"Legal Process Outsourcing/Offshoring (LPO)"
Legal Process Outsourcing (LPO) is the industry in which in-house legal
departments or organizations or Law Firms outsource legal work from areas
where it is costly to perform, such as the United States or Europe to areas
where it can be performed at a significantly decreased cost, primarily India.
Legal Process Outsourcing is a high end industry that has been growing rapidly
in the recent years.
Legal Process Outsourcing covers the following services in general:
- Contract Drafting Services & Contract Monitoring/Management
- Document Review, Electronic Discovery and Litigation Services
- Medico-Legal Support Services
- Litigation Document Management
- Bankruptcy Filing, Pleadings & Documentation
- Legal Research
- Paralegal Support Services
- Contract Drafting Outsourcing
- Contract Monitoring Outsourcing
- Contract Management Outsourcing
- Document Review Outsourcing
- Electronic Discovery Outsourcing
- Litigation Support Outsourcing
- Medico-Legal Outsourcing
- Medical Malpractice Outsourcing
- Medical Malpractice Legal Support Outsourcing
- Medical Malpractice Litigation Support Outsourcing
- Litigation Document Management Outsourcing
- Bankruptcy Filing Outsourcing
- Legal Pleadings Outsourcing
- Legal Documentation Outsourcing
- Legal Pleadings & Documentation
- Legal Research Outsourcing
- Paralegal Outsourcing Services
- Patent drafting
- Simple legal filings
- Legal Publications
- Proof reading
- Litigation support
- Legal Research
- Document Drafting like standard contracts, agreements, letters to the clients, patent applications etc.
- Intellectual Property research--substantive and administrative
Out of the above the high value services are legal drafting, immigration
visa processing, intellectual property registrations, legal research,
anti-infringement operations, insurance claims administration etc.
According to Nassscom, estimates of current addressable market potential for legal services that can be
outsourced from the U.S. alone are pegged at $3 billion to $4 billion. It is estimated that only 3 to 4
per cent of the potential market has been tapped so far. By 2010, India is poised to achieve significant
growth by doubling its share to 6 to 7 per cent in the $250-billion global market of LPO.According to
the BPO Council of the Associated Chambers of Commerce and Industry (ASSOCHAM), over 200 top U.S.
companies alone are looking for offshore locations towards achieving savings of up to 70 per cent. Thousands
of Indian patent agents and intellectual property professionals will be working for U.S. and European clients
in the next few years.LPO is the industry in which in-house legal departments or organisations outsource legal
work from areas where it is costly to perform, such as the U.S. or Europe, to areas where it can be performed at
a significantly decreased cost, primarily India.
Sony pictures had to prepare an ‘ Opinion Letter ‘ ( Outlining the activity and the risks involved) for insurance
firms in order to secure cover for shooting movie, and the movie’s fate hinged on the letter and the cover.
Preparing the letter was a 400 hour job which would have cost $250,000 to get done in the US and Sony gave
it a second thought. Eventually, the job was done in India for $43,000.
Cost saving is the biggest attraction for the western firms that outsource their legal work.
India’s legal services are widely considered affordable, efficient, and above all, skilled.
For a legal job outsourced in India, the U.S. firm pays hardly one-fourth or one-fifth of what
it has to pay in the US for the same work . In other words, lawyers in India charge a pittance
in comparison to their U.S. counterparts. Another big attraction of LPO is the geographical
position of the U.S. vis-a-vis India. U.S. legal firms get a turnaround time of 24 hours by
outsourcing their work to India according to one market survey.
According to The New York Times reported “The reason for the shift echoes the reason companies
are sending other work abroad: they save substantial amounts of money. Some companies say they
can reduce certain legal costs by as much as 50 percent, and receive work that rivals what they
can obtain in the United States. According to Dennis Archer, the President of the American Bar
Association, ‘The need to cut costs reaches across many departments, so it should be no surprise
that it goes to the legal department as well’….‘There is no problem with offshoring,’ said Stephen Gillers,
a professor at NYU School of Law and a legal ethics expert, ‘because even though the lawyer in India
is not authorized by an American state to practice law, the review by American lawyers sanitizes the process.’ ”
Financial experts concur that the law industry in the U.S., which amounts to 77% of the industry globally,
is on the verge of a seismic shift. In particular, legal process outsourcing or off shoring to India is widely
projected to expand by several hundred percent within this decade. Corporations and legal service providers that
do not take advantage of this development are likely to find themselves at a competitive disadvantage.
The Law Firms and Clients in U.S. are struggling tremendously with staying profitable once litigation enters the picture.
High volume document reviews are becoming more and more common and they are extremely expensive. The Indian attorneys
performing these legal services are often far more qualified than paralegals and contract attorneys and they cost a fraction
of price. Small and medium law firms can effectively compete with the large law firms by developing a relationship with an
LPO and offering very low cost legal services to their clients.
In U.S. according to one survey newly minted and sometimes even unlicensed associates who admittedly lack many of the skills
needed to practise law, but yet are paid a starting salary of $1,60,000 per year and who are learning as they go along, at the
expense of clients, who in turn are charged as much as $360 or more per hour for the privilege.
According to a survey generally a high quality level of service costs about $ 300 – 2000 per hour when done through Western
lawyers due to editing and supervision by talented senior lawyers which cost the western clients are no longer willing to tolerate
especially when offshore providers offer flat rates and hourly rates that average from $ 25 to $90 per hour for high end work and
$ 10 – 25 per hour for lower-end work as against $ 300 – 2000 per hour charged by the U.S. Lawyers. ( Survye report dated September 06, 2007).
