In the recent years, India has achieved remarkable success as a global supplier of Information Technology Outsourcing (ITO) and Business Process Outsourcing (BPO).The dawn of Legal Process Outsourcing (LPO) in India goes way back to mid-2004 when only a handful of Third Party Vendors had set the motion for a substantial evolution in the legal outsourcing industry. One of the reasons for the survival of the LPOs in India and other destinations outside the USand UK can be attributed to the steadily increasing US legal costs and to the negative economic impact of the faltering global economy.
Outsourcing includes Near Shoring , Offshoring and Onshoring or a combination of any of these. It has enabled legal firms and corporations in the US to focus on their core business activities and take advantage of the Indian business paybacks as an efficient and cost effective destination. India is geographically placed in a time zone that is distinct to that of the US and UK, thereby enabling round the clock legal support to these countries. The Indian Constitution adapted and inherited the common law from the UK, which also ruled the US’s early constitutional history. The Indian lawyers and graduates have a good understanding of the legal systems of the two countries and a special emphasis on English as a preferred medium of instruction in many law schools in the country, adds significance to their role in an LPO unit. Apart from its stable political and economic stage that is conducive to the growth of the LPO industry, India is among the globally chosen few for its advanced and high class technology offerings.
The most popular international destination for LPO is India followed closely by Philippines, South Africa and New Zealand.The global legal process outsourcing (LPO) market is slated to multiply in value by 2015 to more than £2bn. The GCs (General Counsels) are now more focused on approaching LPOs to avail of their services rather than that of law firms. The Indian legal system is similar to the US, UK, Canada and a considerable part of Europe. The Indian litigation and dispute resolution methodologies are well founded in the constitution of the biggest democratic republic in the world.
It is vital to stimulate India’s vast knowledge class to perform "high end" skills, judgment and analysisbased services. However, there exist caveats, particularly with regard to controlling intellectual property and protecting sensitive data. These caveats are mitigated by a strict adherence to basic business hygiene such as an appropriate due diligence, planning, and a well-crafted outsourcing contract that properly identifies and addresses risks and provides real and practical safeguards as a means to protect confidentiality of information outflow.
Reasons for Continuance of LPO
Some basic factors that endorse the continuance of legal outsourcing are the striking cost effectiveness, use of technology, quality and timely completion of work. However, the theory of outsourcing has been redefined over years by many and now it is considered as a mode to allow law firms and corporate legal departments to concentrate on their core business or strategic value work and they engage LPOs to support them on non-core or high volume/tediouswork. The majority of legal work continues to be outsourced from law firms or through corporate legal departments who drive law firms to outsource to bigger LPO providers who in turn outsource excess work to other intermediary vendors. Generally speaking, a licensed US attorney may charge about $150-$ 300/hour whereas a billable resource from an LPO for any offshore work to India would charge a fraction of it, say about20-30%. With the 2008-2009 financial emergency and the onset of economic instability, US law firms and corporate legal departmentshave become consciouslymindful of curbing uncountable costs involved in litigations and in-house legal spend. Hence, there is a rise in the outsourcing of legal work to India and rest of the low-cost legal offshoring destinations.
Apart from labor arbitrage and quality of work offered by LPOs globally, there are other factors as well that support the outsourcing philosophy. Some salient features include;
- Low cost
- Time zone advantages
- Common Lawroots, especially in India
- English speaking abilities
- Quality methods and Training
- Technology enabled differentiators
Transition from Labor Intensive to LaborInnovative
The quality of legal work outsourced to India has vastly improvedover the years and now a majority of work includes high end servicessuch as End to End E-Discovery Management (Litigation and Regulatory Reviews), Legal Research, Drafting of Pleadings, IP services, Compliance &Due Diligence and End to End Contract Management.
The lower end of the food chain projects also continue, albeit in lower numbers and LPOs still provide the following services - Deposition Summarization, Legal Transcription, Legal Coding and Indexing.
Some of the major work categories are as below;
1. End to End E-Discovery Management
Massive volume of electronically stored information is collected, processed and then finally reviewed by a team of offshore/onshore attorneys to code relevant documents to a particular case or regulatory enquiry. The offshore/onshore attorneys support the US legal firm to decide if it would be appropriate for their clients to go to trial or settle out of court on the basis of the review findings. With the rise in the number of cases and related documentations, the legal world has been looking for a more cost-effective alternative.
2. Contract Management
Contract management involves managing the life cycle of a contract. This includes an extensive use of technology and a perpetualservice for clients from the time the contract is redlined until the expiry of the contract. It also involves capturing and monitoring the obligations within the contract and reporting any deviations to the client.
MNCsare specifically interested in contract summaries for quicker reference rather than referringto an entire contract.Hence they outsource their complex contracts to LPOs in order to get a summary consisting of the relevant abstracts from each contract. The LPO attorneys are required to track the required information in the contract and extract relevant contents from the master contract. The role of a contract abstraction team is not easy as it asks for a keen understanding of the company’s business practices, similar industry specific contracts and a diligent eye with attention to details so as not to miss the relevant extracts.
3. IPR
Patent - Patent outsourcing includes technical research, proof reading, prior art searches, drafting patent applications and patent amendments among other services. This includes a huge amount of research for patents being filed with the USPTO (United States Patent and Trademarks Office). Patent outsourcing requires domain experts such as scientists, software engineers, lawyers, doctors, biotech graduates and chartered accountants amongst others.
