First, top Indian legal process outsourcing company CPA Global and its $25,000 sponsorship fee were warmly invited. Then, the invitation was withdrawn. Then, the withdrawal was withdrawn.
All of this confusion relates to the Australian Corporate Lawyers Association annual conference, and an unsuccessful attempt by a large law firm to exclude legal services off-shoring from the agenda.
But the "miscommunication and misunderstanding," which conference organizer LexisNexis says was the cause of the chaos, is indicative of a larger problem. Many players in the Western legal industry still do not understand the benefits of legal services off-shoring. LPO providers mistakenly are perceived as threats to the success, or even the existence, of law firms, while at the same time, contract attorneys and laid-off lawyers argue that legal off-shoring is little more than a tool of law firms, which only want to squeeze their associates and increase partner profits. The truth is found elsewhere.
Regarding the CPA Global incident, here are a some excerpts from yesterday's lengthy report from The Wall Street Journal, in conjunction with The Australian:
GLOBAL legal outsourcer CPA Global has almost been rejected as a sponsor of the Australian Corporate Lawyers Association annual conference.
National law firm Middletons objected to the company's inclusion.
CPA Global, which helps companies cut their legal bills by outsourcing legal work to India, had been invited to participate in the conference and was planning to pay ACLA $25,000 to help sponsor the event.
But on Monday, conference organiser and legal publisher Lexis Nexis told CPA Global by email that the company had been rejected because of concerns that had been expressed by Middletons.
* * *By Wednesday, after inquiries by The Australian with ACLA, Middletons and Lexis Nexis, the rejection had been overturned.It was described by Middletons as the unfortunate result of a "miscommunication down the line".
"We have no objection to CPA Global being involved. They are not in direct competition with us," a spokesman for the firm said.
Lexis Nexis marketing director Marc Peter used the same term to describe the circumstances that led to the email his company had sent to CPA Global. It was the result of "miscommunication and misunderstanding".* * *Monday's email from Lexis Nexis coincided with the arrival in Australia of CPA Global's London-based strategy director, Leah Cooper, a former global managing attorney for mining house Rio Tinto.
Ms Cooper had received word that the outsourcing company was being excluded from the conference just before a long-scheduled interview with The Australian.
"I think this is outrageous," Ms Cooper said at the time.
"I am surprised that ACLA is denying its members the opportunity to learn about outsourcing, especially when this is something that is so widely accepted as an alternative."
Before joining CPA Global this year, Ms Cooper had been running Rio's legal department where she had sliced $14 million from the company's legal bills in six months by sending some of the company's legal work to CPA Global's offices in India.
Before the company's rejection had been overturned, Ms Cooper said she was considering running an alternative conference to ensure the general counsel at leading Australian companies could be told how to cut their legal bills by using legal services outsourcing.* * *"CPA Global is not a law firm, [Ms Cooper said.] Our role is to help in-house counsel and law firms get back to the business of practising law.
"We handle the 500 little things in a big deal so they can focus on the strategy and delivering top-tier legal advice necessary for that deal. This collaborative approach results in increased value to the client."
The above is not the only example where outsourcing of legal work to India has been perceived as a threat to law firms. In a thoughtful article, "Innovators at the Barricades," published two days ago by the Adam Smith, Esq. blog, Bruce MacEwen argues that the not-so-secret strategy of "CPA Global and its ilk" is to advance from down-market upstarts to up-market leaders, by eventually moving up the value chain and "taking law firms out of the equation altogether":
Outsourcing is here to stay. Whatever you call it, and whatever you think of its quality, clients have tasted of the fruit of the forbidden tree and they're not going back.
* * *
A particularly interesting firm, which has ambitions you may deem admirable or frightening or a combination thereof, is CPA Global, which bills itself as the world's leader in legal process outsourcing, and which raised a mere $700-million in a private placement in the UK this past spring. For that nice sum, the investors got what? 49%. Not even control. This is a war chest on a scale the AmLaw 10 and the Magic Circle, put together, would be very hard-pressed to match. And they'd probably have to cede control.
* * *
The ambitions, and business strategy, of CPA Global and their ilk are no secret: Bypassing law firms altogether and marketing their offerings directly to clients. If another word for outsourcing is disintermediation, welcome to the ultimate disintermediation: They would like to take the law firm out of the equation altogether.
* * *
And this [offering of not only document review but also higher value work, all at "Bangalore" rates] is precisely where the independent outsourcing firms can have an 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.First, clients hire, or "request" (read: demand) that you hire an outsourcing firm for, say, document review. Next, the outsourcing firm makes it known that it can prepare witness binders, and next, that it can aid in the preparation of witnesses.
To say that LPOs could, or even want to, eliminate law firms is obvious hyperbole. Legal outsourcing companies, even the best ones, cannot appear in court, cannot sign legal opinion letters, and are unlikely to conduct deal negotiations. And they do not need to do any of that, in order to be tremendously successful. Especially if they can provide dramatically increased value to clients in areas that go beyond document coding -- areas such as legal research, contract drafting, IP registration, and drafting of litigation papers. This is already happening.
But does any of this threaten the very existence of large law firms? No, unless you want to define large law firms as inherently dinosaur-like, and incapable of changing to avoid extinction. No, the threat is not to law firms themselves, but to an outmoded model of law practice that clients increasingly will not tolerate. As we noted over two years ago in a LexisNexis magazine cover story, "Beyond the Back Office: How Some Legal Outsourcing Companies in India Are Moving Up the Value Chain," law firms that are willing to adapt to the changing times will not only survive, but thrive:
One of the key drivers of [the Indian legal outsourcing] phenomenon has been, and most likely will continue to be, the movement of legal off-shoring work from back office functions for Western law firms, into high-end, knowledge and judgment-based legal services for corporate clients who are determined to find alternatives to the traditional Western law firm delivery model. Another driver will be forward-looking law firms. These are the ones who are starting to realize that by partnering with legal off-shoring companies, and by making themselves more efficient, they can position themselves favorably at the front of this new market and gain more revenue than they lose. We are witnessing the start of a positive, paradigm shift in the way that legal services will be delivered in the West.
* * *
Some law firms are embracing the change, and reaping rewards from it. One example is our own law firm, New York/London-based SmithDehn LLP, which went so far as to set up its own legal outsourcing / LPO / legal services KPO company in India. As a result, our law firm is receiving more client revenue, not less. This is coming in part from (a) existing clients who send us “elective” legal work that otherwise would never be performed, due to cost, but which is not a problem when our U.S. lawyers are paid only to supervise and edit the work of attorneys in India, and (b) new clients who come to our law firm only because of our reputation for developing an alternative to the old model.
Even Bruce MacEwen is not calling for funeral arrangements to be made for law firms. His conclusion, addressed to firms that want to meet the above challenges, is as follows: "Your response must be to assume the mantel of an innovative within your own walls. Because the innovators outside your walls are coming." We agree.
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