lin in the New York Law Journal, August 27, 2008

Legal process outsourcing (LPO) continues to be in the news. Law Practice Management magazine (a publication of the Law Practice Management section of the American Bar Association) has a feature article on it. Separately, next week in NYC at the ABA Annual meeting is a “Presidential CLE Centre Showcase Program” on outsourcing (I am a panelist). 

Outsourcing Legal Services Abroad is an excellent overview of the LPO market and issues by Bill Gibson in LPM magazine. I found particularly interesting the experience of Richard Granat, a lawyer who has long been an innovator in delivering legal services to consumers (his web sites include MyLawyer.com and Maryland Family Lawyer.) The article quotes Granat:

“Through my virtual law firm operation, I have used an Indian firm to do legal analysis for clients that I’m working with, and the results have been excellent - and it costs about 50 percent less than the cost of a U.S. paralegal. Since the person doing the work is an attorney trained in English common law, the quality of the work is often better. We’ve also assigned basic legal research, as in compiling statutory materials on a particular subject for every jurisdiction. This work has been excellent and our cost is about $12 an hour, and that cost includes the cost of online legal research services. This cost is less than it would cost [to have the work done by] a U.S. law student, and the work is more reliable.”

Gibson notes, however, that Granat “feels more hesitant about sending more specialized legal services overseas at present, he does foresee an expansion in how smaller U.S. firms will use the Indian outsourcing firms to serve their needs and increase their efficiency going forward.” More detail about Granat’s experience with outsourcing is available in LPM at Richard Granat’s Outsourcing Experiences. See also the article about 36-lawyer firm Zeichner Ellman & Krauses positive experience with outsourcing in Battling the Big Boys: Outsourcing Helps New York Boutique Compete in Megafirm Arena

For anyone attending the ABA 2008 Annual Meeting in NYC next week, Bill Gibson will moderate a legal outsourcing panel at 10:30am on Friday, August 2nd, in the Trianon Ballroom at the NY Hilton. The panelists are Sally King of Clifford Chance; Jim Lantonio, the retired executive director of Milbank Tweed and now a consultant; and me. (ABA Annual Meeting program - BIG PDF file.)

Updated 4 Aug 2008: Another LPO article: Sea change - Ever-rising costs are forcing a growing number of law firms to offshore legal work by Mary K. Pratt in the Boston Business Journal, 1 August 2008.

Today inhouse counsel at Sun Microsystems shared hands-on experience with legal outsourcing. This is the best legal process outsourcings (LPO) presentation I have seen to date by an actual customer. 

The Legal Process Outsourcing Chapter of the International Association of Outsourcing Professionals today held its second webinar, chaired by Mark Ross of LawScribe (his recent blog post describes the event).

Connie Brenton, Assistant General Counsel for Sun Microsystems, provided an in-depth case study of Sun’s decision to offhsore a large-scale document review project, from the search for the provider through the RFP process and concluding with Sun’s analysis of the projects outcome. High points of her presentation include:

• The drive to reduce cost motivated Sun to look at outsourcing starting in 2005 and to travel to India in 2006 to learn more about providers.
• The first offshore project in 2006 was a contract review. It did not go well but Sun learned many important lessons about how to outsource. {Editorial note: corporations understand that problems are learning opportunities, not failures; law firms find this idea difficult.}
• The second project was much better because Sun provided and required much more training and process guidance. Sun looked beyond the management of LPOs, who are often experienced US-trained lawyers, to assess the skill level and training of Indian lawyers. Sun also provided a project manager and contract templates. {Editorial note: Ms. Brenton did not use these words, but it sounds like first project was classic “lift and shift” outsourcing, which almost always fails, and second was a re-thinking of how to use different resources to do work a better way.}
• Beyond the savings from labor cost arbitrage and process improvement, Sun cut costs even further through a “dynamic bidding event” (DBE), a real-time, web-based process in which providers bid on the work. Total savings of offshoring coupled with DBE were 78% relative to budget. Project was “wildly successful.”
• Sun continues using LPOs. This year, it improved its approach, refining task delegation, pricing, and how it prepared and presented requirements to the LPO. In evaluating vendors this time round, Sun saw that leading LPOs are very flexible and highly sensitive to quality results.
• The company is committed to continue using offshore resources. Sun may insist that is US outside counsel work with offshore providers.

The process Ms. Brenton laid out is a great road map for other law departments that want to outsource.

The entry of established, adjacent players in an emerging market is a sign of good times. This is now happening with legal process outsourcing. 

I began writing about legal outsourcing (onshore and offshore) five years ago. Since then, the LPO market has grown. There have been countless articles in both the legal and general press (the most recent being Contract with India: Legal outsourcing, Financial Post, 25 April 2008). And the number of LPOs as tracked by Joy London and me is now over 100.

Another positive sign for a market is when established players enter it. Infosys and Wipro are two of the largest and most successful outsourcing companies in India. On April 28th, the Economic Times reports in Wipro logs on to LPO services that Wipro “has started offering legal process outsourcing (LPO) services.” As Wipro notes on its LPO web page, “With growing focus on profitability and cost reduction by corporations & law firms, things are beginning to change - and, like in many industries, outsourcing is playing a key role.” Earlier, on 5 Nov 2007, the Economic Times reported in Law & order: Infosys to foray into LPO business. (See the Infosys LPO web page.)

It will be interesting to see the impact of these well-established companies on the LPO market. Both Wipro and Infosys have great brand equity in business process and IT outsourcing. It’s not obvious, however, that this brand equity counts for much with general counsels. What may matter more are the relationships both have with with CIOs, CFOs, or COOs and whether introductions from them effect CLO decision-making.

Legal process outsourcing continues to make the news in mainstream media. This time its Time. And now it’s time to ask where we are in LPO adoption. 

The New York Times, Wall Street Journal, and Business Week have covered LPOs. Call My Lawyer … in India (Time, 3 April 2008) opens with a point not usually voiced. It quotes a lawyer who “says he’s ethically obligated to do what’s best for his clients, ‘and that includes saving them money’.” The General Counsel of TransUnion (N.B.: another law department on the record about outsourcing) cites document review savings of 85% versus the domestic alternative. Interesting that many BigLaw partners on record in the legal trade press focus on the potential risks and overlook what may be another ethical duty.

Time reports the potential confidentiality issue. It does cite the numerous security measures Integreon takes (full disclosure: I work for Integreon) but leaves the issue open. Does this situation remind you of anything?

If you worked in the legal market in the early 1990s, it should remind you of lawyer adoption of e-mail. Many resisted e-mail - why, it might not be safe!! Who knows where a message goes once I hit send!!!!!! Never mind that doubters happily sent confidential faxes to hotels where it was guaranteed a third party would see (if not read) the fax. Never mind the Fedex disclaimer explicitly did not guarantee privacy.

Today, it’s hard to find a lawyer who does not use e-mail. And it’s not that the infrastructure is more secure. What finally drove adoption was widespread use of e-mail by clients. Interestingly, many clients today move highly sensitive data around the world, both among their own operations and to third parties, including outsourcers in India.

Legal outsourcing may not achieve the near 100% adoption of e-mail. It seem likely though, that it will share a similar attitudinal outcome with e-mail: in a few years, most lawyers will wonder what all the fuss and worry was about.

This post originally appeared at Strategic Legal Technology.

Many discuss legal outsourcing but few admit doing it. 

I predicted in January that more law firms will go public about outsourcing. As more law departments reveal publicly that they outsource and offshore, barrier for law firms to do the same falls.

HSBC launches offshore legal team for bulk work in LegalWeek.com (7 Feb 2008) reports that “FTSE 100 banking giant” HSBC “has set up a team of four lawyers in its global service centre in Malaysia’s capital, Kuala Lumpur.” The article also reports that BT “last year expanded its existing offshore legal function in New Delhi with two new outposts in Sao Paulo and Buenos Aires to support its US operations”

Separately, Offshoring litigation work in India is a podcast by The International Institute for Conflict Prevention & Resolution (click here for landing page for CPR’s complete podcast directory). CPR interviews co-founder Sanjay Kamlani and VP of Legal Services Shelly Dalrymple of Pangea3 (40 minutes). Starting at about time mark 26:50, Mr. Kamlani shares that Philip Morris has a 10-person Pangea3 team working on day-to-day contracting worldwide.

How many more BigLaw partners will go on record about the risks of offshoring legal work when their clients - or companies they would like as clients - are already doing so?

See list of outsourced legal services for other companies offshoring.

This first appeared at Strategic Legal Technology at Prism Legal.

Update (29 Mar 08): Picking an Outsourcing Partner (The Recorder, 31 Mar 08) reports that O’Melveny’s marketing department outsources research to India.

In January, I predicted that legal process outsourcing would likely consolidate. 

Copal Partners eyes LPO foray via buyouts in The Economic Times (15 March 2008) quotes Joel Perlman , the president of Copal, an established “knowledge process outsourcer” (KPO) that specializes in equity and credit research: “We are in discussions with 10 LPO firms in India whose revenues are in the range $5-75 million. We hope to close one or two acquisitions this year.”

The start of LPO consolidation?

Legal outsourcing continues to be in the news. And the list of providers continues to grow. 

Joy London of excited utterances and I started tracking legal process outsourcing providers almost three years ago. We have just updated our list of Outsourced Legal Services.

Three years ago, we had under a couple of dozen entries. With this update, the number of vendors is up to 111 from 100. Other updates include:
- Moving a few vendors to “no longer offering", two because they were acquired and one because it appears inactive.
- Additions to the list of companies publicly identifying as offshoring legal work.

The growth in our list, along with the number of articles and new conferences about outsourcing, suggest that the topic remains hot.

A new survey shows the direction legal outsourcing is heading - up. 

Jack Diggle is a principal consultant at princeOMC, which is a consultancy that provides clients with “the resources to build the right sourcing solutions…. services include … strategy formulation, service provider selection and operating model design, and governance and service management.” In the Shape of Things to Come in Legal Business (Feb 2008), Diggle presents the results of a survey (conducted with Legal Business) of over 100 senior US and UK large law firm managers. Key findings include:

• 20% of overall law firm workforce (27% practice support; 15% legal work) will be offshored by 2015.
• Legal outsourcing will shift from onshore to offshore, driven by cost savings and talent availability.
• The move offshore, however, can be complex, with law firms concerned about data protection, vendor reliability, and loss of control
• Over 50% of respondents believe that commoditized legal work will be offshored within 5 years. Moreover, about 25% believe even “specialist legal work” will “move outside the firm” in this time period. Already, 10% and 5% of respondents respectively have offshored commoditized and specialist work.
• Over 20% of respondents have already outsourced lawyer support such as word processing or research.

The complete survey is available for purchase at Legal Industry Outsourcing Trends 2008.

In my last post I wrote about large law firm Howrey opening its own document review facility in India. Is it a good idea for law firms to own and operate their own offshore center? 

Because I now work for a legal process outsourcer (LPO), I was reluctant to question Howrey’s wisdom in building an owned and operated ("captive") offshore processing center. An article today relieves me of that reluctance. Rethinking the India Back Office in the Wall Street Journal (11 Feb 2008) explains that captives are often more expensive than companies expect. Consequently, “Some of the largest outsourcing units are still those belonging to Western companies, including Wall Street’s biggest banks… could soon be looking to get out of part or all of the business by selling either to Indian companies that specialize in outsourcing services, to private-equity firms or through initial public offerings.”

Dollar depreciation and Indian wage inflation have taken a toll but India still offers a significant cost savings. The bigger problem is that operating a captive is expensive and hard. A recent McKinsey / Nasscom study found that captives are “less efficient than companies run by outsourcing firms that specialize in the business. ” The article continues to observe that “Once the initial benefit was felt, companies found it hard to keep on top of their costs. Salaries and the cost of office space jumped. Staff turnover has been high, and companies are having to spend on headhunting fees and training.”

My 20 Sept 2008 post, What Direction Legal Outsourcing?, also cites an article analyzing the trend of companies that built their own offshore centers to sell them.

So, to answer my own question… I think Howrey has great vision in opening an office in India and offering its clients the option of low cost, high quality services from India. But if the history of captives is a guide, Howrey’s Pune office may someday be owned and run by a third party, even if it is for the exclusive use of Howrey.

“It’s not outsourcing” says Robert Ruyak, Howrey managing partner, of the firm’s new office in Pune, India. 

So reports “Howrey Vindaloo” (American Laywer, Feb 2008). Howrey, which has long operated a document review facility 15 minutes from downtown DC, has opened an office in Pune to handle client work.

Ruyak says clients don’t want to outsource. Howrey, like any other large firm, would have little business if that were true. BigLaw primarily serves as an outsourced service for corporate law departments.

He also says the Pune office is “just like if you had people working at home or in another location.” That seems right to me though I would take that thought further. I previously suggested that outsourcing and offshoring are extensions of a long tradition of lawyers delegating work. Ownership of the resources and infrastructure seems less important than the degree of control and supervision. One can imagine situations where resources are owned and operated but totally out of control and vice versa, outsourcing with very tight controls and QC.

With Seyfarth Shaw using an offshore legal process outsourcer, with Howrey opening its own offshore office, and with Lovells going public on its offshore document review (Lovells loves India, The Lawyer, 3 Dec 2007), the tipping point of firms going public about offshoring seems near.

Update (12 Feb 08): Howrey Opens Office in India, Gives Clients Lower-Cost Option is now available on the web. Note the change in title from print to web.

Update (2 Apr 08): Office openings signal drive to keep panel places (TheLawyer.com, 31 Mar 08) provides some additional context for Howrey’s India office.

Will legal process outsourcing (LPO) grow in 2007? Will LPO vendors consolidate? When will law departments and law firms “go public” with their offshoring? These are some of the questions addressed in a new article. 

Legal Process Outsourcing (LPO): 2007 And Beyond by Mark Ross, with contributions by Ron Friedmann and Neeraja Kandala address these questions. Mark Ross is a UK solicitor and Director at LawScribe and blogger at http://blog.law-scribe.com/; Ron Friedmann is Senior Vice President, Marketing at Integreon and Neeraja Kandala is a Senior Research Analyst with ValueNotes, a company that has done an excellent job tracking and analyzing the LPO market. This article first appeared at Mark Ross’ blog and was subsequently published by Immigration Daily (ILW.COM) in January 2008.

In it, I predict that the LPO market will consolidate because (1) maturing markets usually do, (2) the operational and strategic advantages of scale, and (3) lawyers’ preferences to avoid small suppliers that may not be stable. I also suggest we will see more public acknowledgment of offshoring because of the usual legal market “tipping phenomenon” where no firm wants to first (or 2nd or 3rd) but after a half-dozen, all rush to follow.

Legal process outsourcing and offshoring remain hot topics judging by two recent articles. And both illustrate on-going perception issues. 

In GCs Embrace Outsourced Work (The Recorder, 25 Jan 2008) a BigLaw partner objects to offshoring document review because it is “better for lawyers who are working on the case to review related documents.” Absolutely. But few think associates should review every document. Whether contract lawyers or ones offshore conduct the first pass review should have little impact on what associates end up seeing. The key is having a process - human and software - that quickly, accurately, and cost-effectively filters what the case team sees.

Legal Outsourcing to India Is Growing, but Still Confronts Fundamental Issues (New York Law Journal, 23 Jan 2008) reports on a recent conference on legal offshoring. The reporter observes that the economics of offshoring are not as simple as may first appear because

“Maintaining a group of lawyers in India imposes significant infrastructure costs on the outsourcing companies. Aside from office space and computers, the leading companies also have U.S.-trained lawyers working in both India and the United States to supervise the work of Indian staff. They also maintain client development teams to market services to U.S. companies.”

All true but little different than the economics of contract lawyers in the US. Last time I looked, domestic litigation support and staffing companies also maintain sizable client development teams. And let’s all hope review lawyers have space and computers somewhere (and space is generally cheaper offshore).

But yes, it’s probably true that offshore providers have more lawyer supervision. Some of the “delta” (the additional use of lawyers) stems from transactional costs of being offshore but most likely reflects the amount of attention any document review should receive. That is, the problem is not that going offshore mean over-investing in lawyer supervision; rather, it is that in onshore reviews, clients and firms often UNDER-invest in lawyer supervision and project management.

I have oft stated that these are empirical questions, subject to testing. In my post Honestly Held Beliefs May be Wrong I point out that lawyers often operate from honestly held but mistaken beliefs about the way things work. Much of the discussion in the legal profession about offshoring to date strikes me as based on speculation about possible problems of working offshore. The dialog would be much better if more lawyers and reporters commenting on the topic do so based on empirical data and a comparison of alternatives.

[Disclosure: I am not disinterested. I started working for Integreon in Sept 2007. But regular readers will recognize that my changing hats has not changed my analytic and empirical approach to the questions here.]

Live from the ACI Legal Process Outsourcing conference in NYC. Session: Best Practices for the Ongoing Management of the Outsourcing Arrangement. Speakers: Angelo Paparelli, Managing Partner, Paparelli & Partners LLP and Elizabeth Foster
Partner, Business and International Services Groups Luce, Forward, Hamilton, Scripps LLP. 

Paperelli Offers a Case Study in LPO

In my firm’s practice - immigration for large companies - we faced severe price pressure. At the same time, we faced escalating costs (rent, associate compensation). It became clear that to operate profitably, we needed to find less expensive ways to work. I also was concerned that young lawyers spent too much time on writing and research and not enough time with clients. So I looked at offshoring….

Offshoring strikes fear in associates and staff. You have to think carefully about how you introduce the concept to your firm. If you don’t do it the right way, offshoring will be sabotaged. Thought that one meeting was enough to make everyone comfortable. It turns out that was NOT the case. It takes time to get people comfortable. The senior lawyers on each team have to champion offshoring. The right way is explaining facts to team: the economic challenges, for example, the challenge of scaling up and down as work flow ebbs. Explain all the reasons why LPO can solve the problems without threatening jobs (in fact, it will let existing team do higher value work). It did not go over well initially.

As part of offshoring, you have to make sure your processes are in good shape. You also need metrics in an LPO agreement, with real-time access to work status. To get the right LPO metrics, you first need the right metrics in your own firm. Otherwise you can’t reliably compare your own work with the offshore work. Both sides should measure performance and regularly compare notes.

A government rule change caused a substantive change in how work had to be done…. certain work now had to be done in a shorter time frame. When the firm tried to return work to client, client made noise about discipline. That brought religion to staff, who then saw there was no choice but to consider offshoring in order to deliver what the client needed. The fact that we had laid the ground work was critical though.

I thought I could build own facility offshore but realized it is much harder than anticipated for a smaller law firm.

Elizabeth Foster

My firm has not yet done any offshoring. For providers, it should be helpful to hear the perspective of a mid-size firm as it considers offshoring. Draws analogy to finding a US lawyer in another state. It’s done by word of mouth with few reference checks. Thinks that the same will eventually be true for offshore work.

