Legal Process Outsourcing (LPO): Giving lawyers a case of their own medicine?
July 29, 2009
For certain the legal profession, long despised for its sky high fees, is one profession that few Americans would be sorry to see outsourced to India resulting in large scale job losses – at least for lawyers that is. Hence, will the emergence of Legal Process Outsourcing (LPO) finally cut the legal profession and its fees down to size? Maybe. Or maybe not.
Fortunately or unfortunately depending on how much you love lawyers, the legal profession is one profession that seems to be largely protected from the full blown effects of outsourcing. After all, a lawyer in one country generally cannot practice law in another country as the legal profession is governed by intricate licensure and ethical rules that are set by jurisdiction. Hence, Forrester Research is quoted in the Wall Street Journal as estimating that only 35,000 USA based legal jobs will be moved offshore by 2010 and 79,000 by 2015 – only a tiny fraction of the estimated 1.2 million lawyers in the country.
Moreover, don’t expect any US$500 an hour lawyer to have his or her job outsourced to India any time soon as the brunt of any job shift will be felt by paralegals and junior lawyers as LPO type of work typically includes basic legal research, documentation writing and review and the drafting of legal briefs and pleadings. In other words, routine legal and corporate secretarial type of work that no US$500 an hour lawyer would do themselves.
However, the potential cost savings from LPO are enormous with a recent USA Today article stating that some LPO companies will charge only US$25 an hour for work that would otherwise cost more than US$125 an hour if it were done in the USA. Moreover, starting salaries for new associates at big law firms in the USA can be more than US$200 an hour or US$160,000 per year at large and prestigious law national firms while the national average annual salary for lawyers according to a 2007 Altman Weil survey is US$318 per hour and US$550 per hour at large New York City law firms. However, an experienced lawyer in India can be bill at US$75 to US$100 per hour, roughly what some experienced USA based paralegals charge; while a Filipino lawyer with five years of experience can be hired for just US$30,000 a year including benefits, half of what an experienced USA based corporate paralegal would earn. And not to mention there is the cost of office space in New York verses Mumbai or Manila.
Nevertheless, don’t expect much in the way of cost saving to trickle out of large law firms or the legal departments of large multinationals. However, LPO does have the potential to significantly level the playing field for smaller law firms, smaller companies and individuals who can now have an amount of legal work done that could not be affordably attained in the USA. In other words, LPO has the potential to free up and leverage resources that will allow lawyers and Americans in general to do what they have almost always done best: sue each other.
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There are several lower-end LPO jobs are getting outsourced to offshore locations. But I do not think any higher-value LPO jobs like legal research, legal anaysis, etc is outsourced to offshore locations.
I am completing an LPO request on behalf of a client and I am hoping that you can direct me or verify that I am indeed on the right track. My client is seeking suppliers of LPO packaged applications to support the workflow management processes involved in delivering an LPO service to legal clients – from initiation to service delivery. It does appear from my research to date is that the major providers are using proprietary software solutions. Is this correct? Are you aware or can you direct me to providers of this service? Sincere regards,
Yes, off-shore legal outsourcing can lead to savings. Savings of up to 50% or much more. As The New York Times reported: “The reason for the shift [to outsourcing legal work] echoes the reason companies are sending other work abroad: they save substantial amounts of money. Some companies say they can reduce certain legal costs by as much as 50 percent, and receive work that rivals what they can obtain in the United States. According to Dennis Archer, the President of the American Bar Association, ‘The need to cut costs reaches across many departments, so it should be no surprise that it goes to the legal department as well.’” The financial benefits of off-shore legal outsourcing can be seen not only in the obvious differences between salaries and costs of living among the workforces of the U.S. and India, but also in the cost of office space, which is ultimately paid for by a law firm’s clients. Many law firms locate all or most of their personnel in relatively expensive offices in the largest cities in the United States and the United Kingdom. This has led to a situation where much of each dollar or pound that these firms charge their clients pays for office rent. In Mysore, India, for example legal outsourcing employees work in state-of-the-art facilities at 1/43rd the cost of comparable space in major U.S. cities. This is a major part of the way that an LPO can keep its promise to clients that they are paying for legal services, not real estate.
Padmavathi Shanthamurthy
http://www.sddglobal.com
high-end legal outsourcing