Lows and Highs
In part to show how fast things are moving in the small but growing world of legal outsourcing, copied at the bottom of this post is a cover story I wrote 10 months ago for the new Indian legal magazine from LexisNexis. The article is already seriously out of date.
For one thing, the number of “legal process
outsourcing” providers has doubled again, to around 200 or so. For another, it seems my cheerleading statement that one
of the key features of our industry will be the “movement of legal offshoring work
from back office functions for Western law firms, into high-end, knowledge and
judgment-based legal services for corporate clients” was not quite
accurate, or at least was premature. Yes, there is much more work
being sent by corporate clients, but “back office functions” are alive and
well, and spreading! The key driver of
our industry right now is not higher-end, intellectually challenging work. That kind of work continues to be overwhelmed
by document coding, form-filling, transcript-digesting, e-discovery processing,
and other low-hanging fruit. As the
popular expression goes, but this time without irony, “hey, somebody’s gotta do
it!”
With the help of some brilliant young Indian lawyers in the industry who
have shared their (non-confidential) experiences with me, I’ve recently been
able to take a vicarious inside tour of the current “LPO” landscape. Below are a few postcards from the trip: (
Several companies have large investor funding and big, shiny offices, full of people doing soporific tasks that most law associates in the U.S. don’t want to perform.
Many companies are managed not by lawyers, Western or otherwise, but by former BPO executives not very familiar with law firms or legal work. In some of those companies, legal training is nearly non-existent. Which is fine, since not much in the way of legal services is being provided.
A pioneer company, which once focused with pride upon high-end legal research and drafting, is now doing mostly document-coding. Another leading company, one of only a few performing work that requires legal skill, is moving in the same direction.
Some providers are promoting their large employee “strength” (an interesting term, when so many Western companies see large numbers of employees as a weakness), but most of the people occupying the seats are either non-lawyers, or worse, in the hard words of one of my sources, “the lawyers with zillions of years of experience, but who cannot write a single sentence in correct English.” But as Seinfeld would say, "not that there's anything wrong with that!" Paralegal work is as much an honorable profession as any other, and there are countless tasks in the law world that don't require good English writing skills.
One of the “Top Ten” legal outsourcing vendors, from the 2008 “Black Book of Outsourcing” list, provides mainly clerical and secretarial services. Again, clerks, secretaries and word processors are valued parts of many legal operations, but I have to admit that I don't usually think of them as legal services providers.
I'm less thrilled with reports that in the name of “data security” and “confidentiality,” employees at a number of companies are treated more like prison inmates than lawyers. Would-be professionals are frisked as they enter and leave, CCTV cameras are trained on their every move, internet-usage is banned, and permission must be obtained to go to the toilet. (Call me crazy, but I always figured that if you treat someone like a criminal, this will increase, not decrease, the chances of him becoming one. And what’s with the frisking? Unless you’re doing a full body cavity search, how can frisking stop someone from walking in and out with a pen drive or an iPhone camera? With the recent attacks in Bangalore and Ahmedabad, I guess terrorism-prevention may now become the watchword, but if legal companies are hiring bombers as lawyers, then we may be in worse trouble than anyone imagined.)
Rather than moving into lower-cost, so-called “Tier-2” cities, most companies continue to locate themselves in Indian metro areas, some of which now have higher office and residential rents than New York, London, or Los Angeles, along with much heavier pollution and congestion. One Indian LPO employee describes the process of her getting to and from work as a “twice-daily nightmare.” Another, who commutes two hours each way, told me his only social life is in his car pool.
With very few exceptions, informed rumors have it that the focus on low-end, back-office work, while generating heavy volume in many cases, is not generating any profit. I hope the investors don't pull out (which is something I’ve encountered on an “up close and personal” basis, on the higher-end side), because the aftermath may not be pleasant.
Having said all that, the current prevalence of so-called "low-end" work is really no mystery,
since (1) this is the kind of work that law firms and some corporate clients
are most comfortable in sending to India on a high-volume basis at present, (2)
higher-end work for the most part requires extensive training and supervision by
Western lawyers, to whom most Indian legal outsourcing companies have little or
no access, (3) nearly all of these companies lack a strong connection, much
less an affiliation, with a Western law firm that can help provide credibility and accountability
to clients and get higher-end work from them, and (4) if it were not for "low-end"
work, some of these providers would have no work at all.