Live from the ACI Legal Process Outsourcing conference in NYC. Session: Avoiding the Ethical and Liability Risks Associated with Outsourcing Legal Services, Speaker: Lawrence Schultis, Partner, Pillsbury, Winthrop, Shaw, Pittman LLP. 

The New York City Bar ethics opinion is the leading one for ethical issues in outsourcing and offshoring. In the eyes of the bar, any lawyer not licensed in NY are not considered lawyers for purposes of NY law (and is thus a non-lawyer). Lawyers must adequately supervise non-lawyer . Any time a licensed lawyer delegates work to a non-lawyer, she must assure the work is properly conducted.

For offshore work, lawyers must be “vigilant and creative” in supervising non-lawyers. Of course, these words are not defined and provide little guidance on their face. The NY opinion provides some guidance though:
- get background information on workers
- conduct reference checks
- interview workers for suitability
- ensure non-lawyers understand assignment and expectations

Factors showing supervision include:
- Discipline and termination for improper conduct
- Adjust compensation for poor performance
- Contractual right to get workers off your matter
- Lawyer provides training
- Lawyer reviews ethics and practices
- Discretion to confine areas of work or scope or responsibility
- Thorough review of work product. (MOST IMPORTANT)
- Lawyers MUST NOT delegate authority over strategy, question of judgment or final content.

Arrangements with LPOs are contractual, so contract must say the right things. In contrast, with US lawyers, ethics rules govern and create obligations. For example, confidentiality is protected by US ethical rules for US work; the LPO contract must contain confidentiality provisions. Customer must also follow strict conflict checking rules. The contract should have an explicit conflicts checking plan. There is no law yet on how far back an LPO needs to look for conflicts. Even in US, there is not a clear cut rule about how far back to look.

Disclosure and consent is not required unless:
- Non-lawyer will play a significant role
- Client confidences must be shared
- Client expects that only personannel employed by the law firm will handle the matter
- Non-lawyers are billed to client on a basis other than cost
NY bar uses “should” but this should be read as “must.”

Absent specific agreement, non-lawyer services should be a pass through cost. The mark-up rule does differ between a contract “lawyer” (meaning the person is a licensed NY lawyers) and offshore workers assuming. In practice, there is much “winking” at fact that some contract lawyers are NOT licensed in NY. If the contractor is not licensed in NY state, then rules concerning mark-ups would the same as for an offshore worker.

Draws analogy to initial ethics rules regarding use of e-mail. Some early opinions said e-mail waived privilege because message traversed the net. Thinks the rules will eventually change for LPO work, as they did for e-mail.

Live from the ACI Legal Process Outsourcing conference in NYC. Session: Initiating an Offshore Legal Services Operation, a presentation by Nancy Laben, Deputy General Counsel, Accenture. 

Laben has, as a lawyer, negotiated many outsourcing deals over 15 years. Five years ago, she was involved in setting up a captive LPO. It works for us. Manages 400 lawyers as Deputy GC. We expect to grow but we can’t keep growing at same rate because of economics and span of control. So I am looking for the next new thing - outsourcing may be it.

What factors should you consider when deciding to outsource? This is my GC / user perspective. You have to have measurable processes to prove success. A lot of prep is required. Start by defining business requirements (what is your scope?). Is it one project or a strategic relation? Must also define risks.

Be prepared for change management. If outsourcing affects your team, they must understand the new goals and impact on them. Communicate clearly what the rationale is and expectations are. For example, is it about cost or doing a bigger volume of work. I start with quality and figure out how I can get that level. Don’t expect a Lexus at Yugo or Nano (Tata) prices.

Make sure you have the right cultural fit - does the outsourcer understand how you want your work done. When I ask how do you work, I don’t want to hear “Anyway you want.” I need to know what the intrinsic culture of a supplier is. I need to make sure it fits. I am especially interested in supplier flexibility.

Communicate your priorities to the vendor. Don’t do a wish list; make clear what the requirements really are. Most LPOs disclaim that they are providing legal services. So how does that fit with the required legal Q&A. Be sure you understand how this could affect legal privilege.

There is more value if you see beyond mere vendor relationship. Seek synergies, understand where your interests and vendors align. Work toward a real partnership. Assess future scalability. Know the cost of managing the outsourced relationship.

Accenture is metric driven, so we look at base case that includes all our costs. We look at cost by function and level, including recruiting cost. Have a realistic view of the quality your inhouse department provides. Most don’t measure this - if you don’t how can you compare to an LPO? If you are asking for more quality than you currently provide, you should at least know you are doing this.

Trust is critical. If you change your mind, tell your supplier.

Choosing a provider: Start with referrals; consider reputation; look at 3rd party benchmarks; ask your law firms (especially those with a positive view of LPOs); check with chambers of commerce (some, particularly in NY, track outsourcing).

What goes into RFP? Avoid something too long. Key terms and conditions: confidentiality. service levels, metrics, reporting, conflicts checking, privilege, security, and export control, termination provisions, background checks of team, hours and time zone availability, audit rights, compliance with local law, volume discounts, rates, expenses. Accenture wants “completed enclosed” service providers (dedicated center). Understand depth of vendor bench.

I just came back from India to visit with LPOs. I was very impressed generally with security (and Accenture focuses on this in its business) .

How should you conduct due diligence? Reputation, referrals, financial strength, insurance, facilities, certifications, disaster recovery, data security, training, how employees are evaluated, quality, litigation history, technology in use. If tech is important, bring a tech expert for due diligence. Get a micro look at vendor work processes. Understand how LPO hires and retains its employees. Don’t overspecify. Attrition may be ok if work is highly proceduralized.

Accenture’s own legal outsourcing initiative: Five years ago we found a shift in our business and we had our IPO. We needed to figure out how to measure lawyer productivity and increase it. Our own lawyers were not happy with spending so much time on low value work. We considered India we thought (five years ago) it was too immature. We decided we could not buy ready-made services so we would have to build. We set up a small team (<10) in Mauritius. Metrics: timeliness, quality, types of contracts reviewed, utilization (productive hours worked), total volume, amount of savings. I would expand if I could but the amount of legal talent in Mauritius is limited - we are big employer of choice there. We save $55k per month over US operations.

Why not expand? We are now looking at India LPO because market has matured. We will set up our own in India if we don’t find a vendor we like.

Live from the ACI Legal Process Outsourcing conference in NYC. Session: Comparing and Contrasting Different Models for Offshoring Legal Services. Moderator: Andrea Lee Negroni, Esq. Of Counsel, BUCKLEY KOLAR LLP, plus four panelists. 

Chris Veator of CPA
- Background: CPA started in IP and now has contracts and document review. We have 40 years experience in legal outsourcing work. Founded by lawyers 40 years ago; 40k customers around the world; 1100 employees; global footprint; multiple locations.
- Business options: captive, US-based, India-based, 3rd party LPO.
- Within legal, captives can never gain the requisite scale to gain outsourcing benefits. A sub-scale LPO will hae trouble attracting and retaining employees. Attraction of LPO to Indian lawyers is career advancement - captives cannot offer this without scale. Also, you cannot gain cost efficiency at a small scale. And finally, innovating requires sufficient scale to invest.
- Law firms or departments have to be careful of “captive fatigue.” Do you really want all the headaches of running your own offshore center?
- Where should you do outsourcing? It does not matter if you partner with the right LPO company, your vendor can craft a solution that meets your needs.
- Key competencies:
(1) Recruitment and training [if you need a team, a good LPO will not have people on the bench but will know how to hire good people for you];
(2) Project and contract setup (make sure the transition is well managed and contract is clear);
(3) Legal expertise, project management, and structured teams;
(4) Building Delivery Communication, Reporting, and Metrics (you only have an illusion of control with local employees).

Ed Burke, Bodhi Global
- Founded by a top Indian law firm (AZB & Partners)
- Patni Family, owners of NYSE listed Patni Computer Systems and PCS Technology are involved. They bring IT and security expertise
- We combine law, process, and technology
- Our model offer credibility and financial stability.

Live from the ACI Legal Process Outsourcing conference in NYC. Session (9:45am): Panel Discussion: First Hand Experiences on Making the Business Case for Outsourcing Offshore – Qualifying the Viability and Benefits to Overcome Stakeholder Resistance. Moderator: Jonathan Goldstein of Pangea3; Donna Webber, Chief Counsel, CIT Capital Markets; Shannon Copeland, Practice Group Manager, Kilpatrick Stockton LLP; (2 scheduled panelists not present; bold comments reflect what I found most interesting) 

What is your internal situation?
Copeland:
- Three years ago, firm hired former consultants to help manage the law firm business. This is new move in the southeast. In Fall of 2005, one of our first projects was legal outsourciing. It was obviously coming. There are 4 MBA types in our firm; we look for business opportunities and advocate for change. Lawyers are skeptical but our clients are addressing that head on. My group keeps the pressure up in our firm.
- We do use contract lawyers which we pay $80 to $90 and we bill at $150. We can get $30/hour in India with better quality.
- Our experiments internally are still too small to have material impact on our lawyers. Some of our experiments - via LPO vendors - include offshore work for Home Depot and GE. We compared results of equivalent briefs written in our office and in India - the briefs from India always came back better. [Update, 1/31/08 - Mr. Copeland clarified this point in an e-mail message: “Kilpatrick Stockton’s experiments, especially with higher level litigation work in India are nascent. KS sent a single previously written brief assignment to India and the results were much better than expected. Further exploration has therefore been encouraged by our partners and our clients."]

- We are up to $100k in fees to offshore providers so far.

Webber:
- Law department headcount was frozen but we had new tasks we had to do. So outsourcing was natural to evaluate. But American lawyers are innately skeptical of lawyers elsewhere to do the work. When we first approached offshoring, we were skeptical. When we saw quality, we were relieved.
- Given the offshore savings, making the decision was easy.

What types of work are going offshore?
Webber: All of our NDA for deals are drafted and/or reviewed by offshore lawyers. We found that inhouse counsel spent inordinate amount of time doing this. WE developed extensive guidelines on provisions to include and how much we were willing to bend. We provided this detailed guidance to offshore lawyers. So far, our business clients are very happy. The other offshore project is to conduct surveillance of e-mail. They sort out junk from 500 to 600 e-mails a day so that fewer need review inhouse.
Copeland: environmental research, mortgage backed securities document prep, due diligence for global construction projects.

How did you screen and select vendors?
Copeland: Two of my peers came from Accenture offshore arm. We had a lot of sophistication. We signed MSAs with two vendors. We demanded a variety of certifications and security. We got very good results from our LPO. We want to deal with LPOs who can talk very specifically about their work and experience. We looked at the 2 vendors who came knocking on our door. We started using ValueNotes in summer of 2005; we used that report to identify top vendors.
Webber: We went with first vendor we contacted; it came highly recommended to us. We felt strongly that people running the LPO had a very good understanding of American client demands and law. I find formal RFPs less useful than client references. I feely share my experience with peer inhouse counsel.

How do you measure success of LPO work?
Copeland: We provide services now, at a cost that client demands, that we could not do without offshore resources. We look very innovative to our clients.
Webber: The value for us is the time freed up for inhouse lawyers to do higher value work. This helps reduce outside counsel fees and keeps our lawyers happier. We avoided a new hire by using LPO services. We also so spot quality checks and are happy with what we found. We did this much more in first 6 months; now we are comfortable with quality so we do less. Need to recognize that lawyers are not good at formal, quantitative metrics.

What are your views on build versus buy (captive versus vendor)?
Copeland: We considered building early in our evaluation process. We knew how from Accenture experience. But seeing many providers, build did not make sense. Were work to grow to $1mil or $2mil, we might re-visit build v. buy decision.

What factors do new vendors pitch that are NOT relevant?
Webber: I have not been pitched very much, mainly because I’m not the obvious target in my organization
Copeland: We don’t have formal pitches we get. Vendors should be specific.

Were concerns of key stakeholders well-founded?
Webber: Inhouse clients were skeptical because on the NDA project, they were used to talking to business unit lawyer. But resistance was easy to overcome. Moving to e-mail was an easy transition. In the end, the quality and service level is better from India than from local business unit lawyer.
Copeland: Ethics, security, and quality were initial concerns. Bar association opinions allayed ethics concerns. We have examined mark-ups (upcharges) for offshore lawyers. We bill Indian lawyers at $70/hour when we pay $30 or $40/hour. It took effort to overcome upcharge hurdle but we have costs to cover. We disclose to our client use of offshore lawyers and what our upcharge is. We are focused on making this an innovation initiative.

What work cannot go offshore? How do you decide what to offshore?
Copeland: Not sure what the limit is. We may have to do more training. But our senior partners say judgment cannot be offshored. But we think we can push a lot of issue identification offshore. Our clients don’t want directly to manage LPOs. We go back to skeptics repeatedly with success stories.
Webber: Where knowledge of business is critical, we cannot move work offshore. But that is work we cannot easily send to outside counsel in US either. Also, some issues require immediate action - this can be impossible to offshore, especially for delicate issues where we are the trusted adviser. We did go directly to LPO. We use traditional big, NYC law firms. I don’t see them offering offshore services the way Kilpatrick is doing. I would be very receptive to a firm that offered to use offshore service.

How do you manage LPO projects?
Webber: Each project has an inhouse primary contact. If any issues come up, inhouse contact raises with vendor.
Copeland: We are no more sophisticated managing vendors than other AmLaw 100 firm. We haven’t done anything with Pangea3 other than vetting agreements and informing clients. Lawyers still manage the vendors.

How important are state-side lawyers in choosing an LPO?
Webber: Very important for us. Critical in our decision.
Copeland: Critical for us to. But video with Mumbai is very easy. And our lawyers find service from India is very good.

Q&A
- What is impact of fixed fees on offshoring? Webber: CIT does not demand fixed fee work generally; sometimes on a matter basis. Copeland: Absolutely, fixed fees would push us to more offshoring.

Update, 1/31/08: embedded in text above

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. 

Glennie presents:
- 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.

Ever get the feeling that people are doing something but just not talking about it? 

It could apply to large law firms and law departments that outsource and offshore legal work. Now the secret may be out. Well-known legal blogger David Lat at Above the Law posted A Very Special Invitation from Seyfarth Shaw, which displays a Seyfarth invitation to lawyers to “join us for a cocktail reception to welcome the group of attorneys visiting from Manthan Services in Bangalore, India. The group is here to learn how we can together work to provide high quality and cost-effective legal service in specific areas. We encourage you to come to the reception, meet the Manthan team, and discuss your practice and ways that Manthan can help us grow our business.”

A Wall Street Journal Law Post reports a comment from a firm spokesperson: “Seyfarth Shaw is always exploring innovative ways to efficiently and effectively serve our clients and grow our business; this is one such example.”

Bravo. My 3rd blog post in May 2003 was about outsourcing and offshoring legal work to India. This perhaps unexpected PR seems favorable to me and the firm’s comment on the mark. Any client or prospect thrills at the idea that its BigLaw firm seeks ways to work more effectively.

With the proverbial cat out of the bag, perhaps other firms and departments will be less timid about being more effective and efficient.

Inside Counsel magazine recently asked its general counsel readers “Have you ever outsourced legal work to India?" 

The questions was asked on the magazine’s web site and the answers published in the November issue:
- 26% “Yes”
- 22% “May in the future”
- 52% “No”

Given that legal outsourcing and offshoring has only been a widely publicized option for less than 5 years, I am surprised that one-quarter half already used and another quarter are considering it. More surprising, however, is that half rule it out. Given the answer choices, the most reasonable interpretation of “No” means “no, and I will not consider it in the future.”

Offshoring may not be a good option for every law department but I wonder how one would explain to corporate management a blanket refusal to consider it. It may not be appropriate today but what about tomorrow? What’s a reasonable basis to rule it out? I suppose the “No respondents” here may well have responded the same a dozen years ago to “Have you ever used e-mail to conduct legal work” or a half-dozen years ago “Have you ever used e-billing with outside counsel.” Smart business people do not rule out viable ways to do business.

Updated (11/19/07): After I wrote above, I came across In-House Lawyers Manage Outside Counsel More Closely (Fulton County Daily Report, 11/16/07). It notes “GCs everywhere seem to be applying the same kinds of cost control measures to the outside law firms as their C-suite counterparts do with any other vendor service…. GCs have talked about sending less critical work to smaller boutique firms, solo practitioners and even outsourcing to India.”

Two current articles raise some interesting questions about law firms and outsourcing. 

Small World in Law Firm Inc. (10/07) is an interview with White & Case CFO Greg Dolan. The firm outsources some word processing to a legal process outsourcer (LPO) in Chennai. It has also opened its own “captive” or “insourced” center in Manila to handle accounting, finance, and some tech. Asked why outsource, Dolan says “we decided to do both and see which one we like over the longer term.”

Now that I work for an LPO, I am not dis-interested, but I think that captive centers are unlikely to prevail long term. Scale, focus, and specialization are key reasons to outsource; running a captive does not capture these benefits. (That said, I applaud W&C’s empirical testing; my Best Practices posts argue that firms should manage based on real evidence, not myth.)

Look at legal technology as an example: large law firms increasingly outsource. The reasons range from business continuity, to eliminating headache, to reducing cost, to improving service levels. The decision is not all or nothing. For example, Good chemistry in Legal Technology Journal (Issue 6, fall 2007) describes in excellent detail Eversheds‘ decision to outsource significant aspects of its information technology. The firm is keeping “a relatively large IT team” but shifting its focus “from day-to-day service delviery to strategic development and innovation.”

My sense is that firms that once would have only considered “captive” IT solutions now readily consider outsourcing. I suspect that this same trend will apply to other law firm functions (as it has to everything from the mail room to food service to e-discovery processing).

Captive Carve Outs (Global Services magazine, 9/20/07) is a more general take on challenges captives face. It examines IT and business process outsourcing operations that were started as captives of single multinationals but have since been “carved out,” that is, spun out and taken private or sold to a specialist outsourcer.

The number of legal process outsourcing (LPO) companies continues to grow. 

Joy London and I have updated our Outsourced Legal Services list: it now includes 100 LPOs, up from 77 in just three months since our last update.

Some notes about our list: It reflects published sources (web sites and articles). It does not distinguish between companies that may have 2 people versus those that may have 2000. We no longer check existing entries for each update. Instead, we now indicate the date we first added the LPO to the list and the date we last checked the web site; we hope to check web sites at least annually. As always, we welcome additions and corrections (e-mail to info at prismlegal dot com).

