As we reported in May in Part 1 of our Trends series (click here),  law firms and legal process outsourcing to India still has a long way to go, and law firms still appear unconvinced.  And this is despite the Rio Tinto/CPA Legal tie-up (for insightful analysis on this subject from Rees Morrison click here and Jordon Furlong click here).   In Part 1 we reported on several recent studies including a very detailed ValueNotes study which was published at the end of May.  Those studies revealed that less than 3% of law firms had any past experience of off-shoring legal services.    Although legal services outsourcing has garnered a lot of media attention, there still is a sizeable proportion of the legal community that has not considered outsourcing legal services to lower cost destinations.

The ValueNotes study has been making the rounds (it’s extremely detailed) and various blogs are offering detailed comments.  One of the best is provided by Ron Friedmann at his blog PrismLegal (click here) where he discuses how the ValueNotes findings match the market assessment of Integreon as an LPO provider, but with differences.   The following are some of Ron’s points with our comments (TPL) noted:

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”.   TPL met with the IT departments (folks “in the know” on LPO connections at their firms) at 22 law firms in the last eight weeks and we agree with Ron and think it’s higher. 

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”.  As TPL has reported (click here) we have seen a dramatic increase in onshoring.

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”.  TPL has made this point countless times: corporate clients are driven by price.  But we diagree slightly with Ron about “turnaround time” because many firms told us that onshoring provided a faster turnaround time.

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”.    TPL agrees but found that law firms and corporate clients had difficulty finding LPOs that hit all these points. 

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!”   Actually, LPOs date back to mid-1995 and growth went vertical in 2000 when GE, Dupont, Dow and others opened captive LPOs in India.

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”.   TPL found that security/client conflict are still concerns at many law firms.

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”.  In our two trips to India, TPL found a surge in the employment of U.S. attorneys as project managers, trainers and supervisors.  We also found that more and more U.S. attorneys were being hired as LPO sales agents in the U.S.

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”.  That comports with what TPL found with the largest percentage being IP and/or othr civil litigation with financial/credit crisis litigation document review building. 

To see Ron’s full post with links to sources click here.    To follow Ron on Twitter click here.

Even with contract attorneys providing law firms the opportunity to cut their bills/its costs with respect to e-discovery, the expenditures can still be prohibitive, particularly in high-cost regions like D.C. and New York where the cost to house document reviewers on a contract basis is higher than elsewhere in the U.S.   As we have reported in the past, besides the state-of-the-art technology driving costs down, the drive to cut costs has led corporations and law firms to seek other ways to cover their e-discovery work — without sending it overseas (click here and click here). 

These outsourcing discussions highlight a law firm or client’s desire to simply seek lower cost alternatives, and that has led to a growing development of “farmshoring” or “onshoring” by staffing projects in preferred locales that the industry calls the lower cost “on shore” centers of, for example,  Atlanta, Charlotte, Columbus, Houston, Indiana and Tennessee, as well as working with law firms in smaller metropolitan areas where billable rates are lower but quality is just as high, or going with lower cost niche firms throughout the country. 

As Lumen Legal says in its recent white paper: “As such, the industry is re-thinking its cost-saving strategy even further, expanding it to ask not only who is performing document review, but where.  Companies are starting to accept that the location of the contract lawyers is irrelevant.”

And so we’ve seen this greater movement to “outsourcing” document reviews but to these “on shore” centers — to U.S.-licensed lawyers in less-populated, less expensive areas of the country.  It’s the alternative to offshoring that many clients and attorneys find unattractive.  Ohio, North Carolina, Tennessee and Texas, for instance, have a wealth of law schools, a supply of legal skills and legal services capacity, and housing document reviews is not as expensive as other regions.

And that’s why we’ve recently seen a 50+ lawyer document review in San Antonio, a 45+ attorney document review in Tennessee and a soon-to-launch 50-75 attorney document review in Ohio.

And that’s why our staffing agency list keeps growing .  You can find a complete list of staffing agencies (with more to come) under “Staffing Agencies” on our home page.