As for our company, we’re nowhere near the point of giving up on the dream of helping to develop the functional equivalent of a global law firm in India. In fact, the steps toward that goal are being implemented every day. I see smart, enthusiastic Indian law graduates eagerly soaking up the kind of high-quality training that Western law firms and law schools don’t adequately provide. I see them working on challenging assignments, using their brains to provide legal research, analysis, drafting, and problem-solving for Western and Indian clients alike, and all at a fraction of the cost of traditional law firms. This may not be the norm right now, but it is happening.
By contrast, the system currently imposed on clients in the U.S. and U.K. by the Western legal establishment, with its increasingly exorbitant fees and inefficiencies, remains untenable. It reminds me of the old Soviet Union, which seemed strong on the surface, but which collapsed like a house of cards. (Another analogy, provided by Mike Dillon, General Counsel of Sun Microsystems, is that of dinosaurs. Mark Chandler, General Counsel of Cisco Systems, provided yet another, referring to the traditional law firm model as "one of the last vestiges of the medieval guild system.") As Western clients start to revolt on a mass scale, one of the alternatives to the current system will be legal outsourcing. Even large law firms will need to get on the bandwagon to survive. Forward-thinking law firms will embrace it, and profit from it.
So I continue to believe the now still-nascent legal offshoring industry will help
bring about a paradigm shift in the way legal services are delivered in the
West. I still think it will be a
monumental, history-making development -- one that will help Western economies as well
as India’s.
Call me a dreamer, even the only one if you want, but I still believe
this change will contribute to a better, more equitable world, in which
artificial barriers across countries and continents do not hold back the most
efficient and enthusiastic people from performing the work they can do best.
Now, here’s that “old” article, from the October
2007 debut issue of Halsbury’s Law Monthly, the magazine for the Indian legal
industry, published by LexisNexis and Cyber Media.
BEYOND THE BACK OFFICE:
How Legal Outsourcing
Companies in India Are Moving Up the Value Chain
Lawyer jokes are as popular in India as they are in the West. “How many lawyers does it take to change a light bulb?” Answer: “How many can you afford?” Here’s a better one: “How many U.S. lawyers does it take to draft a successful legal brief in a complex case before the United States Supreme Court?” The answer is, “none!” Indian lawyers at legal services offshoring companies have already been there, done that.
If the Indian legal outsourcing business were a rocket or a space shuttle, we would have to say that the days of conceptualizing, of building and experimenting with launch prototypes, are over. This rocket ship is also past the ignition stage. It is taking off.
Four years ago, you could count the number of Indian legal
outsourcing providers on one hand. Now
there are over 100, with many more reportedly in the works. Revenues recently have more than doubled, to
$146 million in 2006.[1] The number of employees has tripled since
2005, to approximately 7,500.[2] Research
analysts predict that LPO revenues and employee numbers will reach $640 million
and 32,000, respectively, by 2010.[3]
Those predictions are conservative. The actual potential is much greater. Speaking from experience, I can tell you that
the majority of legal services in the West can and should be sent
offshore. Bradford W. Hildebrandt,
chairman of the prominent legal consulting firm, Hildebrandt International
Inc., has stated that "ultimately, there may be little limit to what can
go offshore." [4] And we are talking about services that
now fetch a price tag of $250 billion per year and growing. [5]
One of the key drivers of this phenomenon has been, and will continue to be, the movement of legal offshoring work from back office functions for Western law firms, into high-end, knowledge and judgment-based legal services for corporate clients who are sick and tired of the traditional Western law firm delivery model. We are witnessing the start of a positive, paradigm shift in the way that legal services will be delivered in the West.
A Few Words About
Terminology
The term, “LPO,” for “legal process outsourcing” (which also
stands for the London Philharmonic Orchestra and the Libertarian Party of Ohio), is
apparently a media invention, first appearing in 2005. It derives from BPO, or
business process outsourcing. But to the
extent that the word, "process," suggests standardized, commoditized,
easy-to-replicate tasks that can be performed without a lot of education, much
less any professional training, it is a misnomer for the legal services
offshoring industry. Typing a medical transcription, or answering calls
based on a script, is a "process." On the other hand, legal
research, legal analysis, or drafting complaints, contracts, patent
applications, or legal briefs, is not a BPO-like, commoditized
"process." Those are legal services, even if they do not amount
to "practicing law," which can only be done by the supervising,
licensed attorney (often in-house corporate counsel) who reviews the services
that so-called LPO companies provide.
That is why many in this industry do not refer to themselves as “LPOs.” One company uses the phrase, a "provider
of global legal and patent outsourced services." Another refers to
itself as a "premium legal services company." Others refer to
their "Legal Knowledge Services" or "Offshore Legal
Services." Still another has adopted the label of "legal
services organization."