Some observations:

• Anecdotally, it appears that more and more LPOs offer offshore document review. Reading vendor web sites, however, it can be be hard to distinguish between responsiveness and privilege reviews versus more limited ojbective or subjective coding.
• Outsourcing has now spread to other countries. Two new LPO entries offer services from Israel; they seem to rely on US-trained and -experienced lawyers who live in Israel. Separately, Lex Factum is a legal research outsourcer based in Finland that serves the European market. Lex Factum is not on our list because we do not include US-based outsourced legal researchers. But it shows that outsourcing is not bound to any particular country.
• While the total revenue of the LPO market is hard to pin down, it seems safe to say it is fragmented. Rahul over at Legal Process Outsourcing blog comments on the consolidation potential (citing WNS Global and ExlService look at inorganic growth in LPO (The Economic Times (7/31/07)).
• Other commentators also question the apparent rapid growth. Mark Ross of LawScribe has a thought-provoking blog post, Is Everything What it Seems in the India Offshore Legal Outsourcing Space?. He compares the limited available published data to conclude that all may not be what it seems in LPO land. That said, he does envision rapid growth.

A final tidbit relating to the seeming spread of legal outsourcing: law firm Haynes and Boone LLP “plans to increase its use of Indian lawyers” according to the biographical statement of the HB lawyer-author of look abroad to outsource legal analysis (Houston Business Journal, 6/1/07). Few US law firms go on record about using offshore lawyers. Here is a a firm already using Indian lawyers and planning to increase use. A slip of the keyboard? Or a signal to clients that it is being efficient and cost-effective?

Have you ever heard anyone say “I want to study law so I can get a job reviewing discovery documents?" 

Not likely. Yet many US contract lawyers review documents for a living. How satisfied are they with job content and the potentially nomadic life. If job satisfaction is low, what does that mean for quality?

Contrast this to Indian lawyers who work for Legal Process Outsourcers (LPO). Legal eagles for digital age (Hindustan Times, 9/1/07) reports that for Indian lawyers, LPOs can be more attractive than Indian law firms. “When you work for an Indian law firm… the transactions you are seeing from those clients are likely limited to India-centric transactions… At high-end LPOs, lawyers are servicing multinational in-house lawyers and law firms on their global practice.” The article also reports other LPO benefits over Indian law firms: better training and more growth opportunities.

If you share my assumption that context matters for job performance and quality, then it seems likely the context for document review in India is better than it is in the US (or UK, Canada, or Australia).

Spotted at Recruiting Lawyers for Document Review … in India at Inside Opinions / Legal Blog Watch.

Two recent surveys and two recent LPO announcements illustrate that t he legal process outsourcing (LPO) market remains hot. Continued LPO growth has implications for CIOs and IT Directors. 

IT is no stranger to outsourcing. ILTA surveys show that many firms, large and small, outsource aspects of IT. Soon, the rest of the firm may get on the bandwagon. Back office functions such as word processing and finance and accounting can be outsourced. And so can some legal work, particularly document review in litigation. As firms evaluate options, CIOs and IT Directors will, at minimum, likely play a role in vetting and supporting the technology used to support outsourcing initiatives. Forward-thinking CIOs may well play a bigger role in re-engineering firm business processes to attain the maximum benefit of outsourcing. Now, the recent news….

The Brown-Wilson 2007 survey (see the Black Book of Outsourcing) was released recently. Top rated legal process outsourcing (LPO) vendors include Integreon, Pangea3, Merrill Corporation, QuisLex, Law-Scribe, and Mindcrest. See an Integreon press release for the lists.

Market researcher ValueNotes released its July 2007 Offshoring Legal Services to India - An Update. “Based on our exhaustive primary research and analysis of this sector, ValueNotes has identified a ‘List of frontrunners’ which includes Evalueserve, Integreon, OfficeTiger, CPA Global, Mindcrest, Pangea3 and Quislex. We have also identified ‘Emerging players’ that have potential to emerge as winners within their chosen niches. These include players like LawScribe, New Galexy, SDD Global Solutions, Tusker Group, Aptara, Lason and Quattro BPO.” The Indian LPO market has 100+ vendors that employ 7,500 people.

Pangea3, a leading LPO, announced (press release, 7/10/07) ” it has closed $7 million in Series C funding, funded by Sequoia Capital India.” The company will open in September a new 250-seat facility that will “contain segregated and dedicated document review facilities”

Pangea3 is not the only LPO expanding. An April 20th article in Pune Newsline, Boost in legal process outsourcing reports that Mindcrest opened a new 400-seat facility.

Several articles in June cover outsourcing, both in the corporate and legal sectors. My perhaps biased take is that they suggest a continued up tick in legal outsourcing. 

Seven Myths About Outsourcing (Wall Street Journal, 6/16/07, $) reports “companies that think handing off an operation to an overseas provider is easy can get a rude awakening.” To avoid that rude awakening, it reviews seven myths and steps to overcome them:

1. We Can Have It All
2. Outsourcing Services is Like Buying Commodities
3. We Need an Ironclad Contract
4. Contracts Don’t Matter
5. Vendors Are Insurance Companies
6. It’s Not Our Headache Anymore
7. Our First Failure Should Be Our Last Attempt

There’s good advice here for law firms or law departments considering outsourcing.

Karen Asner, the White & Case administrative partner, wrote How Law Firms Can Achieve Optimal Procurement (law.com, 6/20/07). She concludes “Procurement is more than just saving dollars and cents. It is a strategic function that can help each group, and your firm as a whole, work more efficiently to achieve your business objectives.” It’s a good read but I was surprised not see any mention of outsourcing as an element of a procurement strategy.

Meanwhile, British firms seem to view outsourcing as part of their procurement strategy. Another big British law firm recently announced that it is outsourcing IT. Eversheds outsourcing deal to cost cool £27m (Legal Week, 6/6/07) reports that the ” top 10 UK firm will transfer 79 professional staff as part of the deal, which covers various core support functions including the help desk, network, infrastructure teams and its IT training specialists.” The article also reports that Linklaters has outsourced “support and maintenance of the firm’s global data centre and infrastructure.” For details on Eversheds outsourcing, see an Orange Rag blog post. It quotes the IT Director, who says the deal will enable the IT department to “deliver leading-edge business solutions that benefit our people and clients”

With outsourcing virtually old hat in the corporate sector and more and more law firms thinking about procurement, it seems likely that we will see more instances of legal process outsourcing.

Update (10/20/07): It turns out White & Case does outsource. See my post What Direction Legal Outsourcing?

Many of us already outsource significant aspects of our personal lives, for example, house cleaning, tax prep, yard work, dog walking, and grocery shopping . Next, you may send jobs to offshore personal assistants. 

Connie Crosby over at the blog slaw.ca points to a Toronto Globe and Mail article on personal assistants overseas. Outsourcing Your Life (Wall Street Journal, 6/2/07) reports on this trend in detail as well.

A more in-depth analysis of this trend (and one cited in the WSJ) is available in Person-to-Person Offshoring, an April 2007 white paper by Evalueserve Chairman Alok Aggarwal. In it, he analyzes current business models for personal outsourcing and offshoring, provides examples of markets for this, and provides a snapshot of ten leading services most likely to be offshored.

Implications for lawyers? John Tredennick pointed out in Outsourcing for the Small Law Office: Lessons from “The World is Flat.” (Trial Magazine, Fall 2006) that small law practices have ample opportunities to outsource. The cited items suggest even more options for small firms.

For BigLaw, the institutional implications seem limited. Individual lawyers, however, might find it easier to meet ever-growing billable hour targets if they can outsource even more of their personal life!

The Future Of Legal Outsourcing: What Every Law Firm And Corporate Legal Department Needs To Know. That’s the topic of a panel discussion at the ALM Outsourcing Conference 515pm session. 

[This blog post comes to you live from the ALM-sponsored Legal Industry Outsourcing Forum (May 23, 2007, NYC). Notes and comments are real time with minimal editing and posted as a session ends. I am taking notes in Microsoft OneNote, so use the outlining format.

This is the last post of the day. Hope that readers find this helpful. I realize the format is not great but that’s a price for being real time]

Panelists
- Jason Brennan, VP, Legal Services, OfficeTiger
- John Croft, President, Global Sales and Marketing, Integreon
- Bradford W. Hildebrandt, Chairman/Founder, Hildebrandt International
- Peter S. Pantaleo, Partner, DLA Piper US LLP

1. Where is LPO going?
a. John Croft
i. Trend is unstoppable. Support is easier to understand. At Integreon, the LPO part has huge momentum. For example, at a top five UK firm…. The litigation partner at the law firm talked to his COO about a huge litigation matter for a long-standing client. He said I am competing for this client’s work in the open market. I have heard about offshore document review. While we could do this internally, I need to add value for this client. Our value is to win the case, we can let someone else do the document review. This is a firm that had not outsourced document review that is now doing so.
b. Jason Brennan
i. Firms are focusing on boosting revenue and reducing cost. They are thinking about new services to clients, enabling lawyers to work on higher value work
c. Brad Hildebrandt
i. The corporate law department is more apt to outsource substantive legal work. They look to their own corporations and Wall Street and are comfortable. Law firms are less likely to rush to outsource. The back offices of law firms are not as big a relative cost as they are for corporations. Not clear that law firms want to hassle with transition for savings. On the other hand, costs _are_ going up faster than revenues, so there are some pressures.
d. Peter Pantaleo
i. I founded an outsourcing company (CBF) five years ago that Integreon purchased. I am no longer involved. I am managing partner of NYC office and I am on executive committee. Law firms do not think that outsourcing their primary way of making a living is a good idea. There are 130,000 lawyers in NLJ 250. That is 200 millions hours that they have to bill. Billing them in Bangalore does not help them.
ii. That said, DuPont and GE, known as efficient consumers of legal services, can move commodity work offshore. Firms like mine do not need to intermediate this for them. But the first time a GE or DuPont vendor makes a discovery mistake a la Morgan Stanley, they will pull back.
iii. It makes more sense for law firms to focus on expense reduction. Law firms manage the back office very poorly. Firms today outsource backoffice work to Merrill or Bowne or others because they do not want headache of managing the functions. If you look at secretaries, they cost $90k/year. It costs my firm about $50/hour for each secretary. We need to make them more productive. Use outsourcing to rationalize that expense. It was hard at DLA to make the transition to moving work to CBF in Fargo.
iv. There is no viable business model for law firms to outsource legal work.
2. If outsourcers move up the value chain via law departments, will firms and vendors clash?
a. Brad - Law firms are turning work away now as it is. Firms should work with clients to figure out what work to send offshore. Points out the moderator firm Milbank is recruiting lawyers in Sydney. Firms have more work that they can handle
b. Jason - Firms are already using contract lawyers extensively.
c. Peter - It does not take a big percent of the market for outsourcers to thrive. We use contract lawyers on document reviews. Privilege and responsiveness review _should_ go to India.
d. John - it may not make sense to outsource every matter, but document review is ideal task to offshore. Young lawyers do not want to do this work anyone.
3. Will mid-tier but still high quality firms face different pressures? The very top firms may be able to avoid offshoring, but can smaller firms outside of major cities? Will firms band together for share services?
a. John- Orrick is stand alone example. Brad - other firms will not buy from Wheeling center run by Orrick
b. Brad - in event of legal market down turn, offshore work will be pulled back
4. Peter - clients spend huge sums on document review. It’s possible that this will go away in five years via technology. Within five years, we will be able to automate document review. This will eliminate a lot of commodity lawyer work.
a. We cannot increase productivity (utilization) much more - lawyers cannot bill more hours
b. We cannot increase rates that much more - we are reaching the limit
c. We cannot improve realization when we ask associates to work like maniacs
d. Increasing leverage is hard absent UK model of making lawyers retire at 55
e. The only lever is expenses - outsourcing can move it.
i. DLA has 36 conflicts clerks in the US. It still takes a week to open a matter. We can do better on leveraging this type of expense down.
ii. LPO talk may matter to clients but it’s not to law firms
iii. We retain Brad and he tells us every year to cut our expenses
5. Brad - In corporations, the internal clients want to see their lawyers. With SOX, they are risk averse and want lawyers nearby
6. What will be different in one year? In five years?
a. John - more of the same. Law firm support service is a big growth area as is corporate GC use of offshore lawyers
b. Brad - law firms will continue to seek ways to control expenses, onshore and offshore. Substantive work is not going to move
c. Peter - clients will beat us up on costs. We will see stratified law firms. Selling to law firms takes forever. COOs never get fired for saying no. This will slow down expense control
d. Jason - in one year, there will be aggressive offshoring but it will swing back five years out

Outsourcing Return On Investment: the Myths, the Methods and the Means. That’s the topic of a panel discussion at the ALM Outsourcing Conference 315pm session. 

[This blog post comes to you live from the ALM-sponsored Legal Industry Outsourcing Forum (May 23, 2007, NYC). Notes and comments are real time with minimal editing and posted as a session ends. I am taking notes in Microsoft OneNote, so use the outlining format.]

1. Panelists
a. Moderator: John Croft, President, Integreon
b. Mike Bryant, CEO, Integreon North America
c. Chris Bull, COO, Osborne Clark (UK)
d. Christian Cooley, CFO, Sidley Austin
2. ROI Case Study: Internal Integreon processes for document production
a. Typically, doing ROI starts with labor cost arbitrage opportunity
b. A law firm customer (disguised) case study
c. Look first at “work ready” hours - how many hours per year are staff available and what’s the cost
1) For experienced legal secretaries, if you assume 100% utilization and fully loaded salary of $85k, then hourly cost is$50. But if you make more realistic assumption of productive time (utilization) of 80%, hourly rate is over $62/hour.
d. Law firms have limited ways to manage these admin expenses.
i. Central production pool is one way to manage document production. A lot of doc production occurs during non-core business hours when secretaries are not available (and if they are, they cost overtime). That is the business requirement for central pool.
ii. Central document production facilities are expensive
1) A lot of staff
2) Expensive real estate
e. At the firm, overtime cost was $5mil, or 0.50% of gross revenue. The firm wanted to cut this in half over a one year period.
i. This saving would fund the outsourced document production service
f. What savings are possible by re-sizing central facilities and outsourcing some of the work
i. Firm wanted to cut central staff by 20 people
ii. Move secretarial ratio from 2.50 to 2.75 (a savings of $3.5 mil/year)
g. Firm looked at breakeven analysis if it could charge back some Integreon service to clients (shift some overhead that clients might pay for as pass through expense). For example, some of the “admin” work turned out to be litigation support traditionally billed to clients.
h. All the potential savings and revenue made for a an annual savings of almost $4mil.
i. Actual savings turned out to be about $5mil in first year - subsequent years yielded another $3mil for a total of $8mil.
j. This firm did not lay off anyone - all staff savings occurred though natural attrition and by not hiring as much as they would have otherwise
k. The savings are a combination of
i. Substituting low cost for high cost resources
ii. Re-engineering processes (that could occur independently of outsourcing but often does not)
3. Osborn Clark outsourcing experience
a. Services outsourced
i. Document services
ii. Catering
iii. IT network support and help desk
iv. Training
v. Research and analysis (mainly market and business research, not legal)
b. Have now identified 100 jobs in the firm (cost of $8mil) that is non-core and could be sourced externally. Considering options now.
c. ROI
i. Cost elements of doing work with full time employees
1) Direct and allocated staff costs, bonus, benefits
2) Overtime
3) Uniforms, expenses, travel
4) Occupancy
5) Training
6) Recruitment (rule of thumb: one year salary if you factor in all the costs)
ii. Make sure you understand the cost elements of outsourcing
1) Open book costing - understand all elements
2) Transition from internal to outsourced - be able to justify any change to partners
3) Seek forward looking efficiencies - guarantees for productivity improvements or additional cost savings
4) Dealing with early termination
5) Clarify or cap annual increases
6) Seek procurement from providers if they have bigger scale - but what is the extra cost of doing so
7) Cost recovery potential
iii. Intangibles
1) Back-up and substitution (what does it cost for back-up service)
2) Flexibility (build in short-term variability into contract; estimate savings based on both peak and trough loads)
3) Quality - define by SLA, measure time savings, increased availability
4) Value add - figure out extra value and see if you can value ("value account")
a) We ended up willing to pay a lot for elements we did not initially understand to be valuable
b) In law practice, “value account” can be access to information, secondments, or other “extras” that law firms can provide law departments. In UK, firms’ fees can be reduced if these extras are not delivered
5) Track impact of outsourcing on client acquisition and retention. May be hard to find but worth looking for
4. Sidley Austin, Summary of Outsourced Services
a. Office services
i. Copying
ii. Purchase and delivery of paper to copiers and printers
iii. Mailroom
iv. Supplies
v. Messenger, courier, delivery
vi. Facilities assistance (office moves, room set ups)
b. Word processing
i. Word processing
ii. Proofreading
iii. Desktop publishing
iv. Fax services
c. Benefits
i. Some financial
ii. Some is avoiding headaches
iii. Providing higher touch services to over-worked lawyers
d. Ability to arbitrage labor costs now is better than a few years ago
5. What happens after the immediate benefit of cost arbitrage is recognized? What’s next?
a. Chris Bull - experience so far is disappointing
b. From provider perspective, there is a lot of upfront cost to learn a customer’s work processes and cultures. Integreon tells clients that initially, it will need more people, but over time, fewer people will be required with experience, so savings can increase.

The Next Generation of Outsourcing: Offshoring High-Value Legal Services To India. That’s the topic of a panel discussion at the ALM Outsourcing Conference 1115am session. 

[This blog post comes to you live from the ALM-sponsored Legal Industry Outsourcing Forum (May 23, 2007, NYC). Notes and comments are real time with minimal editing and posted as a session ends. I am taking notes in Microsoft OneNote, so use the outlining format.]