Copyright - This work includes Copyright searches, preparation of documents for registration, copyright monitoring and a watch mechanism on journals andcopyright infringement study & analysis.
Trademark - This requires Trademark Searches, Preparation of Trademark Applications, and Trademark Monitoring & Watching, Registration and Renewal, Infringement checks and other allied services.
4. Legal Research and Memo Writing
Legal research requires comprehending the client's need sometimes in advance andpresenting an efficient, time bound and effective solution. Adopting a meticulous approach in understanding the existing regulations including any federal, state, local rules and amendments and basing strategy on a cost/time/benefit analysis in turn reflects commitment in providing value and expertise.
LPO teams of specialized legal professionals are skilled in conducting continuous and/or 'point of law' based extensive researches, primarily on US and UK statutes, that includes but is notlimited to analyzing cases, updating research information on client databases and producing short summaries or vital abstracts. The research process usually involves:
- An all-embracing research on legislations, statues, and relevant case laws;
- Legal research surveys on cross border jurisdictions including 50 state surveys;
- Validation of opinions;
- Country law review including tracking and updating of changes in the law from time to time;
- Submissions of vital annotations in the form of Legal Memos and highlighting the pros and cons to assist clients in taking decisions on many crucial issues.
The research is usually performed on search engines such as Westlaw, LexisNexis and also involves conducting multi-state research; reporting on statutory/regulatory requirements in multiple jurisdictions relating to the research topic and drafting legal research memorandums in the IRAC (Issue, Rule, Analysis, Conclusion) format.
5. Medico Legal Work
Medico-Legal work is a very niche, but growing demand in India for, in the LPO front.
It includes projects pertaining to certain areas such as:
- Medical records screening and Case Screening
- Review of medical records
- Medical expert's consultancy and Opinion
- Clarification of medical language and abbreviations
- Medical records summary
- Identification of standards of care and its application to the potential case
- Legal research
- Identifying the strengths and weaknesses of the case
- Preparation of synopsis and summaries
- Developing a case strategy
- Drafting
Internal Governance Technique: The work outsourced to India is subject to stringent accuracy checksfor determination of quality of work at multiple stages. Evaluations and assessments of an associate’s performance remains unbiased and is based on meritocracy, which in turn imbibes a positive impact on the associates and adds momentum to their quest for providing standard work product. Vigorous competition among the teams and across LPOs to perform better inculcates a passion to pursue target completion which is again a calculated basis for measuring performance.
Challenges for the LPO Industry
Some of the major challenges faced by the LPO industry include issues pertaining to quality of legal services, conflict of interest and breach of ethical obligations. This has been supported by Jerome Shestack, the former President of the American Bar Association who said: "I do have concern about confidence, confidentiality, privacy, conflict of interest, ethical values, and those are issues that are a real concern."
The top challenges can be identified as the below:
1. Sustainability: There are many LPOs that start up, make some noise in the markets and then disappear noiselessly. Since business is based on projects and annuity projects are hard to come by, it is easy for many LPOs to handover pink slips to all its employees, but the biggest reason for this phenomenon to occur is lack of sustainability. It is very important for an LPO to have adequate financial stability and an ability to retain clients by providing continuous value adds.
2. Lack of a Robust Sales Team: Many LPOs suffer because they continue to support their clients on their offshore needs but do not try and maintain an aggressive sales team to drive the work inflow. This is due to lack of awareness in some LPOs who do not understand that the momentum of work inflow can change at any given point in time. Even today they resort to traditional practices and processes that slow down efficiency of resources. So, openness to new ideas, an ability to gauge the fast pacing industry and adapting to its changing dynamics will be crucial for survival in this sphere. Many LPOs closed as they lack a dedicated sales team to form a pipeline of strong clientele to pursue.
3. Confidentiality Safeguards: This is one topic that is often repeated but highly pertinent and potent especially since the legal industry thrives on confidentiality. Though there are additional safeguards undertaken to prevent breach of confidentiality through world recognized standards and certifications, small sized LPOs are maimed due to credibility issues when pursuing clients.
4. Conflict Of Interest: Conflict of interest occurs when an LPO takes a project, knowingly or unknowingly, which is detrimental to the interest of the client. However, in order to ensure that there is no conflict of interest, credible LPOs conduct a thorough conflict check prior to undertaking a project and also reject client work in case of a conflict. In order to avoid any conflict that will be detrimental to the clients’ interest, LPOs take adequate precautions by requiring attorneys to sign Non-Disclosure Agreements and moreover maintain a database of attorney profiles and their past project experiences to validate any conflict.
5. Client Relationships: It is imperative to adhere to the legal industry standards and deliver work to client within the agreed timelines. However, there is also a craving need to nurture client relationships and focus on mining existing relationships by practicing Client Relationship Management (CRM). A client will come to you if he is sure of your capabilities to deliver but will see you as a preferred vendor if he feels content that you value the relationship and continuously strive to outshine his expectations. Most LPOs spend all their time in delivering what is expected, but few go on to “wow” clients by providing value ads.
Conclusion
To sum up, due to the continuous increase in costs and greater advances in technology, LPOs are increasingly attracting legal work. Notwithstanding the distance and time zone differences, attorneys who outsource must undertake efforts to supervise LPO work. It has been an interesting journey for LPOs until now and the future seems bright for LPOs to be seen as transformational partners for law firms and corporate legal departments rather than the perceived outdated thought of it just being a back office.
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