Yet another potential misnomer is “outsourcing.” There is nothing new or controversial about the outsourcing of legal services. Every law firm in the U.S. and the U.K. is an outsourcing company. Their corporate clients have routinely “outsourced” legal services work to outside counsel for hundreds of years. If there were no outsourcing, there would be no law firms. What is new is not outsourcing, but offshoring. What is new is the creation of a worldwide legal landscape, where offices and employees will be located in places determined by the actual needs of clients, rather than the habits of law firms that do not wish to change.
Moving from the
Conceptual to the Real
If it does not involve walking into court, holding a client’s hand, signing an opinion letter, or signing a court filing, most likely it can be done in India. Western legal services available in India include legal research, drafting of commercial contracts and litigation papers, applications for U.S. and U.K. immigration visas, patent applications and analytics, and a whole host of other high-value work.
Indian lawyers at the legal services offshoring company,
Lexadigm, already have drafted a brief filed in the U.S. Supreme Court, involving the application to a
tax dispute of the due process clause of the Fifth Amendment to the U.S.
Constitution. [6] For another example, in an article entitled,
“Fortune 500 Firms Driving LPO Industry,” one of India’s leading financial
newspapers, The Business Standard,
reported on one of SDD Global’s accomplishments as follows:
[One of the major Hollywood film studios] had to [obtain] an ‘opinion letter’ (outlining the activity and the risks involved) for insurance firms in order to secure cover for shooting a movie, and the movie’s fate hinged on the letter and the cover. Preparing the letter was a 400-man hour job which would have cost $250,000 to get done in the U.S., and [the client] gave it a second thought. Eventually, the job was done in India for $43,000. [7]
SDD Global’s draft of this 45-page opinion letter, complete with 242 footnotes, each citing pertinent legal authorities, led to the greenlighting of a major motion picture, which might otherwise have not been released.
To cite another example, Atlas Legal Research in Bangalore, together with Atlas’s U.S.-licensed, supervisory attorneys in Dallas, were hired to draft a 50-state legal survey for a U.S. medical services company. Here is a portion of a “thank you” letter written by the CEO of a grateful client:
You may not be aware, but we had a small portion of that research
complete when we hired Atlas. As a test,
we had your team reproduce some of the same work done by our nationally
recognized law firm. The legal research
and opinions that your team produced were essentially identical, except for the
price tag. Your group saved us 90%, and
completed the work in less than half the time. For clarification, the research you did in less than one month saved us
over $200,000. [8]
For one last example, out of countless others, SDD Global was retained by a Fortune 100 client facing a multi-million-dollar out-of-state lawsuit, brought by a plaintiff who had agreed in writing that any such dispute would be litigated only in New York. A major U.S. law firm in the state where the claim had been filed had advised our client that a motion to dismiss would not succeed, citing two authorities. In-house counsel for the client asked SDD Global to prepare a memorandum on the subject. Overnight, Indian attorneys did the research and provided the memo, which allowed the client to conclude that the local law firm was wrong, and that the lawsuit could be dismissed. This led to the following unsolicited email from the client’s Senior Vice President for litigation:
"[The memo]
lifted my spirits and gave me reason for hope. It's really well written
and clear, by the way. Let your Indian team
know that I applaud and thank them. Thank you!!!"
Why are Indians so good at handling high-end, offshored legal work? In addition to the fact that India churns out 80,000 English-speaking law graduates per year and shares the same “common law” system with the U.S. and Britain, here is another factor, reported by ABC News:
The Urgent Need for
Legal Services Offshoring
The Western legal services industry is in trouble. According to a survey of in-house legal department heads at hundreds of leading companies in the United States, which represents 77% of the global legal services market, [10] only 30% of those companies would recommend their primary outside law firm to others.[11] Moreover, fully 53% of them recently fired their primary outside law firm.[12] According to Business Week magazine, “[f]ew industries seem more ripe for radical restructuring than legal services.” [13]
The reasons are easy to understand. The traditional model propagated by large Western law firms, which Clay Christensen of Harvard Business School refers to as “just about the most profitable businesses in the world,” [14] is not serving the interests of their clients. The model is based on a pyramid structure, with most of the services provided by over-worked, under-trained young lawyers beholden to a billable-hour system. The system rewards the partners at the top for the junior lawyers’ inefficiency and padding of time sheets, at the expense of clients who pay increasingly unaffordable hourly rates. At the same time, the pyramid system causes the young lawyers to quit, almost faster than the law firms can fire them to make way for younger recruits -- yet another pillar of the system. Indeed, 40% of associates quit even before they finish their third year. [15]
