Legal Process Outsourcing providers have been subjected to a two-pronged attack over the last 60 days. The attacks are taking place in the LPO's primary locations: The US and India.
In India, a group calling itself "The Association of Indian Lawyers" filed a petition in the Chennai High Court against foreign law firms doing business in India, despite a ban against them. The petition mentions top US and UK law firms, but also includes Integreon, the largest and most credible LPO provider. The inclusion of LPO's stems, according to the petitioners, from the LPO's being illegal foreign law offices.
It is to be noted that a number of top Indian law firms, most notably Kochhar & Co. and FoxMandal Little have tried to penetrate the LPO market, with little success. This is mostly due to the passive mentality of Indian lawyers and the nature of practicing law in India which conflicts with the much more aggressive and dynamic US and UK legal systems. Clearly, the traditional Indian lawyers are feeling threatened by the new entrants, and want a "piece of the action".
Around the same time, in the US, both the ABA Commission on Ethics 20/20 and the ABA Section on International Law have requested inputs on the ethical aspects of both domestics and foreign outsourcing of legal work.
"The Commission [on Ethics 20/20] is reviewing the ABA Model Rules of Professional Conduct, existing ethics opinions and other literature and studies about this topic. The Commission is also interested in gathering information about domestic and international legal process outsourcing from lawyers, law firms, clients and outsourcing providers [...]".
The ABA Section on International Law in turn held a meeting on April 17, 2010 titled Public Forum on Offshore Outsourcing of Legal Services in New York. The stated goal of the meeting is "information gatehring", but participants did put LPO representatives on the defensive.
The LPOs were represented in the various US meetings by Pangea3, UnitedLex and Quislex.
Our opinion is that the Indian front will get bogged down in the notoriously inert Indian legal system (0.8 prob ability), and will achieve little in the foreseeable future. The US action will unlikely produce any significant threats to the industry, but may introduce more specific guidelines around the ethics of Legal Outsourcing (.7 probability). Such guidelines could prove beneficial to the industry and to the globalization of the legal trade.
11 May 2010
16 March 2010
Disadvantages of the LPO Model
There are a certain number of disadvantages and risks when using LPO's, and they include:
-Difficulty in communicating expectations and requirements. With most LPO's located half way around the world, time zones (9.5 to 13 hours), differences in semantics, and cultural differences make it hard to communicate requirements and obtain feedback
-Cultural differences are huge. Cultural differences between the US and UK on one hand and the Philippines and India on the other make it hard to conduct business. The English language being spoken in the Philippines and especially in India is different from what is spoken in North American and the UK. Words can have different meanings, sentence structure tends to be different (Indians tend to speak in the passive voice), different styles of communicating (Indians tend to avoid confrontation, and will agree verbally when in reality, they disagree). Indians often agree to deadlines that they know they are unable to meet, only because they are reluctant to say "no".
-Differences in values and ethics. While UK and US employees tend to be loyal to their companies, and follow a certain code of ethics thought to be universal by the naive Western world, Asians have no such loyalty, and look for opportunities to take advantage of their employers' trust. They often see the employer as a foe rather than a benefactor. Examples of this include violations of intellectual property, leakage of corporate information, and theft of company property.
-Quality. While LPO's take various measures to produce a deliverable of acceptable quality, it is very often the case that the quality of their deliverable is significantly inferior to what is produced by UK and US-trained lawyers. LPO's are then forced to add multiple layers of quality assurance and inflate the number of team members working on projects, leading to a higher total cost of their work product.
-Legal protection. The protection of intellectual property and corporate information remains an afterthought for most law enforcement agencies in emerging countries. And while there are some recent laws in India and other countries that are supposed to remedy this, those laws are seldom enforced.
The LPO model can be enticing, but buyer beware! Companies planning to utilize legal workers overseas must perform a careful diligence in order to protect their asset, reputation and get the value they expect.
14 March 2010
Advantages of the LPO Model
Legal Process Outsourcing, like all of the other outsourcing models are premised on the need by US and Western corporations to continuously reduce costs.