1. Panelists
a. Moderator: David Perla, Co-Chief Executive Officer, Pangea3 LLC
b. Sandip K. Berri, Senior Vice President, General Counsel, Genpact
c. Janine M. Dascenzo, Managing Counsel, Legal Operations General Electric Company
d. Nancy Laben, Deputy General Counsel, Accenture
e. Ramona E. Romero, Esq., Managing Counsel, Operations and Partnering, DuPont Legal
2. Genpact
a. Was spun out from GE
b. Originally started as entity that set up the GE captive legal processing in India
c. Started with basic contracts, legislative monitoring, corporate housekeeping
d. We divided work into 3 buckets of varying levels of complexity, starting with least complex
e. Work was kept simple initially, in part because of politics
f. Customers now ask for legal outsourcing services
3. Accenture
a. Laben manages 350 lawyers around the world at Accenture
b. We initially looked for service providers. Found GE, but it was captive at the time
c. We set up our own captive center for contract review and management in Mauritius. 10 lawyers who are bilingual in English and French. They have moved up the value chain since we opened the center
d. We will repeat this model in Spanish in Buenos Aires. Also will open a center in the Philippines.
4. DuPont
a. Romero joined as a litigator. Has managed partner program for last couple of years.
b. Last year, entered into contract with Office Tiger for legal outsourcing
c. We have been outsourcing commodity legal work domestically for 10 years, with Kelly Law Registry and other providers
d. The only news for us is the offshore element
5. GE (General Electric)
a. Dascenzo joined GE a few years ago. Now is managing counsel of Global Legal Organization. 1300 lawyers worlwide; 800 in US
b. We are talked about as pioneer in legal outsourcing.
c. Early on, we outsourced via Genpact; now we have spun it out (but retain 30%)
d. We spend $3mil annually for routine legal work offshore - simple contracts, warranties, trademark management
e. Now looking at legislative monitoring, higher level corporate governance, routine compliance (anti-money laundering, prohibited person list management) via Genpact
f. WE have 65 captive lawyers (employees) who work on US patent applications. These are attorneys trained to US PTO standards and the work is supervised by properly licensed US lawyers
g. GE has not yet taken the next step to more complex legal work - others are ahead of us
6. What drives the move to consider moving legal work offshore. What work occurs offshore.
a. DuPont: cost is the biggest driver. Bulk of our spend is on litigation. We saved over $500k on $2.5mil spend in first year. These savings are measured against what cost in prior year.
i. Not all Office Tiger work has been conducted offshore. Export Control limits what can be sent offshore. Our goal is to drive as much work offshore as possible.
ii. All litigation support functions offshored also occur onshore. Export Control drives the decision. Office Tiger does conversion, objective coding, database development, initial subjective review, privilege and responsive review. This is all done under the supervision of the inhouse legal team. OT did work on a database - this work was instrumental in a damages case against one of our insurer (DuPont was plaintiff). OT worked under supervision of domestic expert.
iii. Data collection is performed internally with a custom built tool - outsourcing begins with conversion of data to other formats.
iv. In the DuPont Legal Model, working with Office Tiger follows the same pattern of other partners - a long term relation. DuPont network members refer work to one another, even where DuPont is not the client
v. Using teams in India and Philippines. I don’t see a difference in training required between onshore and offshore personnel
b. Accenture: our business changed. We had just done an IPO. On the road show (to investors), we heard that we needed consistent revenue. We grew outsourcing aspect of our business. The legal support required for outsourcing is greater. We had to expand our capabilities. We looked at increasing higher value work domestically. 85% of legal effort is negotiating outsourcing contracts. We save about $55k per person for each employee in Mauritius. Data collection is an internal function, not outsourced.
i. Training and turnover is a significant cost onshore, offshore, employees, or outsourced. We are looking at ways to outsource the training of legal personnel.
c. GE: we do not outsource work that would otherwise be done by law firms. It’s only work that would otherwise be done inhouse. $3mil savings is not that much relative to our $500mil outside counsel spend. The benefit is letting inhouse lawyers do higher value work. As we move more complex work to India - work that might now go to outside counsel - we will see a much bigger saving.
i. Long term relationships are critical. You must know who your team is. There is upfront investment in training. GE lawyers cannot just “dump” work offshore. Especially for repetitive work, absent turnover, it does become autopilot. In the context of a longer term relationships, it becomes easier to deal with doing a one-off transaction offshore.
d. Genpact: most of our employees work on a dedicated model. But in some work, non-dedicated works better. Where work may spike, to manage capacity, we look at non-dedicated personnel. Clients understand you cannot manage to demand without non-dedicated personnel.
7. What were critical success factors in making offshore? Where did offshore work and not? What drove success and failure?
a. Genpact: Success factors
i. Biggest factor is willingness of US process owners to invest in moving the work.
ii. Training is second.
iii. Ongoing communication - process owners need to be available and make offshore personnel part of the time
b. GE: Success factors
i. Upfront investment
ii. Supervision with clear lines of communication. You need a point person - onshore or offshore - whom you trust, who will make sure expectations are set and quality standards met
iii. Picking the right work to send offshore. Routine contracts have worked well; some areas of law don’t work so well offshore
c. Accenture: Success factors
i. Culture at Accenture is strong. Whether captive or 3rd party, you need to include in the culture
ii. Continuous and consistent demonstration of value, not just cost-savings. We regularly document the delivery of services more quickly (because of time zone offset). One reason we will set up in Buenos Aires and Philippines will allow around the clock operations AND two sets of eyes to review work.
d. DuPont: Success factors
i. Selecting the right partner (especially at DuPont with its partnering mode). We were looking for fit, use of Six Sigma, established expertise, range of services
ii. After narrowing candidates, we sent 3 employees to India to conduct due diligence. One of the 3 was a very senior litigator, another was our litigation support manager with strong skills, and I went as manager of partnering manager. When we came back, our team made the case for selection AND integration plan.
iii. Invest early to make sure relationship start well and things work. A lot of communication is essential early on.
8. Best Practices - what are the best practices in offshoring
a. Training sufficiently and early
b. Keeping the offshore team close through close communication - don’t ignore team once set up
c. Visit the offshore site regularly
d. Data security must be ensured
e. Commitment and persistence - need to overcome law department and outside counsel resistance without shoving process down their throats
f. Service providers must create good career paths for employees. It’s one thing to attract the best talent at outset; to keep them, you have to provide the right path
9. Choice of country
a. Accenture chose Mauritius for several reasons. Looked at 5 locations including one onshore (Cleveland). India, Canada, and one other on list. Mauritius and India were close on cost. Because one-half of our work is in Europe, we wanted similar time zone. Also, there was too much competition for talent in India at the time. Others are following us to Mauritius. WE get a lot of site visits. So we are working on keeping our employees there. Buenos Aires will give us Spanish; Philippines gives us time zone coverage for Asia and Australia
b. GE looked at quality first, though cost is always a factor. With India, there are many qualified and sharp lawyers who know common law. India was natural for us because of internal business unit (now Genpact) that did BPO in India.
c. Genpact: India attractive because of breadth of skill set beyond legal (e.g., finance, engineering, science). This is beyond common law training and English language. Indian rules keep law firms small and often family - owned. That means LPO opportunities are attractive for Indian lawyers.

Support Services Outsourcing: Understanding the Processes, Mehtodology and Lessons Learned. That’s the topic of a panel discussion at the ALM Outsourcing Conference 10am session. 

[This blog post comes to you live from the ALM-sponsored Legal Industry Outsourcing Forum (May 23, 2007, NYC). Notes and comments are real time with minimal editing and posted as a session ends. I am taking notes in Microsoft OneNote, so use the outlining format.]

1. Panelists (full details here)
a. Moderator: Jim Lantonio (Visiting Professor, Stony Brook University; former Executive Director, Milbank Tweed)
b. Jason Brennan (VP, Legal Services, Office Tiger - OT)
c. Sal Curreri (COO, Mandel Katz - MK)
d. Patrick Fogarty (VP, Business Development, William Lea - WL)
2. Introduction by Lantonio
a. Outsourcing has been around for a long time
b. Already in the 1960s, Archer Services started with bicycle messengers. It eventually evolved into duplicating and other services and into bigger companies
c. Offshore outsourcing is just another phase in the gradual development of outsourcing
i. In the 1980s, law firms resisted outsourcing inhouse copy centers
ii. Lawyers worried about letting non-employees have access to confidential documents
iii. Today, this is a non-issue
iv. But now we have the same reaction to sending work to India
d. Market is at a turning point now
e. Wants perspective of suppliers (Office Tiger and William Lea) and of customer (Mandel Katz)
3. Williams Lea perspective (Patrick Fogarty)
a. Williams Lea in business since 1820; started as financial printer. Become full business process outsourcing company in 1980s
b. W-L is now a corporate solutions company - people and process enabled by technology
c. Services: office document services (eg, copying), IT (help desk, asset management), word processing and document production, litigation support (scanning, coding, e-discovery / EDD, data mining, forensics)
d. Lantonio asks about W-L onshore capabilities
e. Fogarty says many law firms resist going offshore
f. To respond to this, W-L acquired Orrick’s word processing operations in Wheeling, WV
g. This has been a terrific success - over 100 people in Wheeling. Serving 3 firms now; 3 are about to commit
h. W-L need to leverage labor arbitrage but keep jobs in US
i. The challenge is to demonstrate value of outsourcing to law firms. One or more years into the deal, you can begin to introduce the offshore element (though the interface is still with US personnel).
j. Domestic / onshore aspect works well and continues to grow
4. Office Tiger perspective (Jason Brennan)
a. Cultural differences among firms are significant with respect to preferences of onshore versus offshore
b. O-T was originally more offshore (India and Philippines). In response to customer demand, we now have onshore capability
c. Surprised at the number of firms that are not even interested in domestic option
5. How firms respond to letting go of work (Sal Curreri - MK)
a. One response to confidentiality issue: many internal word processors are actual freelancers. (One partner, when told that, said “I wish you hadn’t told me that.")
b. Biggest lesson in years of outsourcing experience: the law firm manager still owns the process, costs, and the results. Law firm manager must be engaged with the service and communicating changing needs to outsource provider.
6. How should we deal with objection of taking jobs away from Americans?
a. Brennan (OT): I don’t hear that argument very much anymore. I do hear concerns about what will happen to long-standing employees
b. Fogarty (WL): Agrees that law firms don’t focus on this consideration. With big financial concerns having their own operations in India, many objections have dropped. Concern is more about managing data security and controlling the spin of the outsourcing deal. Firms want to avoid any negative PR. As clients outsource, law firms have less basis to object
7. Quality issues - he found offshore quality was BETTER than domestic work. It took a while for lawyers to internalize this. Yet a perception continues that offshore quality is not as good. Some of this perception stems from call centers based in India and personal / consumer negative experiences with customer service based in India. How do legal process offshore companies (LPOs) deal with this issue?
a. WL: this perception is definitely an issue in LPO space. There are cultural differences. One step we take is having Brits or Americans running operations in India. WL also has domestic facilities that handle many customer facing interactions. One step to take is to have law firm customers visit domestic operations centers. Our clients have experienced increased quality and service. The outsource and offshore model allows law firms to provide the same level of service across far flung offices.
b. OT: Most of our engagements involve onsite personnel. Lawyers and staff typically interact with someone locally. You have to deal with this issue in the planning and negotiation stage. We have to coach law firms not to think about outsourcing people. The focus needs to be on tasks and where each task is most efficient to perform. Even when looking at the call center world, the airlines, Dell, and others have not retreated from India even with the widely publicized problems - they have modified how they operate.
8. There is a perception that outsource services are targeted at very large law firms. There are now more than 1 million lawyers in US. 60% are not in major metro areas or in big firms. Can LPO offer these 60% outsourced services?
a. WL: Law firm consolidation will not end, so firms will be bigger. We can also re-scale our services. Even some of our work for large firms starts with small jobs. We are learning to say no to some of these “opportunities.” We are likely to evolve our services to be able to offer them to smaller law firms.
b. OT: There always has to be some scale to make outsourcing pay off. Big firms initially came to us to save money or faster turnaround. I now see mid-size firms coming to use for resource availability. They don’t have the scale to have 24x7 service centers. Many firms still have silo support services - all services local in all offices. Some are now seeing that model makes no sense - they want to consolidate. Or they don’t offer these services in all offices and want to do so.
c. Audience member: a few mid-size firms are coming together - almost as a co-op - to have joint outsourcing services. Three firms of about 300 lawyers each are doing this. They are overcoming confidentiality issues and making the joint effort work.
i. OT and WL think this model is not common and will not work widely. Too much concern about confidentiality; scalability is harder across organization

What are current outsourcing trends and issues. That’s the topic that John K. Halvey of the Strategic Sourcing and Technology Group at Milbank Tweed addresses in this Outsourcing Conference 9am session. 

[This blog post comes to you live from the ALM-sponsored Legal Industry Outsourcing Forum (May 23, 2007, NYC). Notes and comments are real time with minimal editing and posted as a session ends. I am taking notes in Microsoft OneNote, so use the outlining format.]

1. What is the net effect of outsourcing generally?
a. McKinsey Global Institute reports a net positive effect. But Tom Daschle says exporting jobs hurts millions of Americans. Halvey does not see political resistance to offshoring legal work. But he anticipates more regulation of offshoring in the next administration.
2. Current snapshot
a. The IT outsourcing market continues to grow but is maturing
b. We are now in the 2nd phase of the business process outsourcing (BPO) is now well underway but also maturing.
c. The Global 1000 are moving to BPO - little cannot be outsourced
d. Legal Process Outsourcing (LPO) is in a nascent stage
e. The distinctions among different types of outsourcing, however, are blurring.
3. The LPO market
a. LPO market in India is worth $80mil according to Forrester
b. It could grow to $4bil by 2015 (Forrester)
c. Global Legal Professional (GLP) certification test is a likely future development
d. Bars have issued ethics opinions
e. Halvey, who practices outsourcing law, has heard for decades that this or that will never be outsourced and eventually it will. Two years, lawyers were very skeptical. He thinks it is clear that LPO will grow, even if Forrester is too optimistic
4. The Outsourced Economy (A Milbank Service Mark, SM)
a. The core of each business shrinks. That is, the set of activities that business is open to outsource, continues to grow.
b. Sees a development that companies will, in future, manage brands, not assets. Viewing world as brand management - goods or services - will allow outsourcing more and more functions. Companies will manage component manufacturers, where a component can be a service. The brand managers - the big companies - will be aggregators. For example, one of his large clients recently consolidated / aggregated all of its project management functions, then outsourced it. If companies can do, this, where is the limit?
5. Maturity of IT Outsourcing > Platform for BPO
a. With the outsourcing of so much technology, the global technology platform is fairly mature
b. The robust global infrastructure enables the global BPO market
6. Question: why haven’t law firms outsourced more of their IT
a. Halvey thinks it is because that have not yet achieved sufficient scale
b. For firms to remain cost competitive, they will have to scale further to take advantage of outsourcing cost reduction opportunities. (Note from Ron: I have written previously that the merger trend among the AmLaw 100 will encourage outsourcing.)
c. Halvey’s outsourcing deals often involve multiple data centers and 10s of thousands of PCs. Contrast this scale of typical law firm, even large ones
7. BPO Offerings
a. HR
b. Finance and Acccounting (F&A)
c. Procurement
d. Marketing and PR
e. Customer care
f. Real estate management
g. Project management
h. R&D (Research and Development)
i. LPO
8. Key questions for any contract, including legal outsourcing
a. What is it?
b. Who does it?
c. Who owns it?
d. Who pays for it?
e. What happens if it is not done?
f. These are questions in every contract, every outsourcing deal; answers will be harder in LPO deals than in other deals
i. The complexity will drive growth in outside advisors (consultants), due diligence, negotiating teams with more skills, more lawyers working on LPO deals.
ii. Halvey has seen “cobblers children have no shoes,” meaning law firms that have signed standard forms for outsourcing. He thinks this will change rapidly
9. Getting LPO Deals done (time kills deals)
a. Getting law firms and law departments to close a deal takes time. Time kills deals
b. Consultants and vendors will have to shepherd the process
c. All involved will have to understand the law firm culture - this may well be harder in LPO then other BPO markets
d. Seems necessary to have managers on the ground in India
e. The tendency of law firms and law departments is to bring together a large group of stake holders ("large tent"). To get a deal done, you need no more than 5 or 6 people in the room ("small tent").
f. Deals need a win-win set up. But early deals, to work, will probably require letting someone else win first.
g. We will see “ready, fire, aim” initially. Halvey not clear if firms will share information with each other about their LPO deals. Halvey does not think firms like his will outsource legal work and, if they do, they will not want to share.
10. The normal outsourcing deal is fairly collaborative.
a. Lawyers are MUCH less collaborative than IT or business people
b. Lawyers will have to overcome instinct to take deal and study it to death
c. Suppliers have to work hard to figure out how to engage firms collaboratively
d. When conceding: the when is more important than the what
e. Venue of actual deal making matters. Vendors should get their lawyer customers out of their offices. Lawyers should visit vendors anyway as due diligence.
f. Avoid huge conference rooms and too much food - don’t encourage endless discussions.
g. Law firms, unlike corporations, often lack someone to force a deal to close
h. Lawyers focus more on details than big picture - suppliers need to get them to focus on macro, big picture
i. Lawyers often make idle threats. Halvey seen much posturing around issues. Both sides need to learn use leverage appropriately
j. Some deals should NOT happen. Market is still at risk if a couple of transactions go badly.

Some lawyers seem to view offshoring legal work as exotic. In fact, it’s not that different than delegating work internally. 

As a panelist for The World Is Flat: What You Need To Know About Effectively Outsourcing Legal Services (ALM - Law Journal Newsletter web audio conference on May 16, 2007) my presentation, Legal Outsourcing - Overview, Opportunities, Issues, suggested that outsourcing and offshoring is just another step on the delegation path. Lawyers have long delegated administrative functions to staff and to outside vendors. They regularly delegate substantive legal work to other lawyers, paralegals, and other professionals. Sometimes they delegate to lawyers in distant offices whom they’ve never met.

And sometimes the delegation of substantive work becomes outsourcing, for example, coding documents and legal research. Analytically, the idea of sending work offshore is not so different than delegating. Professor Stephen Gillers of NYU Law, a co-panelist and recognized ethics expert, explained that with appropriate supervision and disclosure, outsourcing and offshoring are ethically permissible.

The third panelist was Ram Vasudevan, President, SQ Global Solutions, a company that provides offshore legal services. He explained the hybrid model - onshore and offshore lawyers - his company uses and the steps they follow to insure compliance with ethics requirements.

Offshoring legal work is hot a topic judging by the number of conferences and the growing list of companies in India that provide offshore legal support. 

Conferences: Tomorow (May 15, 2007) I am a panelist in The World Is Flat: What You Need To Know About Effectively Outsourcing Legal Services (ALM, Law Journal Newsletter web audio conference, $). Next week ALM hosts Legal Industry Outsourcing Forum For Both Work Product And Support Services, an all day conference in NYC.

Updated List of Outsourced Legal Services: Joy London and I have updated our directory of Outsourced Legal Services. We now list 77 providers, up 20 from the prior update in January, more than a 30% increase over just a few months (new entries are not necessarily new companies). Thanks to the blog Legal Process Outsourcing for identifying some of the vendors now on the list.

Thoughts: Law firm interest in outsourcing appears strong and entrepreneurs in India appear optimistic based on the growing list. But I’ve not seen solid data on just how much and what type of work is being offshored. Considering that Clifford Chance and Baker McKenzie have offshore operation centers, however, I think the upward trend is solid and likely to continue. And as US BigLaw continues to grow and merge, firms will find managing operations the traditional way challenging - offshoring will likely increase its appeal.

Another bar authority has analyzed offshore work and concluded that, subject to certain caveats, offshoring is permissible. 

In October, I reported on a NYC Bar Association ethics opinion on offshoring. Now, the San Diego County Bar Association has issued Ethics Opinon 2007-1, which analyzes in details a factual scenario of a California lawyer who outsources significant substantive aspects of legal analysis to lawyers in India. It’s a long opinion that answers three questions. In my reading (and - remember - I don’t practice law), subject to some reasonable caveats, offshoring is permissible.

Thanks to Mark Ross of Lawscribe for pointing out this opinion. He has also written a good analysis of it at his blog, Legal Process Outsourcing.