In a recent speech, Mark Chandler, the General Counsel of Cisco Systems, tackled these issues head on. Describing the traditional law firm model as “the last vestige of the medieval guild system,” Chandler mentioned offshoring to India as one of the solutions, and delivered the following shot across the bow, referring both to the young law associates and the large law firm system in general:
Upending one’s life to support inefficient means of communication, driven by a billable hour system, to maintain a relatively slim chance of making partner, just doesn’t cut it. And when the next generation heads for the exits, it’s a sign of a business model under stress…. But if the economic system of the [large Western law] firm is frustrating to associates and even some partners, I can tell you that from the standpoint of a metric driven general counsel, it is more than incomprehensible. It looks like the last vestige of the medieval guild system to survive into the 21st century. [16]
These conclusions were echoed even more recently by Mike Dillon, the General Counsel of Sun Microsystems, who compared inefficient Western law firms to dinosaurs:
[T]he epoch of the current law firm
model - which derives its profitability from growing scale and raising hourly
rates - will soon be over. The firms that will survive and thrive are those
that recognize this change and focus on how to maintain margins by focusing on
efficiency…. Hopefully, more firms will embrace this change. If they don't, I
fear they will go the way of the Mastodon. [17]
Instead of embracing
change, many Western law firms are continuing their old ways, some to even
greater extremes. Hourly billing rates
have increased over 30 per cent in the last few years. [18] Starting
salaries for untrained lawyers, straight out of law school, have climbed to
$160,000 per year. [19] In London,rates for big
firm lawyers have reached the unprecedented level of £1000 (nearly $2000) per
hour. [20] At the same
time, the mega law firms Jones Day and Kirkland & Ellis recently admitted publicly that they are now
offshoring legal work, in response to client demands. All of this bodes very well for the legal
services offshoring industry in India
Like the U.S. auto
industry, which mostly ignored warnings and continued to focus on the
manufacture of over-sized, over-priced, fuel-inefficient cars, the Western
legal industry will be dragged into either change or extinction by its
customers, helped by foreign competition. However, just as the “Buy American” bumper stickers were too late and
too little to stop Toyota from becoming the
world’s largest automaker, it is unlikely that anything will stop the legal
services offshoring industry in India from stepping into the breach, to ultimately provide most of the legal work
that is urgently needed by the West.
Three Myths About Legal Services Offshoring
Expert business
research analysts have concluded that “law firms and corporates are fast moving
toward offshoring more complex tasks to vendors, as their comfort levels
improve.” [21] Nevertheless, despite (or maybe because of)
the amazing success stories in the field of high-end offshoring, there remain
some naysayers. For example, Gregg Kirchhoefer, a partner at Kirkland &
Ellis, one of the biggest and most profitable law firms in the U.S., estimates it could be 50 years before
lawyers in India do more than "routine, prosaic" American legal work. [22] The pessimists often rely on one or more of
three myths about legal services offshoring, each of them discussed below.
MYTH NUMBER ONE: Indian Lawyers Lack the Skills and Aptitude
to Handle High-End Legal Work for the West
Attacks on the competence of Indian lawyers and law graduates are about as valid as saying that Indian software engineers are incapable of handling sophisticated IT work. To the contrary, the Indian IT industry is a world leader, and the same will be the case with offshored legal services.
A. Indian Legal Training vs. Western Legal Training
Legal education in both India and the English-speaking West serves essentially the same purpose – to train its graduates to “think like lawyers” and to teach them how to conduct research in the British-based, common law system. Western law schools, however, do not train students to practice law.[23] A recent study conducted by Harvard Law School and LexisNexis reveals that 75% of U.S. law graduates admit they do not have the necessary skills to practice law. [24] Interestingly, when young lawyers were asked what is the one thing that they wish they had learned, the most frequent answer was “how to draft a motion.” [25] Yet, motion practice is at the heart of litigation services provided to clients by law firms.
Since Western law schools are mostly litigation-oriented, their failure to train students in the most basic of litigation skills is especially disappointing. However, clients who pay high hourly fees for corporate and transactional work by U.S. law graduates are short-changed even further. It is typical for Western law students to graduate from law school without ever having learned how to draft a contract.
So you would expect that these deficiencies would be met by rigorous training programs undertaken by Western law firms. Guess again! The Harvard / LexisNexis study reveals that 64% of young lawyers receive no organized, on-the-job training. [26] They learn as they go along, by trial and error, with their firms’ corporate clients footing the bill.
By contrast, reputable legal services offshoring companies in India provide rigorous training for their lawyers, and the hours spent on training do not appear on invoices to clients. At SDD Global Solutions, for example, all of our Indian attorneys are trained by veteran Western practitioners who are at the top of their fields. Our training program accomplishes what Western law schools and law firms have failed to achieve, namely, the systematic preparation of young lawyers to provide quality legal services.