It is no surprise then, that the main (and maybe only) advantage of the LPO model is to reduce cost. Indeed, lawyers working for LPO's in the Philippines and India, make between $500 and $1500, depending on experience and education. In comparison, US and UK lawyers command 3 to 10 times higher salaries.
With rates of $20 to $40, LPO workers are cheap, by any standard and make a compelling case for the industry.
Are there other advantages to the LPO model other than cost? There are some less obvious advantages that are commonly mentioned:
-Turning the time zone difference into an advantage: LPO workers in the Philippines, and India will perform your work while you sleep. You can give them the work before you leave the office, and it will be ready the next morning. This is indeed an advantage for small work items like drafting and summarisation, but most of what is done by LPO's are large projects involving intellectual property work, document review and contract work.
-Permanent employees. Unlike contract lawyers that are hired and let go, and retain no corporate knowledge, LPO employees, at least in theory, provide a level of continuity for their clients.
-Scalability. With hundreds of employees, LPO's can provide their clients a scalable model where teams can grow or shrink depending of workload.
-Value-added services. Some LPO's (especially ones that claim roots in the KPO industry) are able to provide well-rounded services that extend beyond the pure legal work that one gets from a law firm or temporary legal workers.
Because the labor cost arbitrage is shrinking due to the crisis, and the competition amongst LPO's to hire a finite pool of talent, the marketing engines of LPO's are trying to focus on the other advantages the industry provides.
03 March 2010
LPO Industry Overview
The birth of the LPO industry was predictible since every process is today's busnisses has been outsourced to one extent or another.
From manufacturing to call centers, to medical processes, to accounting and financial work, no repetitive work that can take advantage of advances in telecommunications has been spared from the outsourcing trend that has swept entire industries. This outsourcing has caused a transformation in many such industries, leading to cost efficiencies, but also to a real and or prerceived drop in quality. Many jobs in the "first world" were also lost to third world countries.
There is nothing special, per se, in the legal industry to make it immune from this global trend. Of course, lawyers tend to be more conservative, more protective of their turf, but the economic realities of Globalization, and the shareholders insatiable appetite for cost savings and ever increasing bottom line were not going to spare any line item on the right side of the corporate balance sheets.
The pioneers of the LPO industry started in 2001, following the .com bubble burst, and the cost saving imperative that followed. But the industry lingered and was vastly unheard of in legal circles until the economic crisis that started in 2007 and continues today. Like the .com bubble burst that served as the springboard to the ITO and BPO industries, the current recession is springboarding the LPO industry.
The only surprising fact behind the industry's evolution is the lack of resistance it has faced from the various bar organizations who tended to espouse it instead of resisting it. There have also been precious few challenges from the courts to discovery work performed in India, the Philippines and elsewhere.
From manufacturing to call centers, to medical processes, to accounting and financial work, no repetitive work that can take advantage of advances in telecommunications has been spared from the outsourcing trend that has swept entire industries. This outsourcing has caused a transformation in many such industries, leading to cost efficiencies, but also to a real and or prerceived drop in quality. Many jobs in the "first world" were also lost to third world countries.
There is nothing special, per se, in the legal industry to make it immune from this global trend. Of course, lawyers tend to be more conservative, more protective of their turf, but the economic realities of Globalization, and the shareholders insatiable appetite for cost savings and ever increasing bottom line were not going to spare any line item on the right side of the corporate balance sheets.
The pioneers of the LPO industry started in 2001, following the .com bubble burst, and the cost saving imperative that followed. But the industry lingered and was vastly unheard of in legal circles until the economic crisis that started in 2007 and continues today. Like the .com bubble burst that served as the springboard to the ITO and BPO industries, the current recession is springboarding the LPO industry.
The only surprising fact behind the industry's evolution is the lack of resistance it has faced from the various bar organizations who tended to espouse it instead of resisting it. There have also been precious few challenges from the courts to discovery work performed in India, the Philippines and elsewhere.
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