The American Bar Association reports today in abaNOW that representatives of several legal process outsourcing companies, including industry leaders UnitedLex and Integreon, have just testified before the ABA Commission on Ethics 20/20, at the 2010 ABA Annual Meeting in San Francisco. Here are some excerpts from the abaNOW article:
Legal process outsourcing may be a flashpoint in the profession, but outsourcing legal processes is not a new concept, Michael Ford, executive vice president of UnitedLex Corp., told the [Commission].In fact, Ford said, outsourcing is a fundamental division-of-labor principle at the foundation of the client-law firm relationship, a supply system optimization. In-house legal departments and law firms cannot support the range of services needed to address the variety of legal issues arising in daily business operations, on the scale that may be needed. They typically outsource specific tasks—or legal functions—to paralegals, document reviewers, e‑discovery experts, copy services and expert witnesses.
Multinational law firms and corporations have sent legal work across borders for decades, Ford continued. Estimating that 85 percent of his company’s work is performed for U.S. lawyers, Ford questioned the importance of geographic barriers when law firm clients or the firm’s supervision is appropriate and meets all standards.
Mark Ross, a solicitor in the United Kingdom and vice president for legal services at Integreon, Inc., opened his testimony by noting that his firm does “not, in any jurisdiction, practice law,” but rather, works under the strict supervision of counsel.
Concern about legal process outsourcing taking over the legal practice in the United States is smoke and mirrors. Ross stated, “You need to be aware of the reality of this industry.” Even if LPO achieves a $4 billion annual market, it still is only “approximately 1 – 1 ½ percent of the legal market.” Concern about moving LPO “up the market chain” also is misplaced, believes Ross, suggesting the real path shifts legal service-related functions “down the market chain.” In the United Kingdom, Ross said, solicitors who once received 1,000₤ for refinancing a mortgage now may earn only 50₤.
Often the impetus for outsourcing legal processes is client demand, noted Ross, but he added that his company views law firms as collaborative partners in serving client needs. While some clients insist on paying only the cost of outsourcing, others appreciate the value of supervision, lawyer oversight and malpractice insurance, he added.
“I’ve never met a corporate counsel who does not want that law firm to make a good living. What they want is for the law firm to understand the value a corporation is looking for. If you provide the value the client is looking for, that is the issue,” stressed Ross.
Regarding Ross's point that "the real path" of legal outsourcing companies is "down the value chain" rather that up, our reaction is: "Different strokes for different folks." While it is true that many LPOs have chosen to focus on commoditized, lower-value services, we agree with Bruce MacEwen of Adam Smith Esq., Jordan Furlong of Law21, and Phil Nugent of NCG Strategic Marketing, who all have concluded that one of the biggest potentials of off-shore legal outsourcing is the move to higher-value work, such as legal research and drafting. Indeed, it is already happening. We discussed this in a recent post on this blog.
Does this threaten the existence of U.S. law firms? No, unless you want to define American 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. We are witnessing the start of a positive, paradigm shift in the way that legal services will be delivered in the West.
Several law firms are embracing the change, and reaping rewards from it. One example is my own firm. As a result of setting up our own legal outsourcing / LPO / legal services KPO company in India, our firm is receiving more assignments and 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 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.
So there is no need to start making funeral arrangements for the U.S. legal industry. Forward-thinking law firms will adapt, embrace legal off-shoring, and learn how to make it serve not only the interests of their clients, but their own.