B. English Communication Skills in and the West
George Bernard Shaw, and later, Winston Churchill, famously referred to Britain and the United States as two countries “separated by a common language.” Because Indian legal education is conducted in English, and because India generates 80,000 English-speaking law graduates per year, [27] similar statements have been made about the difference between English communication skills in India and the West. What these accusations miss is the fact that, at least in the U.S., many law graduates are incapable of writing effectively in plain English. That is why some large U.S. law firms now assign a writing coach to each incoming associate, to help eradicate the stilted, circuitous, jargon-filled style that often plagues Indian legal writing as well. [28] However, most lawyers in the West never receive this kind of training. By contrast, reputable legal services offshoring companies in India provide training in English writing for all of their attorneys.
C. The U.S. Bar Exam vs. Indian Leaving Exams
In India there
are no bar exams. Instead, Indian law students, unlike U.S. law
students, must pass a comprehensive final or “leaving” exam in order to
graduate. But in part because India has no
bar exam, some commentators have suggested that Indian lawyers working
for
legal offshoring companies should be required to pass a certification
test, to
demonstrate their ability to provide Western legal services. This is
an admirable effort. But who will develop a certification system
for Western lawyers, many of whom lack skills needed to properly
practice
law? Regarding bar exams in the U.S., they sometimes seem to serve
mostly as a public relations device for the legal profession. New
York University Law Professor
Harold I. Subin goes so far as to say that they test “nothing
relevant to the practice of law”:
The bar exam…. is good public
relations for the legal profession. Most people are unaware that the exam tests
nothing relevant to the practice of law and therefore feel that the organized
bar is protecting clients against unqualified lawyers.
The bar exam is the final degradation ceremony through which one must pass to join what is sometimes called the legal fraternity…. The term is apt, with the bar exam serving the same socializing purpose as hazing [known in India as “ragging”]: drinking in useless legal data is the profession's equivalent of swallowing goldfish or great quantities of beer, and leads on exam day to a similar regurgitative result. [29]
MYTH NUMBER TWO: “You Get What You Pay For,” or in Other
Words, Low Cost Equals Low Quality
The tremendous cost savings available from legal services offshoring are sometimes met with disbelief. Partners at large law firms in particular are prone to making comments such as “you get what you pay for.” First, let’s examine what a client pays for when it hires the typical large Western law firms (although there are exceptions):
(a) staggering real estate costs, due to the location of office space in some of the most expensive locations in the world, most of which are at least 43 times more expensive per square foot than SDD Global’s office building in Mysore, India; [30]
(b) having most of the work done by newly minted (and sometimes even unlicensed) associates who admittedly lack many of the skills needed to practice law, but yet are paid a starting salary of $160,000 per year, and who are learning as they go along, at the expense of clients, who in turn are charged as much as $360 or more per hour for the privilege; [31]
(c) padding of time sheets and/or an unnecessary
stretching out of work assignments, encouraged by an hourly billing system that
rewards fraud and inefficiency, as young associates struggle to meet
ever-increasing demands to increase their billable hours, with yearly quotas
that have risen from 1600 hours in the 1960’s, to 2100-2500 hours at many large
firms today;[32] and
(d) generally a high-quality level of service, due to editing and supervision by talented senior lawyers, but at a cost that clients are no longer willing to tolerate, especially when offshore providers offer flat rates and hourly rates that average from $25 to $90 per hour for high-end work, and $10-25 per hour for lower-end work, as compared to $300-2000 per hour for Western lawyers. [33]
MYTH NUMBER
THREE: The Higher the Level of Work, the
More Risk of Ethical Violations or Breaches of Confidentiality
An issue sometimes has arisen as to whether the high-end legal research and drafting services provided to Western clients from India amounts to an unauthorized practice of law. Fortunately, this is becoming a non-issue. Ethics panels in New York, Los Angeles, San Diego, North Carolina, and Florida all have concluded that that the offshoring of legal work to unlicensed attorneys is permissible, so long as the work is supervised by a licensed attorney. [34] The New York Times has quoted Stephen Gillers, a professor at NYU School of Law and legal ethics expert, as stating that “‘[t]here is no problem with off-shoring…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.’ ” [35]
In fact, virtually all major law firms in the U.S. routinely use non-licensed attorneys to perform legal work, and they bill their clients for it. The hours of summer associates, who have neither graduated from law school nor passed a bar exam, are billed out to clients at rates as high as $260 per hour or more.[36] Moreover, the work of first-year associates, who start work at law firms before their bar exam results are in (and who often fail on their first attempt), is billed out to clients for as much as $360 per hour or more. [37] This is all permissible, because the work is supervised by licensed attorneys.