Yes, there is work — and it’s not all foreign language and definitely not like the work flow in days of yore — but it definitely is not all in India.   We are certainly NOT discounting the power of offshore centers but there is also an undercurrent in the U.S., away from the metro centers.

So we are expanding the job lists to serve new Posse List members and new agencies.  You can find a complete listings of all our job lists by clicking here.   And there will be more lists to come as we add several cities.

For full story as reported in the New York Times, click here.

The Economic Times of India reports that Clifford Chance is in tie-up talks with Indian firm AZB & Partners — a union that would involve client referrals, consultation, and joint training and marketing. While foreign firms are not allowed to operate in India, and joint ventures with domestic Indian firms are also prohibited, many international firms are opting to pursue informal tie-ups with Indian partners in anticipation of the country eventually opening up its legal market.

For the full article click here.

Martin Shively directs the worldwide IP operations of Microsoft Corp. But he doesn’t commute to the company’s campus in Redmond, Wash., every day. The associate GC works in a remote office in New Delhi, where he’s been based for 18 months overseeing not call centers, but outsourced patent work. And his operation is saving Microsoft millions on its legal bills.

Shively’s Indian experience dates back to 2004, when he took over budget responsibility for Microsoft’s patent group. There was a lot of buzz about outsourcing legal work to India; corporations like General Electric Co. were doing it, and slashing their legal bills. So Shively figured why not Microsoft? He started with the most basic task he could think of — proofreading patent applications. Instead of paying high-priced associates to do this work at a dozen U.S. law firms that drafted Microsoft’s filings, he hired one vendor in New Delhi to do them all. It was, he says, “a safe place to have a failure.” If it flopped “we just wouldn’t tell anyone,” he laughs.

But it didn’t flop. “We went there to save money,” he acknowledges. “We stayed and expanded because we liked the quality of the work.” It wasn’t just OK, it was better.

For the full article click here.

Today’s article is about India legal outsourcing (LPO) and it’s use as a means to slice operating costs to keep clients happy in the saddest of economic times.

The full article can be accessed by clicking here. 

The article raises doubts as to whether law firms engaged in LPO will actually see any tangible savings much less be able to pass these on to their clients.

But the key section to us is as follows: “The largest exponents of LPO have, and always will be, multi-national corporations (MNCs).  Indeed, a cursory glance at some of the major LPO players seems to indicate as much.  SDD Global Solutions, the affiliate arm of New York-based law firm SmithDehn is one such firm. According to SDD president and chairman, Russell Smith, the majority of its work comes from in-house legal teams rather than referral from the monolithic UK and US law firms”.

This comports with the trip recently made by Alex Hania of our staff.  He met with, saw or was given reference 70+ U.S. companies doing direct LPO business in India.  Allstate, American Express, Cisco, Dupont, Dow, General Electric, General Motors, FMC Technologies, Microsoft, Monsanto, Morgan Stanley, Philips (the Dutch electronics compamny), etc. are all doing LPO business there.

That’s the real cost savings: corporate direct to India, not via the law firms.  It’s been the reason for the success of e-discovery companies marketing direct to U.S. corporate in-house legal departments. 

The granddaddy is General Electric.  Companies followed the lead of GE  which in 2001 pioneered the cost-saving strategy of offshoring work to India. GE began by hiring Indian lawyers and paralegals to work for two units, GE Plastics and GE Consumer Finance, performing such tasks as drafting outsourcing agreements and confidentiality contracts. After two years, the company said it had saved almost $2 million in legal fees.  As word spread, more corporations warmed to the idea of reducing legal bills through offshoring. This also led led law firms to set up subsidiaries that acted, for example, as patent service providers.

[Note: according to the information provided to Alex, the average Indian lawyer earns about $10,000 a year.  Indian contract attorneys earn about $5-7 per hour and the charge out rates to clients for average LPO work is $30 per hour.  However, several U.S. attorney project managers told Alex that on higher-level work jobs done in-house in the U.S. for $300 to $500 an hour can be done by Indian lawyers/LPOs for $100 to $200 an hour].