See also Guidelines for Outsourcing Grow (National Law Journal, 5/3/07) for a short article on this and related offshoring ethics opinions.

If you live in the UK, now you can get low-cost advice from lawyers in India. 

A Bob Ambrogi blog post alerted me to UK-based Expert Legal Advice. Consumers buy chunks of time in advance and receive advice by e-mail. The company offering the service is English but the lawyers are in India. Nothing I found on the site suggests that lawyers licensed in the UK supervise the work. (The terms & conditions page was not available when I visited the site.)

I don’t expect to see a service like this in the US as it would probably be the unauthorized practice of law (UPL).

India is a big outsourcing destination. It may also become one for recruiting lawyers. 

Indian lawyers next target for international firms in Lawyers Weekly (Australia, 9 Mar 07) reports that legal recruiters and some large law firms now look for lawyers in India work in outside India (e.g., in London or the Middle East).

Overseas recruiting is not new. Young Australian lawyers are being lured to NYC say my contacts down under. Lawyers Weekly, which I’ve been reading in print for several months now, is filled with ads from UK firms seeking Australian lawyers. Milbank has the March 9th centerfold ad to announce it is recruiting for NYC in Sydney.

Given these trends, perhaps it’s no surprise that the article reports “International law firms, in particular the big UK firms, have also begun to visit Indian law schools to do recruitment drives of their own – a strategy that will help them in setting up an Indian office should foreign law firms be permitted to practise in India. Firms such as Clifford Chance and Linklaters are looking to start large-scale recruitment.”

I recently commented in A New Weapon in the Talent Arms Race that law firms could use blogs in their recruiting efforts. Lawyers could write a lot of blog posts in the time it takes to fly to India.

Joy London (of excited utterances) and I have updated our outsourced and offshore legal service list. This update (the last one was in October) includes 10 new vendors and 1 dropped one. We have also noticed a couple of other trends. 

One is that more Indian companies now list a US presence. Based on our own experience working in the US legal market, that is clearly a good strategy. Law firms are definitely more comfortable if there is a domestic presence.

The other trend is that the services provided by vendors seem to change regularly. Since we rely only on public sources (websites or articles), we don’t know if this reflects actual changes in service offering or just changes in what vendors actively promote.

We have not quantified these two trends, but based on checking web sites for each update and editing our table, the trend is clear.

In other recent outsourcing, news, several UK law firms are actively considering their outsourcing options. An article in Legal Week (11/2/06, UK) reports: CMS Cameron McKenna is exploring moving back-office functions to India; SJ Berwin is considering outsourcing; and Linklaters has inked a deal with Perot Systems. Perot will do some work for Linklaters onsite and some offshore. “Perot will initially work on developing the firm’s know-how systems.” It will be interesting to see how this deal affects knowledge management. On the one hand, from a KM professional’s perspective, this could be good news if more resources will be available to support the IT aspects of KM. On the other hand, who knows!

Legal offshoring and outsourcing is a hot topic. How much is smoke, how much is fire? 

Joy London and I maintain a list of legal market outsourcing and offshoring. In connection with our October update of the list, we wrote an article, Developments in Legal Outsourcing and Offshoring, published in LLRX.com (11/12/06) (also here).

In it, we conclude that “our impression, based on reading and talking to onshore and offshore contacts, is that the volume of work moving offshore is not as large as the growth in our list might suggest.” Read the article for more details about the offshoring scene. Since we wrote this article, Integreon has posted a list of the top 10 legal market offshoring companies, which was researched by Brown-Wilson Group’s in its 2006 “Black Book of Outsourcing”.

Starting in the early 1990s, I noticed that secretarial work was changing as a result of widespread lawyer use of PCs. Yet I have seen few articles about this much less smart management reaction. 

Already in 1991, I thought secretarial roles needed re-thinking. By 2003, when the main reaction seemed to be tinkering with the ratio, I wrote The Future of Legal Secretaries (Legal Times, May 2003). It suggests testing the concept of secretarial teams.

That article emphasizes matching needs and resources more effectively. Today, law firms have a new option to do so and, at the same time, recast the role of the legal secretary. Earlier this year CBF, a secretarial and document processing outsourcing company, retained me to write a white paper. In it, I explain why outsourcing some secretarial and document processing tasks makes sense. The reasoning applies to many law firm operations.

It’s a mistake to assume that full-time secretaries (plus temps) is the best decision. Outsourcing may be wrong - but decide that consciously, not by inertia.

The issues here affect CIOs two ways. First, if firms do outsource as suggested, that will affect training and systems. And second, the underlying reasoning may drive you to outsource some tech functions.

The chart below illustrates how outsourcing could change secretarial roles. This change and forming teams are not mutually exclusive. In fact, outsourcing can support a team approach.

Outsourcing comes in many shapes and sizes. A new legal outsourcing website with a fresh approach has just launched. 

Lawsourcing.com is a web-based service started by two technology lawyers. It’s a legal-specific reverse auction market: lawyers in need of help - substantive or business - post a project description. Suppliers then bid for the work. Only licensed lawyers may bid on legal work; anyone may bid on other work.

This is an intriguing idea. In Inside vs. Outside: When Does it Make Sense for Law Firms to Outsource? (Law Practice Today, April 2006) I noted:

The core business of law firms is a combination of solving legal problems and helping clients cope with difficult situations. An old adage says that lawyers are finders (business getters), minders (relationship managers), or grinders (ones who crank out legal work). Today, lawyers who are great at “client hand holding” typically rely on a partner or associate to do the legal work. Could the minder instead outsource this to a lawyer in another organization? The point is that even in what many would consider the core business of law firms lie potential outsourcing opportunities.

So conceptually, the idea of outsourcing legal work makes sense to me. For the BigLaw skeptics, just remember that you essentially outsource local representation all the time! And for law departments, remember that many of you use lawyers from Axiom Legal. Though Lawsourcing may seem new, it strikes me more as an extension of existing trends.

That said, it will face challenges. I was involved in the early days of an online service for lawyers, Counsel Connect. And I have observed several online legal marketplaces over the years. The challenge is always to develop a critical mass, customers and suppliers in this instance. Lawsourcing looks well conceived but faces this usual challenge. With staying power and the right marketing, will Lawsourcing become the eBay of law?

So what’s legal offshoring really like from the inside? Two Harvard 3Ls report on their journey through India. 

The source on outsourcing in the Harvard Law School Alumni Bulletin (Fall 2006) carries a report by two Harvard Law students who spent time in India researching legal offshoring operations. They “interviewed law students, attorneys at top corporate firms, venture capitalists and India’s second-ranking solicitor general. They also visited the cubicles where legal work is being done at a fraction of the going U.S. rate.”

Though several US corporations have set up their own offshore operations, the students found that the “independent firm started by an entrepreneur, often an Indian-American lawyer who supervises the work of Indian-trained attorneys” is more common. Offshore vendor claims notwithstanding, they found (1) few top Indian law school graduates work in these operations and (2) most offshore legal work, other than in patents, is not very complex. The article offers many other interesting anecdotal reports and suggests an optimistic future for legal offshoring.

And why does this matter to corporate law department tech managers and BigLaw CIOs? If your department or firm does offshore work - substantive or not - you can be sure there will be IT issues involved. And for law firms, any move to offshore legal work will cause - or should cause - law firm management to at least raise the question of outsourcing aspects of IT, if that is not already occurring.

More confirmation today from the New York Times that outsourcing is a big trend in BigLaw. 

Law Firms Are Starting to Adopt Outsourcing (10/27/06) reports on large law firms that have outsourced functions. I’ve already blogged on the examples cited in detail (Clifford Chance and Baker McKenzie), so what is interesting to me is that the NY Times considers the trend newsworthy. The article also has some additional details about CC and BM (e.g., Clifford Chance is working with Integreon). The money quote:

“Despite the attractive economics, a mere trickle of law firms have [sic] actually moved operations out of their headquarters or to overseas locations. Yet some are betting that law will be the next industry to shift parts of its operations to lower-cost regions of the world.”

Coincidentally, earlier this week Joy London and I updated our list of legal offshoring and outsourcing. Joy and I have written an article analyzing what we see as the trend; it is slated to appear in LLRX.com in November.

Update (10/28/06): See the Integreon press release for more detail on Clifford Chance operations in India.

Legal trade press articles have quoted BigLaw partners about the parade of ethical horrors of offshoring. They should read The Association of the Bar of the City of New York Committee on Professional and Judicial Ethics, Formal Opinion 2006-3, which finds that it is ethically permissible to use offshore resources, including lawyers in other jurisdicitions. 

The opinion concludes that a “lawyer may ethically outsource legal support services overseas to a non-lawyer if the lawyer” supervises the work, preserves confidencs, avoids conflicts, bills appropriately, and (in some circumstances) obtains advance client consent. Please do not rely on this summary for legal guidance; read the opinion. In my view, this is good news for firms that want to send work offshore, including document review.

Hinshaw & Culbertson’s opinion summary states it does “not cover administrative legal support services.” I’m not a practicing lawyer, but my read is that the opinion does cover any work that a lawyer sends offshore, from clerical to substantive.

Thanks to fellow blogger Rob Hyndman for alerting me to the above.

Magic Circle law firm Clifford Chance has announced it will move 300 staff positions to India. 

CC to transfer 300 jobs to India in bid to save £30m in legalweek.com (10/2/06) reports the firm is “set to move about 300 support staff jobs from the UK to India over the next four years, in a cost-cutting move that will save it in the region of £30m.” The initial focus is finance and IT staff but other departments are not immune. The firm will operate the support center itself, not outsource it.

With Orrick moving staff jobs to W. Va., Clifford Chance moving jobs to India, Milbank outsourcing functions to OfficeTiger, and DuPont offshoring document review, among other examples, where is the line on who does what?

These offshoring, near-shoring, and outsourcing arrangements demonstrate that that law firms should view as on open question who performs particular functions (employees or outsourcers) and where they are performed (onsite, offsite, near-shore, or offshore).

And as I noted in my prior post, working virtually is a growing trend. It is getting harder to argue that lawyers must show up daily at expensive downtown locations. Telecommuting anyone?

It’s a nice change of pace to talk about a topic instead of write about it. Last week I had the pleasure of participating in a great disussion of both legal technology, including outsourcing. 

Bob Ambrogi and J. Craig Williams host the weekly Legal Talk Network’s Coast to Coast program. In Legal Technology: A Double Edged Sword? (overview page with link to streaming MP3), Bob and Craig interview fellow legal technology consultant Ross Kodner of Microlaw and me.

In the 30-minute program, we covered the impact of technology on jobs in law firms, the current state of outsourcing and offshoring, the relative decline in the focus on hardware in favor of software and business requirements, among other topics.

Of course I’m not disinterested, but I think it’s a good program. I also think that BigLaw should consider this converational format for some substantive updates. Many conference sessions I’ve organized in the last couple of years have been panels and participating in Legal Talk Radio persuades me that the medium is a good way to communicate.

“Offshoring legal work to India could transform how lawyers’ services are bought and sold in North America.” That is the premise explored in a new and useful article in the National, the journal of the Canadian Bar Association.  

In Over the Horizon (June 2006, PDF, p. 22), author Julie Stauffer reviews and analyzes the current state and future potential of offshoring in the legal market. The article is a good overview of the state of the market.

I was particularly intrigued by one tidbit: “One group of Indian IP lawyers has combed the patent portfolios of North American companies and pointed out technical flaws, offering to correct them at no charge to introduce their services. How many North American law firms make that kind of effort?” Indeed! I would say these Indian lawyers are way ahead of most US and Canadian law firms on how to sell their services. Marketing departments, watch out!

Note: see my prior post on churn among legal market offshore providers.

Offshoring continues to be a hot topic. My next post will feature a good article covering the issues. Meanwhile, excited utterances and I have updated our list of legal market outsourcing and offshoring users and providers. 

We assemble this list based on our reading and suggestions we receive. The updated list includes several companies new to the list as of June 2006. Moreover, some of the companies originally listed appear either to have stopped offering legal services or ceased doing business. We have placed these companies on a second table (scroll to the bottom) based on visiting the URL we originally identified and now finding the page inactive or not seeing any links to legal services. We did not try to determine if these companies are operating under different names or web sites.

Based on the number of new players in India, it appears that offshoring is still generating a great deal of interest. Based on the number of apparent “exits,” however, it is not clear how big the demand really is.

Global law firm Clifford Chance plans to do more legal work in lower cost jurisdictions. 

The Lawyer reports on a memo to partners that managing partner David Childs sent recently. Childs: my vision for Clifford Chance (5/29/06) reports that the firm plans “escalation of an offshore outsourcing plan, with the aim of transferring routine legal tasks, such as litigation support and due diligence, to cheaper jurisidictions [sic].”

Update (6/5/06): A&O keeps the faith with Indian outsourcing venture in legalweek.com (6/1) reports that another Magic Circle firm, Allen & Overy, which started offshoring word processing in 2003, will continue using offshore services. The firm is seeking bids.

One “leading indicator” of legal market trends is who consulting firms are hiring. Today, Hildebrandt announced that two sourcing experts join the firm. 

According to the May 8th press release, “Christopher Petrini-Poli and Nicholas Quil will join Hildebrandt, heading up the firm’s new global Strategic Sourcing & Supply Chain Practice.” Brad Hildebrandt notes that “strategic sourcing counsel can save law firms as much as 35 percent of their non-salary expenses.”

I have long thought that large law firms underutilize technology outsourcing. With prominent consultants carrying the torch, firms may examine their options more systematically. CIOs need to stay on top of the “strategic sourcing” trends. And perhaps they should propose options before the choice is foisted on them.

Reviewing documents is expensive and tedious. It’s just a matter of time until some is offshored to India. I hear it is already happening but have no public confirmation… until now. 

The Financial Times (4/12/06) reports that “in an upcoming acquisition financed by a UK bank in the FTSE 100, the lawyers carrying out due diligence are in fact from India.” Law firm marketing expert Larry Bodine blogged about this at Corporations Now Outsourcing M&A Work to India and has the FT article on his web site.

Large firm CIOs need to keep an eye on this trend. If it grows, they will, at minimum, need to vet the technology offshore vendors use. If offshoring reviews gets really big, then extranets or workflow systems may be required.

And though not really the province of CIOs, forward-thinking ones may look for tools or services that can help assess review quality. Any legal issues aside, the main question about going offshore is the quality of the work. The only way to answer this is with a statistically valid comparison of review results from domestic and offshore teams.

The current issue of Law Practice Today (April 2006) has several useful articles about outsourcing in the legal market. 

One of the articles is Inside vs. Outside: When Does it Make Sense for Law Firms to Outsource?, a roundtable discussion that includes several legal technology experts, consultants, and bloggers, including me. The questions answered include:

• Is outsourcing something real or just another area of hype? What do you see happening today in the world of law firm outsourcing?
• Often, outsourcing experts refer to the need to understand your “core business” before you outsource. What is a law firm’s core business? What are some good examples of operations a law firm might outsource?
• What can go wrong when you outsource and how can you protect yourself?
• Looking to the future, what do you see happening in outsourcing in the next three to five years?

This is a good read with good perspectives for anyone interested in legal outsourcing and offshoring.

After the dot-com bust, it seems VC investments are a decent indicator of business potential. So it is interesting to note that a legal offshoring company has received $4 million investment. 

Pangea3, which, according to a March 30th press release, “has created a hybrid business model, leveraging world-class talent from India with US oversight to offer clients legal, patent and IP technical support services at a dramatically lower price structure,” received a $4 million investment from the GlenRock Group. The “funds will be used to recruit top legal talent to ensure continued growth in both the US and India and to expand facilities and offerings in both markets.”

In my post Offshoring Beyond the Routine (May 2005), I reported on a conversation I had with Pangea’s co-founders.

This week printing giant (market cap $7b) R.R. Donnelley & Sons Co. (RRD) acquired (press release) offshore service provider OfficeTiger (OT). OT previously gained legal market notice through its Hildebrandt joint venture and outsourcing deals with Milbank Tweed. The acquisition could affect both law firms and vendors. 

Its not obvious how RRD’s core print business relates to OT’s offshore “business process outsourcing.” The Wall Street Journal ($) explains that the “hope for Donnelley is that these services will help sell more printing work to its clients, while also making it harder for those clients to move their spending elsewhere.” The Economic Times (of India) comments: “Analysts said Donnelley may be keen to cut its costs as a printer and publishing company and wants to obtain critical size quickly in India… Donnelley seems to be struggling and has been restructuring its business, selling off portions of it.”

Whatever the motivation, the acquisition could change vendor dynamics in the legal market. Any US company that currently contracts with OT for offshore services may now worry that the RRD-OT combination could become a competitor. And vendors that have been mulling offering offshore services may now decide and act quickly.

For law firms, I think the news is good. First, large firms considering offshore services may find comfort in ownership by a big company like RRD. And second, if other vendors do start offering more offshore services, then firms will have a wider range of choices and more bargaining power.

Business Week reports in Subcontinental Drift (1/16/06, $) that a growing number of Westerners go to India to work for outsourcing companies. Are lawyers next? 

The article notes that

“firangis - or foreigners - have always been part of the Indian outsourcing scene. But until recently, they were mostly highly paid experts from companies that were sending their work abroad, helping the new Indian team learn the processes… Those folks are still coming to India, but they’re being joined by less-experienced people who make little more than the rock-bottom wages paid to locals that are a key draw for multinationals.”

The article focuses on young people seeking relatively low-level work. I wonder though if some US contract lawyers might not find an Indian stint rewarding. Assuming document review working conditions reported at the Temporary Attorney blog are accurate, moving to India could be a big life-style upgrade.

An offshore company seeking to offer lawyer review for responsiveness and privilege might want to seed a local team with experienced contract lawyers from the US. With the right technology to monitor review progress, it really shouldn’t matter where the lawyers sit. And clients could probably pay travel costs for a few lawyers and still come out way ahead.

Offshoring legal services is a hot topic, covered by the New York Times and Wall Street Journal. Market researcher Forrester estimated (according to the Economist) that 12,000 legal jobs had moved to India by 2004. A new report, however, concludes that the trend is not so hot and the numbers not so big. 

Evalueserve, one of the bigger Indian companies that helps US companies with patent work, released a new study, Legal Process Outsourcing (LPO) – Hype Vs. Reality (and reported on in Economic Times - India). It does not specify its survey method but I interviewed co-founder Alok Aggarwal recently and found him very credible. I’ll quote the key findings:

“only 1,300 professionals are currently providing legal services to the US from India; however, this number is expected to grow to 5,200 by December 2010 and to 16,000 by December 2015…. despite the seemingly large growth in offshoring of legal services, in actuality, only 1.2% of the legal and paralegal jobs would be offshored to India by 2015 and constitute only 0.2% of the total revenue” [emphasis added]

Quite a difference from the Forrester estimate! And numbers this low seem hardly a threat.

