One thing that the legal, financial, educational, and news information giant, Thomson Reuters, has not been accused of is ignorance. Given that this multi-billion-dollar company announced yesterday that it has acquired 100% of the shares of Indian legal outsourcing provider Pangea3, after also recently deciding, for "strategic" reasons, to sell its profitable and high-profile U.S. bar exam preparation course (BAR/BRI), you can assume that some very smart money is betting on a tectonic shift in the Western legal landscape.
Below is a similar opinion from the Wall Street Journal's Law Blog, complete with the Indian national flag as the graphic:
Were you secretly a skeptic?
Did you politely nod along in conversations about India and “legal processing outsourcing,” all the while thinking that it was just a fad? That U.S. law firms would ultimately somehow win back the work by figuring out how to do it better, faster, cheaper?
Well, the news that data and information giant Thomson Reuters is buying Pangea3 should extinguish some of that lingering skepticism.
Here's the take on the deal from today's Financial Post:
If there are any lawyers in Canada that seriously think that the legal world will remain unchanged, you better hope that they’re not managing your firm, nor your law society.
Pangea3, one of the largest and perhaps better known LPOs in the world has just been gobbled up by Thomson Reuters and will be seeking even greater expansion into legal services worldwide. Note: if those who run your law society, or your firm, don’t know what an LPO is, you’re in even greater trouble.
This is a legal earthquake equivalent to 10.0 on the Richter scale; the world’s largest legal information company acquiring the world’s largest LPO.
Law firms and regulatory bodies better have a well thought-out business answer to this – other than the typical, unthinking ring fencing response that will ultimately prove to be the demise of lawyers.
It is well past time to face the fact that law is a business. And we better start acting like businesses, or soon, we’ll all be “out of business.”
And, not to be outdone in sounding alarms, Above the Law comments as follows:
Hang onto your hats, your legal world is about to get rocked.... So Thomson wants out of the “preparing American attorneys” market, and in on the legal outsourcing market in India. ARE YOU SERIOUS? Now go back and read the BAR/BRI email, especially this line: “Our parent company believes, however, that bar preparation no longer fits its long-term strategic vision.” That can’t be good. That simply cannot be a good sign that Thomson evidently thinks there is more money to be made from Indian lawyers doing American legal work than from training American lawyers to do American legal work.
LegalWeek magazine opines that "[t]he entry of Thomson into the LPO market will be viewed as evidence of the high expectations being placed on the model to shake up the commercial legal market."
Offshore legal outsourcing, or legal process outsourcing (LPO), or legal KPO (knowledge process outsourcing), or whatever you want to call it, has been generating both media hype and actual substance for years. But this latest development represents a serious, objective, outside validation.
Congratulations are due to Sanjay Kamlani, David Perla, and the rest of the Pangea3 team, for being the most successful pioneers in this still nascent industry. When they started their company in 2004, employees reportedly were sitting elbow-to-elbow in a less than savory office in Mumbai, making cold calls to the U.S. in a search for business. More recently, Pangea3 has attracted the creme-de-la-creme of Western corporations and law firms, and it's staff now work in gleaming, multi-million-dollar-funded offices in posh neighborhoods. Many of them have (or we should say, had) shares in the company, such that now they are cashing in, and deservedly so.
Pangea3 has been an inspiration to countless other LPO companies that have followed in its wake, even if not all of them have followed its model of pursuing high-volume document review. Pangea3 is among four legal outsourcing companies (along with American Discovery, SDD Global Solutions, and UnitedLex) that recently were ranked among the top 50 outsourcing companies in the world, ahead of over 2,700 other players, according to the 2010 survey of 6,547 clients by the Black Book of Outsourcing.
Regarding the Thomson Reuters deal, we want to reiterate that for Western law firms, this is a wake-up call, but not a death-knell. It is worth repeating that legal process outsourcing does not threaten the existence of U.S. (or U.K.) law firms. Unless you want to define Western law firms as inherently dinosaur-like, and incapable of changing to avoid extinction. 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. Those firms are receiving more assignments and more client revenue, not less. This is coming in part from (a) existing clients who send them “elective” legal work that otherwise would never be performed, due to cost, but which is not a problem when Western lawyers are paid to supervise and edit the work of attorneys in India, and (b) new clients who come to those law firms only because of their reputation for developing an alternative to the old model.
So there is no need to start making funeral arrangements for the Western legal industry. Forward-thinking law firms will adapt, embrace off-shore legal outsourcing, and learn how to make it serve not only the interests of their clients, but their own.