The same is permitted in the case of legal offshoring firms in India. At SDD Global Solutions, for example, we are an India offshoring company managed by a U.S. law firm, such that all of the work by Indian attorneys is supervised, reviewed, and edited (if needed) by licensed U.S. attorneys. Several other high-end legal offshoring companies also have licensed U.S. attorneys on their payroll, or at least affiliated with the offshoring unit. Even where the offshoring companies themselves do not employ licensed attorneys, the work can be supervised by in-house counsel for corporate clients, or by Western law firms who act as intermediaries, hiring the offshore unit on behalf of their clients.
On the subject of confidentiality, this is a legitimate concern of clients, regardless of whether the legal service provider is a Western law firm or an offshoring company in India. Based on my experience both with U.S. law firms and the provision of legal services in India, I believe that quality offshore providers generally are doing a better job than U.S. law firms in addressing this issue.
For example, at SDD Global, we use secure, hack-resistant IBM servers, and the latest Cisco ASA firewall
to protect data and systems from internet vulnerabilities. Even more protection is provided by a Linux
environment throughout our offices. Electronic access control is provided for all areas of the building,
such that no one is able to enter any floor or project area without being
specifically authorized to do so, and without using a custom-made electronic
access card. Our offices are virtually
paperless, and passwords are required for all data access. Most importantly, we take great care in
selecting employees. We hire only one
out of every 900 applicants, and only after a lengthy battery of evaluations
and tests, as well as a thorough background check. SDD Global is not alone in this attention to
security. As research analysts have reported
regarding our industry, “vendors have invested significantly in systems and
processes to ensure data security – often to a greater degree than their
overseas clients.” [38]
Compare this with
many U.S. law firms, where Microsoft-based networks are vulnerable to hacking,
where paper trails abound, where employees are able to roam the offices at
will, and where in one famous case, a person posing as an attorney was
entrusted with the management of important client files, even though this felon
had never attended law school or passed the bar exam. [39]
The Future of the
Legal Services Offshoring Industry
Given the factors discussed in this article, the future of the legal services offshoring industry in India appears bright. Below are a few predictions:
Corporations, not Western law firms, will drive the market in the years ahead. Law firms currently provide 45% of the business for the industry,[40] and more and more of them will hire offshore providers, but this will be driven mainly by the dictates of corporate clients. For example, a major Detroit auto manufacturer approached SDD Global for offshore litigation support. When we asked what the reaction of their usual outside law firms would be to most of the legal work being done in India, the answer was unambiguous: “Our outside law firms will operate the way we tell them to.”
Another way that corporations will drive the market, indirectly, is by obtaining flat (or fixed) rate billing from their outside counsel, instead of hourly billing. For example, the mega law firm, Morgan Lewis & Bockius, now handles all of the litigation for Cisco Systems for a fixed annual fee. [41] This kind of billing can radically alter the dynamics of Western law practice, as law firms working for flat rates will have a compelling incentive to reduce hours and costs, instead of increasing them as before. Flat rate billing will cause many law firms to realize that offshore providers can be important allies in improving their bottom line, rather than competitive enemies.
Every sector of the legal offshoring industry will grow dramatically, including lower end services, such as document coding and legal transcription. Ultimately, however, the biggest impact, the long-term mother lode, will be higher-value services such as legal research and drafting – services that constitute the bulk of the legal work now done in the West.
One of the keys to the growth in higher-value services will be the ability of providers in India to affiliate with, or hire, licensed attorneys in the West, to supervise the work, train the Indian lawyers, and market the services. Offshoring companies that can do this will have an edge.
Legal outsourcing companies who locate or re-locate in so-called “Tier 2” cities like Mysore, where the quality of life is high, and the costs of living and operating are low, will also have an edge. On the subject of Mysore, a major consulting company delivered a comprehensive report to a Fortune 500 client, concluding that this city of one million people has half the cost of living, and less than half the employee attrition rates, as compared with "Tier 1" cities.
The continued boom in the industry will lead to continued and increased competition among offshoring providers for legal talent in India. At the same time, as the public profile of the industry grows and improves, an increasing number of law graduates and young lawyers will gravitate to the industry, and more of the best and brightest among 12th-graders will decide on law as a career. However, during the lag between the current pool of talent and the increase in that pool in the future, the competition for the best law graduates and lawyers will be won mostly by the high-end providers. This is because higher-value work tends to be more interesting and challenging, and because the higher profit margins allow for higher salaries.