Beyond the numbers, the report analyzes the types of work that have moved offshore and estimates the number employed for each type. It goes on to explain four business models for providing offshore legal services, the benefits of using offshore resources, and impediments to offshoring.

All in all, this is a must read for anyone interested in legal offshoring.

A recent New York Times article suggests that law firms should worry about corporations outsourcing legal research. Is this right? 

Even Law Firms Join the Trend to Outsourcing (NYTimes, 1/13/06, $) by Jonathan D. Glater says of legal research outsourcing that the “development may be an ominous sign for the legal profession.” The Wall Street Journal Law Blog notes the Times article.

As a consultant (and former BigLaw employee), I focus on legal technology. But I follow outsourcing both for its overall legal business and technology implications.

I see no anecdotal data for Glater’s “development.” He describes LRN’s network of professors who do research. In 1995, at my invitation, LRN founder and CEO Dov Seidman explained to a group of lawyers I organized his research business model. That group found it threatening.

To my knowledge, the threat did not materialize – I see no evidence of significant BigLaw revenue loss. And observing LRN over the years, I’ve noticed an apparent shift from research to compliance, which may say something about outsourced legal research as a business.

I think the real development is offshore legal research. (See, for example, the list of outsourced legal services that I co-maintain with the excited utterances blog.)

Only time will tell if offshore legal research has a bigger impact than onshore. The Times did report on legal offshoring in March 2004 so it was surprising and disappointing to see domestic outsourced legal research positioned as newsworthy or a development.

Growth in offshoring legal work appears to continue, at least judging by the most recent update to the list of outsourced legal services that excited utterances and I maintain. 

The latest list of legal outsourcing and offshoring contains more than a dozen new entries since our August 2005 update. Growth in number of suppliers does not necessarily correlate perfectly with growth in employment or revenue, but it does suggest many offshore entrepreneurs, especially in India, see an opportunity. For a good analysis of the market, see New Offshoring Legal Services Report at excited utterances.

Reader reports of offshoring or new offshore vendors or other outsourcing experiences are welcome. Can anyone report on trying offshore document review (not just objective coding)? I continue to believe that any client that needs a team of 100+ US contract-lawyer reviewers should experiment with moving some of the work to a team in India.

A Texas lawyer who runs a business saved 90% of legal fees by sending legal research offshore. 

A Smaller Legal World in the Fulton County Daily Reporter (12/13/05) reports that a lawyer running a telemedicine company paid local Texas counsel $250,000 for multi-state research. Subsequently, he turned to a legal research company in India and saved 90%.

The article also reports that Forrester Research found that 12,000 legal jobs moved offshore last year. excited utterances and I maintain list of legal outsourcing companies. It is not comprehensive (for example, we do not include digital dictation), but I still have a hard time understanding where the 12,000 jobs are. I suspect that litigation support coding is one of the highest volume offshore activities; but coding jobs moved offshore years ago and it’s not clear the numbers have grown much recently. I am curious how Forrester came up with this number. The rest of the article has a balanced discussion of the potential ethical risks of sending legal work offshore.

It will be interesting to watch the market evolve. If more firms and clients gain comfort in offshoring aspects of legal work, that might open the door wider to outsourcing law firm and law department technology services as well.

Offshoring “is moving up the food chain” reports Kevin G. Hall of Knight Ridder Newspapers in More complex jobs moving offshore. 

Tax, public relations, architecture, and high-end research are all examples of functions where companies are seeking help in India and elsewhere offshore according to the article. Robert Reich, President Clinton’s labor secretary, is quoted: “Any professional service that can be boiled down to predictable steps, even if they are complicated steps, is now exportable to South Asia.”

Law firms - and clients - should take note that cost is not the only reason to send work overseas. The article reports on a survey by the American Institute of Architects. It found that among architecture firms that sent work offshore, “a quarter cited lower costs, another quarter cited faster production and 50 percent… said offshoring helped them cover peak demand, allowing round-the-clock work on projects.”

The article also discusses the legal market, quoting me about the recent AmLaw survey that found 6% of AmLaw 200 firms have sent work offshore and citing Mindcrest for the document drafting and legal research services it provides.

Reich’s predictable but complex steps may well describe large scale discovery document review. Let’s hope that firms deploying 10s or 100s of contract lawyers have routinized the review process through documentation and quality control. If not, they have an inherent problem. If so, can anyone say software and/or India?

The American Lawyer surveyed the AmLaw 200 firms (see Law Firm Leaders: Conservatively Optimistic). Lots of interesting information on the state of Biglaw; I’ll focus on offshoring. 

The article notes that “Firms embrace temp workers – at least domestically. Seventy-seven percent of respondents said their firms are using contract lawyers or plan to do so. But just 6 percent said they currently offshore work to a foreign country or plan to do so.”

Just 6%?? About 150 firms responded, so that means at least 10 Amlaw firms are offshoring legal work. That’s more than I would have guessed.

I have recently come across a few useful news items concerning offshoring or outsourcing legal services. 

Orrick continues to move forward with its outsourcing initiative. A recent press release reports that “Williams Lea, a leading Business Process Outsourcing provider specializing in Corporate Information Solutions, has entered into an agreement with international law firm, Orrick, Herrington & Sutcliffe LLP to deliver document and transactional processing services to the firm… The new Williams Lea Corporate Information Center will be a state-of-the-art facility with centralized operations for Orrick and other professional business services companies throughout the world.”

Fellow ALM Blogger, The Wired GC has had two recent posts on offshoring. One is a podcast with the Wired GC interviewing David Perla, co-CEO of legal offshoring company Panagea3. (You can also read my May 2005 interview with Mr. Perla.)

The Wired GC also reports on a new web site concerning legal offshoring:   offshore-legal-services.com. I’ve reviewed this web site and it has interesting information. I’m not yet exactly clear on what services are offered but it appears to be positioned to help law firms or departments select or manage lawyers working in India.

A Law Firm Adds Another Shingle: Consultant in the New York Times (10/14/05) reports that Pillsbury Winthrop Shaw Pittman has expanded its legal outsourcing practice to provide outsourcing consulting. Query: have these consultants analyzed their own firm’s operations? 

“Lawyers at Pillsbury, apparently trying to climb up what consultants call the value chain, are becoming involved earlier in such transactions, sometimes even before a client has decided whether to outsource a business operation.” Were I a prospective outsourcing client, I would ask to see sample work product, specifically the consultants’ analysis of the law firm’s outsourcing options and strategy.

Non-outsourcing clients might also tap this resource. Litigation or antitrust clients could ask the consultants to determine whether large and costly document reviews should be conducted by lawyers in India rather than by associates or contract lawyers. The return on investment on such a consulting project might well be enormous.

The article also reports that Milbank Tweed, another firm with a strong outsourcing practice, has stuck to the traditional advisory role. Interestingly, Milbank has outsourced word processing. I do not know if Pillsbury has outsourced any functions. Perhaps the Pillsbury consulting practice will publish a case study of law firm outsourcing opportunities and recommended strategy as a marketing item.

The Wall Street Journal reports on 9/28/05 on the trend toward sending aspects of legal work offshore. 

The lead sentence of Legal Services Enter Outsourcing Domain (page B1) is “It happened with tech support, financial services and catalog order-taking. Now, a growing number of U.S. and British companies as well as law firms are outsourcing legal work to India.” For the most part, the article reports on companies and activities I have previously reported on offshoring.

The New York Times noted the trend in March 2004 (see here). In my experience in technology and management consulting (which includes the grocery industry), once the NYT and WSJ cover emerging topics from particular economic sectors, that’s a sign that the topic has move from “emerging trend” to “it’s actually happening.”

The Washington Times reports on several instances of law firms and departments outsourcing work overseas. 

Spotted on Robert Ambrogi’s Lawsites is the Washington Times article Law firms send case work overseas to boost efficiency. It reports that Venable uses Indian companies to draft patents; “[m]ajor corporations that outsource legal work include United Technologies Corp., Oracle Corp. and Bayer AG, whose officials did not return calls and e-mails for comment.” I would love to know how the newspaper determined which companies outsource.

Joy London of excited utterances and I maintain a list of Outsourced Legal Services.

Fellow blogger Joy London of excitedutterances and I have updated out list of Outsourced Legal Services. In addition Joy, offers an interesting analysis of the market to outsource legal services in India. 

Our list now has almost 30 entries, a mix of companies known to be doing work in offshore locations and companies, primarily in India, offering a range of service including legal research, document preparation, secretarial support, and patent support. For those interested in the trends (jobs and dollars), Joy’s post is a must read.

Three recent articles discuss offshoring legal work in some detail and provide interesting updates and insights. I continue to follow the offshoring option because I view it as similar to technology: a way, properly deployed, to lower costs and improve client service.  

The Corporate Legal Times (July 2005) carries an article titled Overhyped, Underused, Overrated: The Truth About Legal Offshoring. This title seems extreme given that the contents presents a balanced view of legal offshoring. My view of the bottom line of this article is that offshoring is here to stay but can take significant effort to identify appropriate work and set up.

The July/August issue of AsiaLaw magazine reports in detail on offshoring in In-House or Outsourced? The Future of Corporate Counsel. Fellow blogger Adam Smith, Esq. has ably summarized the article in his recent post. (Both he and I are quoted in the article.) Two items caught my attention. First, GE stopped its offshoring experiment in 2003 but Morgan Stanley and American Express now use Indian lawyers. And second, an Association of Corporate Counsel survey found that 1.8% of 167 US chief legal officers surveyed report offshoring work; another 8% express interest in doing so in the future. As the WiredGC notes, even an increase to 4% would be rapid growth and reflect real money.

Last but not least, Law Practice Today editor and CaseShare Founder and CEO, John Treddenick has a good article on legal offshoring in LPT. In Your Next Office— Bangalore? John provides an excellent analysis of why a law firm’s next office might be in Bangalore, summarizing Tom Friedman’s book the World is Flat and citing Prism Legal’s and excited utterance’s list of offshore providers.

Just in case anyone thinks I am overly optimistic about offshoring, of the several ideas I discussed with AsiaLaw, here my one quote that made it into the article: “The limits to offshoring are illustrated by the virtual lock top US firms have on many high-stakes outsourced matters. Smaller and regional US firms and New York offices of large UK firms typically cannot break the lock, so it is improbable that lawyers in India could. It’s often not about cost - it’s about results, reputation, and risk management.”

In New Reality: Temps Must Join DC Bar ($), the Legal Times (June 27, 2005) reports District of Columbia bar regulators ruled that contract lawyers must be admitted to the DC bar to avoid the unauthorized practice of law. This may have implications for offshoring, specifically hiring lawyers in India. 

Some article highlights: Hundreds to thousands of lawyers work as contract lawyers at any given moment. One firm set up a separate office recently with 400 (four hundred) temp lawyers for an antitrust 2nd request review. Deploying scores of temp lawyers is fairly common. “The opinion makes clear that placement agencies, lawyers, and law firms could be forced by the court to stop using non-D.C.-licensed attorneys or face fines.” Interestingly, the article reports that this ruling may not apply to Howrey, which houses its contract lawyers in Northern Virginia.

The DC authorities may create unintended consequences in their zeal to protect, umm, just a second, er, what is it that they are protecting given that the bulk of contract lawyers work under the close supervision of DC-licensed lawyers. OK, forget about the artificial barrier to entry issue. If Maryland and Virginia rules allow temps, firms can easily move work to one of these jurisdictions. And once firms think about moving the work 10+ miles away, perhaps they will also consider crossing an ocean and hiring lawyers in India for this instead.

In a 35-page report titled Calling a Change in the Outsourcing Market (April 2005, PDF), Deloitte Consulting concludes that outsourcing is not all it’s cracked up to be. The report finds numerous problems and limitations. It’s hard to know how to apply the analysis to the legal market given the nascent state of outsourcing but given my many posts on the topic, I thought it only fair to post about this.

Last month, fellow blogger Joy London of excited utterances and I released a list of outsourced legal services (prior blog post here, updated list here). Based on reader comments and our own research, we have found one-half dozen additional examples. 

Offshoring is news in the US and in India. Yesterday, a leading Indian newspaper had an article Legal outsourcing makes its case, which describes the current interest among Indian players to develop this business.

Some may think that with all the new entrants and “buzz,” legal outsourcing has the feel of the dot-com boom and eventual bust. My view is that outsourcing and offshoring will take hold but like many other past and present trends in the legal market - adopting PCs, creating brochures, using e-mail, analyzing practice group profitability, and hiring marketing directors - it will take time to grow and mature.

If you view offshoring legal work as limited to low-value, repetitive work, think again. I recently spoke with the co-founders of legal Indian offshore service Pangea3, which has already moved beyond the routine.  

Co-founders David Perla and Sanjay Kamlani say they help companies with patents, legal research, litigation support, and contracts. Contract work includes high-volume, routine items such as NDAs. It goes much further, however, to include negotiating and drafting one-off agreements. Workers in India sometimes even conduct live negotiations.

In effect, Pangea3 serves as the “contracts department” for some customers, including handling agreements for non-US jurisdictions. Perla says that “more than 50% of our revenue is high value work rather than routine, high volume work; this came as surprise to us but we handle it well.”

I asked if this makes them a US law firm with operations in India. They say no because they do not make legal decisions and because the company delivers its services only to in-house lawyers, who review the work prior to delivery to clients.

Pangea3 employs US and Indian lawyers with industry expertise. The company now has five Indian lawyers for each one in the US but expects to ratio to move to 10 to 1 by year-end, assuming it meets it targets of over 100 lawyers.

Perla and Kamlani are not sure that they have displaced any US lawyers – yet. But with associate starting salaries over six figures, they see a market ready for some dislocation. Kamlani says that the “market complains about costs - now that we are doing something about it, law departments are buying.”

I asked about the role of technology in the business. The company is initially focusing on tools to interact with customers, for example, VPNs, e-mail, and secure extranet. So far, they have not deployed document assembly software.

Reflecting on this conversation and the role of technology, I think it is likely that time saving technology such as document assembly will play an important role if offshoring grows. Sending legal work overseas is already a big change; adopting new ways of doing the work does not seem radical in comparison. Moreover, if cost reduction motivates the move offshore, then competition among offshore players to reduce costs further will likely drive the adoption of more sophisticated technology.

Fellow blogger Joy London of excited utterances and I have assembled a list of outsourced legal services.  

Joy and I will jointly maintain the list, which is also available from the Resources pull-down menu on my main web site. We did this because we both have observed with interest a recent trend by US law firms and law departments to outsource some legal work overseas. As bloggers, we have informally tracked legal offshoring activity and wanted to consolidate our observations in a single list. We hope that readers will offer updates, corrections, and comments as appropriate.

Those interested in the offshore angle of outsourcing might also want to check out Andy Haven’s IndianLegalOutsourcing blog. Andy also blogs at legalmarketingblog.

Lawyers may be safe from offshoring, at least for a while longer. That’s my conclusion after talking to Alok Aggarwal, co-founder of Evalueserve (EVS), a company in India that helps US companies write patent applications. 

I had a very interesting conversation with Alok a few weeks ago (full report here). The bottom line is that setting up knowledge-intensive work in India is much harder than it might appear. EVS has about 550 professionals in India; 85 are engineers and scientists who work on US patents and patent analysis. But it’s taken up to two years of training and a process-intensive approach to handle writing 40 patent applications per month.

This is not to say that lawyers can rest on their laurels or that in-house lawyers should give up looking for lower cost alternatives. The question is what substantive legal work is most suitable to do offshore? Domestic outsourced legal research has not grown as much as I would have expected; lowering its cost further by doing the work in India may not increase demand nor suffice to shift where it is conducted.

My sense is that the initial sweet spot for higher volume offshoring is document review in litigation or antitrust second requests. After all, many large firms already use contract lawyers, sometimes not even in their main office building. So the leap to lawyers in India seems easier for this task. After that, I suspect the next target would be simple contract drafting and review.

Over time, EVS or other companies with operations in both US and India and the patience to invest will likely identify legal work that has enough volume at moderate complexity and so makes it profitable to send offshore. General counsels who face cost pressures - and that would include most - should remain open-minded to the potential of offshoring to reduce costs.

Outsourcing Innovation is the cover story of the current issue of Business Week (March 21, 2005). It reports that major companies now outsource R&D, not just manufacturing. Does this have implications for the legal market? 

I think so. Not long ago, US companies viewed outsourcing as limited to manufacturing and low-end, commoditized work. Now, “the next step in outsourcing [is] innovation itself… the demarcation between mission-critical R&D and commodity work is sliding year by year.” If Dell, Motorola, and Philips buy complete designs of digital devices in Asia and if big pharma teams with Asian biotech companies and if P&G will generate 20% of its innovation ideas from outside, then why can’t large law firms outsource more of their activity to lower cost locations?

To some extent, large law firms already recognize that they can farm out work. I have previously written about the growing use of contract attorneys to review discovery documents and large UK firms delegating property and due diligence work to regional firms.

As corporate clients outsource ever higher links on the value chain, it seems reasonable to assume that they will eventually expect the same of their outside counsel. After all, if top-notch corporations can innovate, maintain quality, and lower costs by outsourcing non-commodity work, why can’t law firms do the same? At minimum, it seems to me that corporate CFOs and business people should be shocked to learn how much routine work their expensive outside firms really do.

Large firm CIOs may not be able to initiate outsourcing substantive legal work, but they will certainly be asked to support it. Whether it is collaborative extranets, workflow, databases, or document assembly, technology will be critical to supporting growth of outsourcing in the legal market.

American Lawyer magazine reports in Briefed in Bangalore (November 2004) on more examples of outsourcing legal work to India. At the same time, at least one US-based company is promoting outsourcing services based on being in the US and using US citizens. 

The article notes that “lawyers, like other professionals, have started to recognize the value of tapping into the highly educated, English-speaking Indian workforce to carry out tasks that would typically be performed by junior-level employees.” It goes on to report on several companies providing legal outsourcing services (most covered in my previous outsourcing posts). The article includes some examples I have not previously seen reported:

• Lawyers in India are performing substantive document review (i.e., responsiveness and privilege determinations).
• Dallas-based law firm Bickel & Brewer has opened a facility in India with several hundred lawyers and non-lawyers who scan, code, index, and abstract documents. The firm has spun-off this operation into a separate company (details here).
• QuisLex provides various services (e.g., research), including to small law firms.
• “250-lawyer Louisville, Ky.-based Stites & Harbison… has outsourced legal research and pieces of M&A transaction and is currently considering forming an alliance with outsourcing vendors and Indian firms.”

On the one hand, these examples suggest and increasing move to offshoring legal work. On the other hand, there appears to be a market for domestic outsourcing. I recently became aware of a domestic legal outsourcing operation, cbfgroup, at a conference. Now I see an ad in the November 8th issue of Legal Times for this company. It stresses that is “US owned and US based… and employs US citizens.”

The great thing about a free market is that it provides options. My take is that the legal outsourcing trend is growing and the market will decide what will go offshore and what will stay domestic.