And as we previously reported, “sticker shock” alone is enough to make corporate in-house lawyers pay attention.  According to a Fulbright & Jaworski client study over the summer, nearly 90 percent of U.S.
corporations are engaged in some type of litigation, with the average company balancing 37 lawsuits at any given time. For companies with revenues more than $100 million, corporate counsel cited soaring EDD costs as their number one concern. In fact, some expressed more concern about litigation expenses than whether or not they actually won the case.

About 10 percent of respondents reported that legal spending accounts for approximately 5 percent of the company’s gross annual revenues. For companies generating more than $1 billion a year, this translates to more than $50 million in legal fees. Precise costs are admittedly difficult to quantify, but with EDD taking an increasing bite out of the bottom line, corporate America is looking for alternatives, and turning increasingly to India.  The review part of the process — the process we know best as contract attorneys — is a key area where outsourcing is the attractive, cost-saving option.

And as we have reported, India isn’t the only country attracting offshore legal work.  There are extensive LPO operations building in Australia, Canada, New Zealand, and the Philippines.
Those are the two gorillas in the room working against contract attorneys: cost-driven clients and cost-driven law firms.  With the state of the market right now and the domestic “push down” of hourly rates (we’ve been flooded with your emails about recent law firm/agency quotes) Posse List members are faced with a “take it or leave” sitaution which — we pray —gets better in 2009.

The Indian legal process outsourcing might be on a high with rising influx of offshore assignments amid the financial turmoil, but the sector still finds less favour among law graduates as a career option.   According to a recent survey, legal process outsourcing firms (LPOs) are the least preferred choices as a profession among the law students.   This phenomenon of lesser liking for one of the emerging sectors of India prevails among the law students despite the fact that a career with an LPO firm is more rewarding, at least financially, than a law firm.

The survey conducted among law students and faculty members at leading law schools, 45 per cent participants felt that the package at an LPO establishment was better as compared to law firms.

For full story click here.

Just a few years ago, outsourcing legal work to India was a dirty little secret — law firms did it, but few admitted to it.  Those days are long gone.  As outsourcing becomes more commonplace and corporate counsel and law firms are under increasing pressure to reduce costs for clients, law firms such as Baker & McKenzie, Greenberg Traurig, Milbank Tweed, and Shapiro Sher Guinot are actually touting at conferences the benefits of outsourcing.  But despite projections that outsourcing legal work to India will be a $4 billion industry by 2015, the work is still controversial, and law firms and companies are still wrestling with such concerns as how to maintain quality control, keep client information confidential, supervise lawyers oceans away and weather new difficulties presented by recent terrorist attacks in Mumbai.  For the full story click here. 

We hope to finish and post our analysis of the India market this weekend.  It is based on Alex’s recent trip and our interviews with several project managers in India, as well as our meetings with several e-discovery companies with operations in India. 

Just a few years ago, outsourcing legal work to India was a dirty little secret — law firms did it, but few admitted to it.  Those days are long gone.

As outsourcing becomes more commonplace and corporate counsel and law firms are under increasing pressure to reduce costs for clients, law firms such as Baker & McKenzie, Greenberg Traurog, Milbank Tweed, and Shapiro Sher are actually touting at conferences the benefits of outsourcing.

But despite projections that outsourcing legal work to India will be a $4 billion industry by 2015, the work is still controversial, and law firms and companies are still wrestling with such concerns as how to maintain quality control, keep client information confidential, supervise lawyers oceans away and weather new difficulties presented by recent terrorist attacks in Mumbai.

For full article click here.

Companies that outsource legal work to Mumbai, India, have been reassuring their clients that operations have not been disrupted and that what happened in Mumbai could happen anywhere.

“Terrorism is a fact of life internationally,” said George Kimball, an outsourcing expert and partner in the Los Angeles office of Baker & McKenzie. “If this is an isolated incident, I would expect things to continue normally there.”

Of more concern, although a remote possibility, said Kimball, is the threat of war between Pakistan and India as a result of the terrorism. Mumbai, the financial center of India, was hit with a string of terrorist attacks last week that left 179 dead. The Indian city is chock full of outsourcing companies doing work for U.S. and British companies, including numerous legal process outsourcing companies (LPOs) doing contract and document review and legal research for law firms and in-house counsel.

For the full article click here.