Training will be central to the industry’s success. Training will be especially critical as providers move up the value chain in relation to their services, and as they recruit more deeply into the pool of available talent, most of whom will be fresh law graduates with no experience in working for Western clients. Outside companies, such as Rainmaker Training & Recruitment, [42] which help offshore providers by locating and training excellent job candidates, will thrive as they address this increased demand.
Long-term, India’s enormous, mostly untapped population of over one billion citizens will continue to make India competitive in relation to other offshore destinations. The shift from unsustainable agricultural jobs to employment in the knowledge industry will be slow and circuitous, as impoverished young people from farms move into low-level service sector positions, and as lower-level service workers, in turn, upgrade their education and move into knowledge-oriented work. But it will happen, and ultimately it will help not only decrease poverty, but increase the number of law graduates.
On the most positive note, the growth and development of the legal offshoring industry in India will help bring about a paradigm shift in the way legal services are delivered in the West. This will be a monumental, history-making development. It will help economies around the world as well as India’s. It will contribute to a better, more equitable world, in which artificial barriers across countries and continents do not hold back the most efficient and enthusiastic people from performing the work that they do best.
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[1] ValueNotes, An Update, 2, July 2007: Offshoring Legal Services to India.
[2] Id.
[3] Id.
[4] Business Week, Let's Offshore The
Lawyers (Sept. 18, 2006), available at http://www.businessweek.com/magazine/content/06_38/b4001061.htm
[5] Business
Standard, Fortune 500 firms driving LPO industry (Aug. 8, 2007), available
at http://www.businessstandard.com/common/storypage_c.php?leftnm=10&autono=293702
[6] Keith Woffinden, Surfing the Next Wave of Outsourcing: The
Ethics of Sending Domestic Legal Work to Foreign Countries Under New York City
Opinion, Brigham Young University Law Review 2007, available
at http://lawreview.byu.edu/archives/2007/2/5WOFFINDEN.FIN.pdf
[7] Business Standard, Fortune 500 firms driving LPO industry (Aug.
8, 2007), available at http://www.businessstandard.com/common/storypage_c.php?leftnm=10&autono=293702
[8] Letter from Michael Gorton, J.D., TelaDoc CEO, to Mr. Rocky Dhir, Atlas Legal Research, LP (July 2005).
[9] See ABC News Report On
Outsourcing To India, available at http://youtube.com/watch?v=FwwgXCOEYks
[10] ValueNotes, 8, December 2005. Offshoring Legal
Services to India.
[11] BTI Consulting Group’s Fifth Annual Survey of Corporate Counsel, Client Satisfaction with Law Firms Plummets
(Mar. 3, 2006), available at http://www.bticonsulting.com/bti_news.htm
[12] Id.
[13] Business Week, Let's Offshore The
Lawyers (Sept. 18, 2006), available at http://www.businessweek.com/magazine/content/06_38/b4001061.htm
[14] The Official
Cisco Blog, Cisco General Counsel on State of Technology in the Law, http://blogs.cisco.com/news/2007/01/cisco_general_counsel_on_state.html
(Jan. 25, 2007, 14:13).
[15] Elizabeth Goldberg, Is This Any Way to Recruit Associates? (Aug. 6, 2007), http://www.law.com/servlet/ContentServer?pagename=OpenMarket/Xcelerate/View&c=LawArticle&cid=1185820712334&t=LawArticle
[17] Posting of Mike Dillon to The Legal
Thing, The Way of the Mastodon, http://blogs.sun.com/dillon/entry/the_way_of_the_mastodon
(May 22, 2007).
[18] Douglas McCollam, The Billable
Hour: Are Its Days Numbered? The American Lawyer, November 28, 2005,
available at http://www.law.com/jsp/ihc/PubArticleIHC.jsp?id=1132653918886
[19] Posting of Amir Efrati to The Wall
Street Journal Blog, Associate Survey: Want to Leave? Big Law’s OK With That, http://blogs.wsj.com/law/2007/08/01/amlaws-associate-survey-want-to-leave-big-laws-ok-with-that/ (Aug. 1, 2007, 11:17).
[20] Frances Gibb, Cost of a top lawyer
in the City soars to £1,000 an hour (July 2, 2007), Timesonline, http://business.timesonline.co.uk/tol/business/law/article2013519.ece
[21] ValueNotes, Offshoring Legal Services to India:
An Update, 8, July 2007.