The Executive Director of Milbank Tweed Hadley & McCloy, James Lantonio, reports in an article in Legal IT that his firm’s experiment with offshoring word processing is successful so far. 

A key factor in the firm’s decision to outsource word processing to India was the partnering of an offshore provider with a domestic company. Lantonio writes that his firm “began a pilot programme about four and a half months ago and it has gone exceedingly well… The quality of the workforce in India has been excellent — they are quick to ask pertinent questions and make no assumptions, and the turn around time is well within the acceptable boundaries.”

He adds, however, that lawyers still need to be convinced that the work can be done remotely. But the evidence suggests that this concern is misplaced. “Amazingly, most of the complaints revolve around work that is done domestically” he reports.

It seems to me that several factors will continue to cause firms to consider offshoring as an option:

The continuing success of offshoring business process operations by corporate America.

The growing number of law firms that have developed an outsourcing practice and therefore have a group of lawyers who increasingly understand the business dynamics and advantages of outsourcing.

Increased pressure in large law firms to control costs.

The success of the domestic centralization of law firm services (e.g., Orrick’s West Virgina center).

Availability of a “US front end” to offshore services.

Sending work offshore to India has been a staple of the general and the legal press. Now comes an example of a large company relying on lawyers in the African island-country of Mauritius. 

The Corporate Legal Times (September 2004) reports in The Mauritius Solution that consulting company Accenture has set up a legal operation in Mauritius. The company, driven by cost considerations, wanted to off-load from their legal department routine work such as NDAs and RFPs. The company set up its own legal offices in Mauritius, choosing the location because lawyers there typically speak several languages and have experience with both the English and French legal systems. Furthermore, the country has a good infrastructure.

As I read the article, Accenture hired local lawyers and set up a service center. The company is pleased with the arrangement, particularly the quality of work. Apparently the only outstanding issue is the 9 hour time difference. (Though, in my reading and discussions about outsourcing, this time difference is often viewed a positive because workers in the US can send work at the end of the US day and have finished product back the next morning.)

The trend to send legal work offshore is still small, but seems to be growing. Assuming that’s so, what will be the impact on law firms? It seems likely that only fairly routine work will be offshored for quite some time. If so, the impact on large firms, which primarily focus on higher value work, will be limited. It’s possible, however, that if corporate counsel become comfortable with offshoring, they may expect their outside counsel to take similar cost saving measures.

Legal publication The Recorder reports in Outsourcing Reaches Corporate Counsel (8/25/04) that more inhouse counsel are finding ways to use offshore labor. Separately, a recent Business Week article discusses some extraordinary security measures Indian outsourcers are taking that might allay some concerns about confidentiality and privilege. 

Here are several interesting points from the Recorder article:

“Forrester Research Inc., a Cambridge, Mass.-based market research firm, predicts that more than 489,000 U.S. lawyer jobs, nearly 8 percent of the field, will shift abroad by 2015. ”

GE now has 8 lawyers and 9 paralegals in India. They work on contracts, under the supervision of US lawyers. Since moving work offshore in 2001, GE has saved $2 million.

Some small companies also send work offshore (e.g., to patent lawyers in New Zealand).

Chicago-based legal outsourcing firm Mindcrest reports that inquires have tripled over the last year.

Much of the article discusses some of the potential barriers - including skeptics among US lawyers - but suggests the trend to offshore labor will continue.

One of the potential barriers I have discussed in prior posts is confidentiality. In Fortress India?, Business Week (8/16/04) discusses how Indian outsourcing companies are clamping down on security and confidentiality to address U.S. and European fears of identity theft. Measures include ID cards, prohibiting workers from taking any personal items into work spaces, shredding conversation notes, call monitoring or recording, watching workers carefully, masking sensitive data, removing any hardware from PCs that would allow downloading or copying data, and video surveillance.

All these measures are designed to prevent Indian workers from stealing data that might allow identity theft. (Editorial aside: it seems to me US operations might emulate these measures as well given the problem of identity theft stemming from within the US.) The measures described in the article are far more stringent than the security I have seen at most law firms. While these steps do not necessarily address the legal sanctions that might be required to protect client confidences (e.g., restraining orders or sanctions), in a practical sense, they would likely address confidentiality considerations that might otherwise inhibit using offshore legal services.

I have written previously about Orrick’s centralized “Global Operations Center” ("GOC") in Wheeling, WV. The Aug/Sep 2004 issue of Law Firm, Inc. has a good follow-up article ("Location, Location, Location") about the GOC. 

Orrick has cut annual operating expenses by $5.6 million by consolidating tech support, operations, finance, and benefits in a central facility in West Virginia. Moreover, the article reports that Orrick is considering offering support to other law firms through its GOC. Chairman and CEO Ralph Baxter says “If we can organize it in a way that provides other law firms the assurance of confidentiality and reliability that they would need, we think we’ve got something there that would be a huge benefit to firms around the country.” COO Douglas Benson qualifies this by saying that the firm would work with joint venture partners to offer such a service.

Certainly there is a market for outsourced services to law firms. For example, the same issue of the magazine reports in “Let Someone Else Do IT” that 130-lawyer firm Herrik Feinstein has outsourced its technology support to Union Square Technology Group. Providing GOC services to other firms would presumably offer Orrick several benefits: incremental revenue, lower unit costs for technology (because of higher volumes), and external forces that instill a disciplined approach to running its operations. But there are potential disadvantages as well: distraction from the core business of law and putting the needs of paying customers ahead of the firm’s own needs.

I applaud Orrick for continuing to think innovatively but on balance, believe that the distraction-factor of re-selling internal services outweighs the potential benefits. I think the firm would obtain greater benefit by devoting time and energy it might spend on selling GOC service to a potentially more lucrative purpose - creative applications of technology and processes to further differentiate and elevate the firm’s competitive position. It’s hard to beat the profit margin of law practice and I think that any speculative or unusual investment a firm makes should be focused on supporting and growing core client service with its traditional margin rather than on an ancillary business that would have no impact on clients and likely carry a lower margin than fee-paying legal work.

In Law Firms Offered Outsourced Support Staffs the New York Law Journal reports (6/7/04) that consulting firm Hildebrandt has inked a joint venture with the outsourcing group OfficeTiger. 

I could not find a reference to this joint venture on either the Hildebrandt or OfficeTiger web sites, though Hildebrandt has previously indicated its intent to enter the business (see my Hildebrandt Report on Outsourcing posting). According to the NYLJ article, the joint venture will focus on administrative functions but “also will be able to provide staff for legal and non-legal research functions.” It will not offer outsourced lawyers, though holds open that possibility in the future. A Hildebrandt director who will manage the JV estimates that “30 percent to 60 percent cost savings in support tasks” is possible.

Hildebrandt is widely known and trusted among many large law firms, so in my view, its backing of outsourcing could significantly affect the decision in at least some firms. One question is what role Hildebrandt will play in the operation. My sense is that outsourcing works best in connection with re-engineering how work is performed; perhaps Hildebrandt will help with the process and cultural changes that may be required to support outsourcing (for more on the process issues, see my Article Offers Practical Tips on Offshoring posting).

I am eager to see the impact of and on technology of outsourcing. Technology is a critical enabler of outsourcing and I expect it will play an important role in moving and managing work. Outsourcing can also directly affect technology operations, for example, by outsourcing network operations or help desk functions. The entry of Hildebrandt in this space bears watching.

The March 29, 2004 issue of the National Law Journal features a cover story titled ‘Offshore’ Legal Work Makes Gains. It presents a detailed and, in my opinion, balanced view of the trend and issues.  

Unfortunately, I could not find the story online (I have never been clear how and why law.com selects some articles to upload to law.com and not others, but I digress). So, here are some highlights and comments.

The article starts by reporting on Lexadigm, an outsourced legal research company that relies on lawyers on India, is growing rapidly. The company web site indicates that lawyers in the US supervise the research of lawyers in India. So it’s not obvious to me how this differs from traditional legal research companies, at least with respect to legal and ethical issues.

It goes on to say that the potential for offshoring work is great, but that, so far, there has been no outcry against the practice (as there was when accounting firms threatened to take share from lawyers). Several lawyers quoted, however, express various ethical reservations about offshoring. As I’ve mentioned in prior posts, I am not clear what the legal reasoning behind these concerns are. I was therefore pleased that the article explored the ethics issue in more detail.

The article quotes Prof. Morgan of GW Law, who points out that US lawyers are still “on the hook” for the work performed in India, which should suffice to address ethics concerns. He does suggest, however, that as a relationship management issue, lawyers who offshore elements of the work disclose this fact to clients.

Another concern discussed is whether rules concerning the unauthorized practice of law might apply. The analysis concludes this should not be an issue, in part because defining law practice has proven difficult and in part because “much of the everyday work of attorneys can be performed by consultants, paralegals, law student or interns without violation of the restrictions on the unauthorized practice of law.” Also, two companies that provide offshore service make clear that they are not providing legal advice.

I was pleased to see a more in-depth article and, in my opinion, more balanced one on the ethical considerations. There may be reasons why offshoring does not grow (e.g., the cost of supervision may be too high or the politics too inflammatory), but at least the marketplace should be able to make that decision, unencumbered by alarmist and probably ill-founded ethical considerations.

If offshoring takes off, it could have strategic implications for technology in law firms. First, it would help support the concept of Working Virtually (one of my recent blog postings and article) by further reducing the link between physical location and work. Second, if any large firms do consider offshoring, it may push in the direction of work flow systems to better control the work (though e-mail and document management may suffice). And third, if the concept takes root, it’s possible that some large firms could use lawyers in India to assist with internal knowledge management activities.

Last summer, the large UK law firm Lovells announced that it is farming out certain routine work to “provincially-based solicitors.” Now, Freshfields is following suit. Details and other outsourcing updates follow. 

According to a Lovells press release dated July 2003, the firm has entered into an “IT-driven outsourcing arrangement whereby lower value or more routine work involved in managing a property portfolio is sub-contracted by Lovells to provincially-based solicitors, who work to quality standards set by the firm, whilst the higher value, more specialist work, is handled by Lovells as principal.”

Legal Week reports that Freshfields is following suit. A March 25th article reports that “Freshfields now regularly farms out due diligence work to firms with operations outside London that include national” and other law firms. Whereas Lovells takes responsibility for the work, Freshfields does not, according to the article.

It seems to me that this type of arrangement is similar to outsourcing legal work offshore. Once a firm or client crosses the threshold of outsourcing, the difference between a domestic and overseas provider does not seem that great. Either way, a client or firm faces management, quality control, and ethics considerations.

In other outsourcing news, Law Abroad, a UK company, is gearing up to outsource legal work to South African lawyers, using automated systems to manage the work. (I spotted this on Legal Technology Insider, Issue 159). Separately, Laying down the law, in the Star-Ledger of Newark (New Jersey), reports on the increasing trend of law firms to use lawyers in India.

It feels to me like the market is “tipping.” That is, soon, it may be common place to at least consider using, if not actually use, lawyers in countries where the hourly rate is considerably lower.

News reports in general interest publications such as the New York Times are often a good barometer for industry trends. Now that the the Times has reported on sending legal work to India, it’s official - the legal profession has the “signal” that offshoring is for real. 

In Corporate America Sending More Legal Work to Bombay (March 14, 2004), the New York Times reports that large companies now send legal work to India. It mentions GE’s use of lawyers in India (about which I have previously blogged) . This article reports that BorgWarner has also turned lawyers in India, using Mindcrest to research an employment law question. The reason cited is to save money. The article is a good summary of trends as reported in legal publications and this blog.

What stood out as new and very interesting is that the article addresses the ethics issues head on:

“When any American legal work is done overseas, American lawyers must review - and bear responsibility for - the final product.

‘There is no problem with offshoring,’ said Stephen Gillers, a professor at New York University School of Law and a legal ethics expert, ‘because even though the lawyer in India is not authorized by an American state to practice law, the review by American lawyers sanitizes the process.’ ”

Gillers (who taught the professional responsibility class I took at NYU law) is a good authority. In my view, his comment helps address the stated but unsupported concerns voiced in some articles by partners at large law firms.

The full-text of NYTimes articles is typically available for a couple of weeks, with free registration.

I spotted on Robert Ambrogi’s LawSites a reference to another example of the trend toward outsourcing legal work to India. Intellevate provides a range of intellectual property support services, including specialized support in India. 

Ambrogi’s blog posting alerted me to Law firm cuts rates by outsourcing to India in the Twin Cities Pioneer Press, March 3, 2004. The article opens rather provocatively: “How about this deal? Get legal work typically billed at $200 an hour for just $50.” According to the article, Intellevate was founded last summer, is majority owned by “shareholder attorneys at Schwegman Lundberg Woessner & Kluth, a 55-lawyer patent firm in Minneapolis,” and has a dozen law firm customers and two corporate customers. The Schwegman firms says it can lower client costs and maintain quality by carefully managing what work the firm’s specialist performs and what work Intellevate performs for them in India.

Interestingly, a competing IP law firm has said it is not considering offshoring work because its client haven’t asked for it. Granted, the success of offshoring is still unclear and it does raise political issues. Yet law firms need to be careful about how they respond to changing markets and changing client perceptions. I recently switched to shopping at Safeway from Giant because Safeway re-modeled nicely and is better stocked - I’m not in the habit of asking my supermarket to make the aisles wider, the lighting better, or decreasing the number of out-of-stock items. The moral is that clients don’t always ask for what they want - sometimes they vote with their feet and their dollars and just move work to where the value is better.

An article in LegalIT (a UK publication) provides some good analysis and practical tips for law firms considering outsourcing non-lawyer functions to offshore locations. The article also helped me see a connection between offshoring and adopting new technology. 

Outsourcing: Quantifying offshore risks, posted on February 5th, explains that many UK firms are considering offshoring but that achieving its benefits may be harder than first appears. The article explains “danger signs” such as under-estimating the impact on the firm and failure to test adequately. It then describes four steps such as designing the framework and managing the transition that are necessary for offshoring to succeed.

I found two specifics of particular interest. First, the article notes that a hidden cost of offshoring is failing to improve “internal processes, which in many cases need to be improved” and that “using offshoring in the belief that it will provide a quick fix to fundamental process issues is wrong.” In my view, this is true for any “automation” project. Just applying technology - or offshoring here - is not enough. Achieving real benefit from technology or outsourcing typically means “business process re-engineering” or at least confirming that existing processes are efficient.

And second, the article notes that offshoring requires changes in how people work and managing cultural changes are tricky. The same is true for many new technologies. It may be hard to remember now, but many firms struggled to adopt e-mail. And cultural issues are a major topic of discussion among knowledge managers.

So reading this article made me realize one reason I found the offshoring topic interesting. I had not articulated this to myself previously, but offshoring raises many of the same “change management” issues as do new technologies. The benefits are potentially great, but they are not free, and good planning is required.

The Chicago Tribune reports today in Law firms slow to outsource (registration required) that law firms have been slow to outsource work. The article describes how Mindcrest, Inc., a legal outsourcing company, does most of its work for corporations, not for firms. 

According the article, most of the work Mindcrest does is “complex but repetitive legal administrative work [such as] processes qualified domestic relations orders.” Mindcrest was founded by a former large law firm partner. Its web site lists the types of projects on which it has worked.

Though the article’s take-away is that law firms have been slow to outsource, I have a different gloss. First, it is interesting that there is already at least one company, founded by big firm lawyers, already in the business of legal outsourcing. And second, the fact that a newspaper deems it noteworthy to even report that law firms are slow to outsource suggests that the pressures in this area mounting.

The article suggests, in quoting a large law firm partner, that confidentiality is an issue in outsourcing. I do not know all the ethics rules and perhaps there are special issues for work done off-shore. I see only one big difference between a firm outsourcing copying, litigation support, and even document review to contract lawyers in the USA and outsourcing legal work to India. That difference is the legal process available to deal with a breach of confidentiality. In the USA, injunctions might be available to stem a leak and civil or criminal actions available against the leaker. The same may not be true in India, but, in a similar vein as I suggested in my posting yesterday, this is as much an empirical as theoretical question. [I would welcome comments or e-mail from a lawyer who has researched the confidentiality issues.]

Separately, those interested in outsourcing might also want to read the Wall Street Journal today, which reports on internal IBM documents concerning outsourcing. The article reports that IBM expects to save over $150 million by outsourcing. It goes on to report that the documents also advise managers how to explain and position these decisions to employees.

I spotted on bespacific a reference to a very interesting article in the Star Tribune (Jan. 16, 2004) reporting that West is running a small test of using lawyers in India for some of its publishing operations. 

According to the Star Tribune, “a few months into the quiet Indian pilot-office experience, the half-dozen or so Indian lawyers have been doing online interpretation and legal-classification of “unpublished decisions” of U.S. state and lower courts that are not considered big deals – or “precedential” in legal parlance.” It goes on to say the work has been good and has highly-compensated West editors concerned about their jobs.

As I have argued in prior blog postings, I do not see any fundamental barrier to outsourcing legal work to countries where people speak English and are trained in British common law. It’s not obvious to me that quality concerns are a unique issue in outsourcing. All legal work is subject to judgment and to errors and requires quality checking (recall that, at least at one time, some large firms had a “2 partner rule” for any documents leaving the firm). Whether lawyer-editors in India can do as good a job as lawyer-editors in Eagan (home of West) is, ultimately, an empirical question. And I suspect that West, with its century-plus experience in publishing, has the know-how to make the empirical call. Of course, beyond cost and quality, West, like any large employer, will also have to consider intangible factors in making the decision to go offshore.

Brad Hildebrandt, one of the best known and most established consultants in the legal market (and founder and head of Hildebrandt International) has issued a very interesting special report on the potential to outsource legal work to India. 

Mr. Hildebrandt reports that his firm will get involved in outsourcing and is considering several business models:

“1. To consult with our clients on outsourcing as well as developments in the Indian legal system.

2. To discuss with a number of clients their interest in coming together to invest in a captive company that will provide services to the profession.

3. To enter into a joint venture with an existing U.S.-based or Indian-based company where we can have input into the design of the services, security arrangements and service capabilities.”

Regular readers of my blog know that I have been following outsourcing for some time and that I believe any effective outsourcing will need to make smart use of technology to distribute and manage work across disparate locations.

Legal Research And Back-Office Work To Go Offshore Next in Information Week (12/9/03) reports that “[l]egal research and other back-office work carried out at law firms may be among the next set of white-collar jobs to move offshore in big numbers." 

The article quotes a Milbank Tweed partner as saying his firm is considering moving some backoffice functions to India. (An interesting aside here is whether the term “backoffice” is the reporter’s or the partner’s and, if the latter, it is meant to include paralegal work. Viewing paralegal work as a backoffice function is a different issue.)

Openwave Computing, an outsourcing company based in India, “is in pilot discussions to provide paralegal services for two or three major U.S. law firms.”

As I have suggested in numerous prior posts, the same technology that allows lawyers to work from home (online research, remote access to firm repositories, and high speed net access) facilitate moving work offshore.

Two recent articles about sending work offshore caught my eye.   In New Economy, Companies sending work abroad are learning cultural sensitivity - to their American customers, the New York Times (December 9, 2003) reports that some company’s that have outsourced work to offshore locations have run into problems. Dell ran into problems providing service for some of its high-end products and had to re-route the call center back to the USA. In spite of this setback, the article quotes analysts who predict that technology jobs will continue to move offshore.

In prior posts on the topic of outsourcing, I have argued that law firms should consider moving some work to India or other countries where people are trained in English common law. The problem Dell ran into is not likely to happen to law firms. Dell and other companies providing customer service provide direct customer access to the offshore resources. As I see it, were a law firm or department to use offshore personnel, it would manage the resources directly, review the work, and not allow direct client contact. That does not guarantee that offshoring would work, but this approach would eliminate a risk customer service organizations face.

Adding fuel to discussion is Change of Venue in the American Lawyer Magazine December 2003 issue. This column’s sub-heading says it all: “Cost-conscious general counsel step up their use of offshore lawyers, creating fears of an exodus of U.S. legal jobs.” The article quotes Forrester Research, a market research firm, as predicting that 8% of lawyer jobs will go abroad by 2015. The article then sites examples of companies that are using the services of offshore lawyers. The head of one outsourcing firm “notes that foreign outsourcing could benefit large, multi-office law firms. Much of the work being done by junior associates, he says, could be handled offshore.” He may not be exactly unbiased, but I believe this is true. The article concludes that with skepticism about the idea of associates losing jobs but nonetheless suggest law firms need to consider the offshore possibility.

Note added 12/11/03: The American Lawyer article is now available on the web: Change Of Venue; Cost-conscious general counsel step up their use of offshore lawyers, creating fears of an exodus of U.S. legal jobs

Several of my prior posts discuss the potential to outsource legal work overseas. I was therefore interested to read Legal-Work Outsourcing Cuts Costs; DuPont’s pitch to in-house counsel: Save millions by sending legal work to companies other than law firms from the New Jersey Law Journal, Nov. 17, 2003, as carried on law.com.

This article describes how DuPont and other law departments outsource elements of legal work to “someone other than attorneys at law firms.†DuPont has used a temp agency for witness interviews and document reviews; Cisco estimates it has saved millions by outsourcing discovery work; and Sun Microsystems uses lawyers who do not work at traditional law firms for some patent work. Companies report saving significant sums with this strategy.

The article quotes a partner at a large law firm who questions the quality of the outsourcing approach. To me, quality is an empirical question - it’s easy enough to monitor quality and even to compare the quality of law firm work to outsourced work in a controlled test.

The same partner worries about the “caliber of person.. you get willing to do that kind of work for their whole career.” I have read several articles in the business press that report that customer service reps in India do a better job than those in the US because for them, the service job is considered high end. Perhaps the same is true for some types of legal work. I personally worry about the opposite: for example, the attention span and focus of “high end” associates with Ivy League educations and very high expectations spending days or weeks on end reviewing often mind-numbing documents.

I find it encouraging that inhouse counsel are looking at alternatives to the traditional way of doing work. Not every outsourcing or alternative work arrangement will work, but it certainly makes sense to explore alternatives and test their cost and quality against traditional approaches. Many alternatives are facilitated by the appropriate use of technology to transfer work, monitor it, and compare results.

[Note: After posting this item, a somewhat different and more detailed version of this article appeared on law.com based on Model Behavior from The Recorder; this version has an explicit discussion about outsourcing legal work to India and to LRN.]

I have written several posts about the potential of outsourcing legal work overseas (Law Firms Outsourcing IT and Document Production, 27 Sep 03; Power Outages and Outsourcing , 15 Aug 03; Technology Outsourcing Example - Document Management , 18 Jun 03; More on Off-Shore Outsourcing, 14 Jun 03; Central Back Offices and Outsourcing; 30 May 03). Among other points I make is that that law firms and law departments should consider outsourcing certain tasks performed by lawyers here in the USA (or the UK for that matter) to lawyers in India or other countries where lawyers are trained in English common law and cost much less than in the USA.

My old friend, Eric Mankin, is a business consultant who specializes in innovation, new products, and new ways of doing business. He has an impressive background (check his Innovation & Business Architectures web site) and has thought hard and deeply about many important business issues. His weekly e-mail update today provided some interesting background and perspective on the question of “offshoring” the work of professionals and knowledge workers. With his permission, I have reproduced it here.

From Eric Mankin (click here if you’d like to e-mail him)
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The steel strike of 1959 shut down 90 % of US steel production for 116 days. In shutting down production, the US industry opened the door to steel imports, which had been a negligible factor before the strike.

Because they couldn’t purchase steel from their usual US suppliers, buyers were forced to look for alternate sources, and they found that steel produced by Japanese or Koreans could meet their needs at lower cost. This marked the start of the decline of the integrated US steel industry.

The information technology explosion had similar effects on the American software industry. In the late 1990s, purchasers of programming found that they couldn’t buy it in the United States or Europe. This wasn’t because of a strike; rather, for a few brief moments, there wasn’t enough programming capacity to meet exploding demand.

India played the same role in the capacity crunch of the late ‘90s that Japan played in the steel strike of 1959. India-based companies started as an unproven supplier of programming, but have rapidly become world-class providers of software coding, and have expanded into many other computer-related business processes, from backoffice to customer service.

Forrester, the market research firm, estimates that offshoring will grow at 30-40% a year for the next 5 years. They believe that 3.3 million jobs will be transferred due to offshoring between now and 2015. They estimate that 400,000 jobs have moved offshore, although estimates from places like economy.com run as much as 50% higher.

Applying the “four question†framework to offshoring reveals why it’s such a compelling product. Offshoring excels across three of the four criteria required to guarantee a product’s success. Compared to domestic alternatives, offshoring is cheaper and provides higher quality. The growth of intermediaries such as Wipro and Infosys makes offshoring easy to buy.

It fails only in its ease of use. All of the managers who work with offshoring warn about the difficulties of working across time zones, and of the importance of managing offshored operations closely.

Last week, I spoke at a venture capital conference in Boston, and offshoring was part of the discussion in a large number of the sessions. If you are forming a company that has customer service or technology needs, you have to consider India or the Philippines for getting this work done. As Jeff Robinson, the VP of Customer Care at UPromise, noted: “We couldn’t be in business if it weren’t for the cost advantages of having our customer service in India.â€Â

At one point in the conference, a panel of CIOs from companies like Teradyne and Millennium Pharmaceuticals noted that they were all using offshore development houses for some part of their work. Which prompted John Logan, from the Aberdeen Group, to ask: “When will the CIOs themselves be offshored?â€Â

If offshoring grows at the rate predicted by Forrester, what happens to all those software engineers, call center representatives, and CIOs in the US and Europe?

Economics provides a rose-colored answer — all of these workers are now freed up to tackle new jobs of even higher value. An August 2003 report from the McKinsey Global Institute framed it this way: “The United States has the world’s most dynamic economy and is fully able to generate new jobs … While still receiving services that employees were previously engaged in, the economy will now generate additional output, (and thus income) when these workers take new jobs.â€Â

Personally, I would find this argument more convincing if McKinsey could give some examples of the kinds of new high-valued jobs that these 3.3 million displaced knowledge workers are going to be taking. If you have any suggestions that come to mind, please send them along.

I recently visited a beautiful new research facility on the banks of Pittsburgh’s Monongahela River. Carnegie Mellon has a building in the complex, as does Sunoco Chemicals. My hosts pointed out to me that, forty years ago, the same site was the home of a huge Jones & Laughlin integrated steel mill.

The steel strike of 1959 was the beginning of the end of J&L’s mill, and the local economy built a research facility in its place.

Now, however, companies like Sunoco can get the same research done by equally qualified personnel in places like India or China. Fifty years from now, what structure will stand where the research facility exists today?

For more information:
-The steel history comes from the Wikipedia’s entry on US Steel
-The McKinsey Global Institute published a report in August 2003 that gives facts and figures on offshoring.
-Offshoring as experienced by a hospital services buyer
- There’s a site that is 100% maintained in the USA — it’s Washtech — the website of the Washington Alliance of Technology Workers, Communications Workers of America, Local 37083, AFL-CIO
- This just in: The New York Times of 5 October provided a range of estimates of job loss in the U.S., as well as examples of Offshoring moving up the chain
======

So, in the legal market, will there be some one-time, “virtual accident” that causes a firm or law department to use lawyers in India and suddenly the market will realize what sense it makes? Only time will tell, but forward thinking organizations should be experimenting with this approach.

In my posting of of 3 Sep 03 Allen & Overy Testing Outsourcing, I conveyed reports that Allen & Overy was pilot testing outsourcing document production to workers in India. In UK firm set for outsourcing deal in India, Legal Week reports that A&O has decided to move forward with this plan on a permanent basis. Legal Week reports that one-half of the 85 document production specialists of the firm will remain in London and that the firm has signed an agreement with outsourcing company Office Tiger for services in India.

Separately, Legal Week reports in Bakers relocates IT functions to Asia that Baker & McKenzie will outsource three IT functions to Asia: network operations, document support, and systems development. According to Legal Week, this includes a data center and call center.

I have written several posts about the potential of outsourcing legal work overseas: Power Outages and Outsourcing , 15 Aug 03; Technology Outsourcing Example - Document Management , 18 Jun 03; More on Off-Shore Outsourcing, 14 Jun 03; Central Back Offices and Outsourcing; 30 May 03.

It strikes me that the ingredients are increasingly in place to outsource some elements of legal work. First, law firms will now start gaining experience with managing offshore outsourced “back office” functions. Second, at least based on anecdotal evidence, it appears that more large firms use contract lawyers to review documents in complex litigation, antitrust second requests, or government/internal investigations. Why not put those two trends together and use lawyers in India to conduct such document reviews?

I have written several posts about the potential of outsourcing legal work overseas: Power Outages and Outsourcing , 15 Aug 03; Technology Outsourcing Example - Document Management , 18 Jun 03; More on Off-Shore Outsourcing, 14 Jun 03; Central Back Offices and Outsourcing; 30 May 03.

Now, Legal Week, in its September 2nd issue, reports that Allen & Overy may transfer some of its document processing to India. A&O set for radical India staff transfer reports that the firm has recently completed a six-week pilot test and will soon decide if it will permanently move some of its document intensive work to India.

Assuming quality control can be maintained - and the experience of many other industries suggests it can - this appears to be an excellent way for law firms to reduce client expenses. With the Internet allowing instant transfer of information, easy collaboration, and controlled workflows, it frequently makes little difference where work is performed. Large law departments concerned about reducing costs and improving turnaround times (remember - the work day in India is virtually offset from the US and UK) should engage their outside counsel in a discussion of outsourcing aspects of legal work offshore.

One theme of legal technology and this blog is outsourcing: Orrick’s move to W. Va. (May 30th), downtown v. suburban offices (June 1st), the move of professional work off-shore as reported by Fortune (June 14th), Dorsey & Whitney’s move to outsourced document management (June 18th), and the move of legal work to India (July 10th).

In Zapped by Outage, Firms Scramble to Cope, the Recorder (8/15/03) reports on the impact of the Northeast power outage on law firm operations. The lead sentence aptly summarizes the situation: “One of the problems with going global is that when disaster occurs in some far-flung locale, every corner of the law firm is affected.” In spite of preparations post-911, the article reports that several law firms experienced significant disruptions firm-wide because key servers are located in Manhattan.

One benefit of outsourcing computer services is that power outages are less likely to disrupt the operations of an entire firm. Take as an example Dorsey & Whitney, which is migrating its document management system to an outsourced service. The firm’s documents will reside in a highly secure facility that has power back-up and a mirrored back-up site. The likelihood of their documents going offline is very low. Of course, any Dorsey office in power blackout zone might be out of commission, but other offices would be unaffected. Contrast this to a firm whose primary document servers reside in Manhattan. When key services are outsourced, it’s even possible that those in the blacked out area could do some work. For example, my brother, who lives in Westchester and works in Stamford was able to use his notebook PC (battery powered, of course) and a dial-up connection (the phones continued to work) to finish essential work.

When law firms consider their back-up and outsourcing options, it would be wise to factor in the cost of business disruption. Firms with central operations in the affected area will now have the potential to quantify the cost of disruption. Once the emergency is over, finance departments should be able to analyze time billed to determine if the outage reduced billable hours or merely shifted them forward to the weekend and subsequent weeks. Even if an outage of less than 24 hours does not reduce billable hours, there is the service element to consider and the value to clients of being able to operate continuously.

I do not mean to suggest that every firm should outsource all of its computer operations. But firm and IT management should explicitly consider the possibility and carefully weigh the costs and benefits to reach a conscious and well-reasoned decision.

The July 2003 issue of Corporate Legal Times in an article titled U.S. Companies Dsicover Cost Savings Down Under, describes how General Mills is saving up to 50% on outside lawyer fees by using Australian and New Zealand law firms to draft US patent applications. Lawyer rates there are 30% less than in the US and the exchange rate adds to the savings.

A sidebar to the article reports that GE has saved $1.7 million in outside lawyer fees in the Plastics and Consumer Finance units by sending basic legal work to GE lawyers in India. (See my prior post on this topic.)

Large corporations are under tremendous cost pressures, which transmit to law departments. I think the surprise is not that legal work is being outsourced. Rather, it is that a much larger volume is not sent offshore. Corporate America is not the only one to feel cost pressures. The current issue of American Lawyer, the annual AmLaw 100 issue, reports that one reason many law firms were able to increase profits in 2002 was careful cost control.

Technology easily allows sending documents, spreadsheets, presentations, and the other raw materials of lawyers’ work anywhere there is an Internet connection. That same connection also allows anyone to access online legal research services, collaborative tools such as extranets, or even formal work flow systems that control document flows.

Certainly the legal market has seen many other significant structural changes, for example, the use of staff attorneys and the growing ranks of non-equity partners. Not every AmLaw 100 firm works on unique matters and even those that do perform some elements of commoditized work. Which global law firm will be the first to test seriously routing work to lower cost locations?

My prior posts on outsourcing focused on cost. But not all outsourcing is driven only by cost - functionality can be the key factor. Yesterday I had occasion to be in touch with Curt Meltzer, CIO of Dorsey & Whitney, which reminded me that his firm is in the process of outsourcing their document management software. Instead of installing Hummingbird DM (aka PC DOCS) or iManage, D&W has chosen NetDocuments, a hosted DMS.

I’ve heard Curt speak twice about the firm’s decision. While I suspect they considered cost, the decision was driven by functionality. Three factors stand out in my mind. First, NetDocuments offers a single repository for the entire firm, which means lawyers only need to search a single database for documents. This facilitates lawyers working together across offices and practices. In contrast, most large law firms I know have set up their DMS as multiple “libraries” or “databases,” each covering an office or a practice. This makes it relatively difficult for lawyers to find documents outside their office or practice.

Second, setting up client access to documents with a single repository and a hosted solution is easier than with the traditional, on-site solution.

And third, with NetDocuments business continuity is assured. The company has two separate facilities, one of which is built inside a mountain and both of which are operated with extreme security and back-up measures.

The decision to outsource is not simple, of course. D&W had to re-engineer its network and upgrade it to assure that each office has high-speed and redundant access to the Internet so that documents are always available. Also, the firm had to work hard to integrate NetDocuments into the various desktop applications (e.g., Word and Excel).

I think this decision illustrates that it is possible - even with seemingly basic elements of tech infrastructure - to think creatively and gain potential strategic and practice advantages.

In my May 30th posting, I discussed Orrick’s centralization of its back office in W. Va. and raised the possibility of law firms and departments sending legal work offshore. An article titled Down and Out in White-Collar America in the June 23, 2003 issue of Fortune describes the high rate of unemployment among professionals. It explains that the “triple threat of computerization, tech-led productivity gains, and the relocation of [jobs] offshore” now effects professionals as much as it does blue-collar workers. For professionals, the offshore move is becoming the biggest factor. In the last couple of years, companies have turned to India and the Philipines for financial analysis, software design, and tax preparation. Ernst & Young has 200 accountants in India who process US tax returns. Even medicine is not immune. One Indian company has established a team of 15 radiologists in Bangalore (all US-trained and licenesed) to interpret chest x-rays and CT scans from US hospitals (at one-half the cost). Can legal services be far behind?

You may recall Orrick’s decision to re-locate information technology, HR, and other functions to a central location in Wheeling, WV. See Almost Heaven: Orrick Relocates Tech Operations to West Virginia (law.com, October 2002). Yesterday I was reminded of this when I read Center of Support, an article by Orrick Chairman Ralph H. Baxter, Jr. that appears in the Winter 2003 issue of Chief Legal Executive. According to Baxter, the move to centralize “back office” functions in a single, low cost location has both improved firm wide service and reduced costs.

It’s surprising that more firms are not moving in this direction. More and more law firms have multiple offices across many time zones, domestic and international. Housing a significant number of staff in downtown real estate is expensive. Moreover, the argument that staff need to have access to lawyers loses weight as the percent of lawyers located in the “home” office declines. And with the increasing use of e-mail, instant messaging, and video conferencing, the need for physical proximity diminishes.

But you do lose something with a remote location. I worked “virtually” for one dot-com, with no two people in one location. And for a second dot-com, I worked in DC with one colleague when the rest of the company located in Utah. It’s easy to feel isolated - proximity still counts, maybe for a lot. But as firms need to control costs and serve professionals in multiple offices, the trade-offs become closer calls.

Law firms have other options for centralizing and reducing costs. A Business Week cover story of February 3, 2003 called The New Global Job Shift examined this trend in detail. It reports that “[n]ow, all kinds of knowledge work can be done almost anywhere…. The driving forces are digitization, the Internet, and high-speed data networks that girdle the globe. These days, tasks such as drawing up detailed architectural blueprints, slicing and dicing a company’s financial disclosures, or designing a revolutionary microprocessor can easily be performed overseas.”

So, can law firm back office functions be outsourced to India? Can aspects of law practice be outsourced to India?!? I have had occasion recently to consider this question. A company based in India approached me to see if it could provide certain offshore outsourced services for law firms, including possibly legal research or knowledge management meta-tagging. In my discussions with several law firms, no one jumped up and said “of course, let’s do it,” but no one dismissed it out of hand either. In fact, one firm has already experimented with outsourcing word processing offshore. Moreover, GE is using lawyers in India for some of its legal work. (See Cracking the Whip in Corporate Counsel Magazine (Feb 03).)

As Baxter points out, it is not just a matter of cost. A central location allows staffing to provide 24x7 coverage worldwide. As the legal market becomes more competitive and as law firms grow, it will be interesting to see if others follow Orrick’s lead or go further and outsource to offshore locations.