[22] Eric
Bellman and Nathan Koppel, More U.S. Legal Work Moves to India’s Low-Cost Lawyers
(Sept. 28, 2005), available at http://www.bickelbrewer.com/377.html
[23] Earl Cherniak, Lawyers must fight
'disturbing trends', Vol. 16, The
Lawyers Weekly, Nov. 29, 1996 at 28, quoting Andrew J. Siegel, Broadcast Counsel for CBS
Inc. (“Hundreds of young lawyers are either dissatisfied with their positions
or out of work. With the economy in such bad shape, firms are just cutting
lawyers. Unfortunately, law school teaches you how to
think like a lawyer, but it doesn't teach you how to practice law.").
[24] Koo, Gene, New Skills,
New Learning: Legal Education and the Promise of New Technology, Berkman
Center Research Publication No. 2007-4, 1 (March 26, 2007), available at http://cyber.law.harvard.edu/~gkoo/NewSkills,NewLearning-Published.pdf
[25] Business Week, Let's Offshore The
Lawyers (Sept. 18, 2006), available at http://www.businessweek.com/magazine/content/06_38/b4001061.htm
[26] See Koo,
Gene, New Skills, New Learning: Legal Education and the Promise of New
Technology, Berkman Center Research Publication No. 2007-4, 17 (March 26,
2007), available at http://cyber.law.harvard.edu/~gkoo/NewSkills,NewLearning-Published.pdf
[27] ValueNotes, Offshoring Legal
Services to India:
An Update, 33, July 2007.
[28] Jeremy Harrell, Growing Number of
Law Firms are Coaching Their First-Year Associates (May 26, 2006), available
at http://findarticles.com/p/articles/mi_qn4189/is_20060526/ai_n16436703
[29] Harry I. Subin, Why the Bar Exam Is
Absolutely Crucial, N.Y. Times, Aug. 3, 1990, at A26.
[30] In Mysore, SDD Global pays approximately $2.85
per square foot per year in rent for modern office space in an upscale area of
the city. In midtown Manhattan, SDD, the law firm, pays 43 times
that rate, or $65 per square foot.
[31] Anna Schneider-Mayerson and Jesse
Wegman, My Very Special Summer (June 19, 2007),
New York Observer, available at http://www.observer.com/2007/my-very-special-summer?page=0%2C3
[32] Posted by Douglas Litowitz on
associates and his book, Destruction of Young Lawyers' of Legal Ethics
Forum blog, http://legalethicsforum.typepad.com/blog/2007/02/douglas_litowit.html
(Feb. 09, 2007).
[33] ValueNotes, Offshoring Legal Services
to India: An Update, 2, July 2007; See also Charlotte
Libov, Small Law Firm Established to Outsource Service to India, Jan. 4, 2007, available at http://www.idiligence.net/files/Miami%20Today%20article.pdf
; Frances Gibb, Cost of a top lawyer in the
City soars to £1,000 an hour (July 2, 2007), Timesonline, http://business.timesonline.co.uk/tol/business/law/article2013519.ece
[34] N.Y.C. Bar Assoc. Formal Op. 2006-03 (2006); LA
County Bar Assoc. Op. 518 (2006); SDCBA Formal Legal Ethics Op. 2007-1; See http://www.floridatrend.com/law_article.asp?cName=Law%2520and%2520Government&rName=Of%2520Counsel&whatID=4&aID=2761734.7445642.614042.6194988.7119191.720&aID2=47225
(“Two committees of the Florida
Bar have taken notice of the practice and have decided, so far, that legal
outsourcing is acceptable under certain conditions”).
[35] Ellen L. Rosen, Corporate America Sending More Legal Work to Bombay, N.Y. Times, Mar. 14, 2004, at 1.
[36] Anna Schneider-Mayerson and Jesse
Wegman, My Very Special Summer (June 19, 2007),
New York Observer, available at http://www.observer.com/2007/my-very-special-summer?page=0%2C3
[37] Id.
[38] ValueNotes, Offshoring Legal Services
to India :
An Update, 37, July 2007.
[39] Posted by Peter Lattman, Anderson
Kill Lawyer, Er, Paralegal Arrested, to law BLOG, http://blogs.wsj.com/law/2007/01/11/anderson-kill-lawyer-er-paralegal-arrested/
(Jan 11, 2007, 9:15am).
[40] ValueNotes, Offshoring Legal Services
to India:
An Update, 44, July 2007.
[41] The Official
Cisco Blog, Cisco General Counsel on State of
Technology in the Law, http://blogs.cisco.com/news/2007/01/cisco_general_counsel_on_state.html (Jan. 25, 2007, 14:13).
[42] For more information on Rainmaker, see the company’s web site at http://www.rainmaker.co.in
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