US associate lawyers’ price tag between $225 and $450 per hour, India became a natural choice. US based research firm Forester finds
“ Legal Process Outsourcing can bring $ 4 billion and 79,000 jobs in India in ten years and boost knowledge process outsourcing.
In the past 3 years, the legal outsourcing industry has grown about 60 percent annually. According to a report by research firm ValueNotes,
the industry will employ about 24,000 people and earn revenue of $640 million by 2010. (As per Report as latest as May 11, 2008).
According to a recent study, India has huge potential in legal outsourcing, with the number of jobs in the field increasing to 79,000 by 2015.
India offers the following advantages:
- The common law system
- Lawyers trained in the English language
- Legal Education in the English language
- Tradition of independent judiciary
- Freedom of Press
- Liberty to enter into contracts
More than 200,000 Indians graduate from law schools each year, five times more than in the U.S.
As per one of the leading survey conducted in USA, the Legal Services grew at an approximate rate
of 6.75% between the years 1990 to 2005 and the forecast for the next 15 years i.e. from the years
2006 to 2015 is 6% per year. Further within the broad field of legal services, revenue growth is expected
to be particularly strong in areas related to the aging and elderly, antitrust, environment, global trade
and intellectual property.
Currently about 5,200 Legal Professionals are providing Legal offshore services and the said number is expected
to rise to about 16000 by 2015. These professionals have approximately generated about $ 56 million by 2005 and
they are expecting to raise $300 million by 2010 and $960 million in 2015.
Electronic Document Management Services: These include word processing, creative design, Legal Transcription, Legal Coding,
Data digitisation, key word and XML tagging and archiving. The rate for this service as on today is about $ 11-13 per hour.
Research Services: These include statutory and case law research services. Since much legal research can be done using electronic databases,
trained lawyers in India can sift through volumes of data and provide focussed results to US attorneys. The rate for this service as on today
is about $24-26 per hour.
Due Diligence Services: For most mergers and acquisitions, lawyers must examine large amounts of data to verify the legal and financial
status of the company that is being acquired. Since most of this information is now available in electronic form, Indian Lawyers and researchers
can set up a “virtual data room” and carry out the preliminary due-diligence for their US clients. This research can involve confirming thousands
of supplier agreements to find out whether they will remain valid after a change of control or whether each might lapse after a certain period of
time. Due diligence may also include checking of company books, board resolutions and shareholder resolutions to ensure that there are no surprises
for the acquiring company. The current rate for this service is about $24-26 per hour.
Contract Drafting and Proof Reading of Contracts: US organisations require a large number of contracts and agreements to be drafted,
which include to name a few employee contracts, non-disclosure agreements, licensing agreements, supplier agreements, lease agreements, vendor agreements,
Vendor Agreements, Distributor agreements Etc.. Since each agreement follows typically a standard template, Indian Lawyers can produce the initial drafts
of such agreements which then can be reviewed and modified by an attorney in US. Furthermore, Indian Lawyers can be used for proof reading or “red-lining”
documents thereby ensuring that these documents follow the guidelines provided by their clients. For example, the Indian Lawyer may check whether a given
NDA has a time limit, after which, the confidentiality of information need not be maintained. The present rates for these services is about $24-26 per hour.
Document Discovery In Litigation: In most litigation cases, lawyers and paralegals have to pour over large amounts of data as a part of document
discovery. This process is often time consuming and usually has a critical deadline. Hence, often the involved lawyers and paralegals have to put in long
hours or hire temporary staff to meet the deadline. Since this work is ‘rule based’ and often in the form of electronic data i.e. e-mail, electronic documents,
and scanned pages Some of this work is now being off shored to India. The current rate for this Service is about $24-26 per hour.
Intellectual Property Services: These services include patent application drafting, prior art searching, patent proof reading, docketing, patent landscaping
and patent valuation. In last about 3 years these services have grown quite rapidly in India. At present this service is commanding a rate of $40 – 50 per hour.
Recently even Trade Mark related work is also off shored to India in this category.
NOTE: All these services require substantial domain and a fairly deep understanding of the laws. Furthermore some of these services are very ‘qualitative’
in nature wherein every word and punctuation mark is crucial and where culture and tends in a given jurisdiction can also pay a significant role.
Captive Centres Formed by US Law Firms and their Subsidiaries: Currently Indian Law does not allow foreign i.e. non Indian law-firms practise
law in India. Some law firms in the US and India are setting up subsidiaries so that they do not practise law in India, but provide legal and paralegal
services only for export purposes. For example, Schwegman Lundberg Woessner and Kluth- a law firm headquartered in Minneapolis-has now captive centers for its subsidiary,
Intellvate, located in Delhi-Gurgaon and Bangalore.Intelleveate currently has over 80 professionals in India, who are involved in prior art searching and patent proof reading
and they will soon provide other IP related services. Other examples of this include Fox and Mandal and ALMT Legal, two India based Law firms and Patent Metrix,
an Irvine-California based law firm. Each of these has less than 25 professionals providing legal and paralegal services from India.
Joint Venture by US-based firms: Rather than opening their own captive centres, several US based firms have joint ventures with firms in India. A good example
is Cantor-Colbourn Esq. who has joined hands with Lall and Sethi Esq. in India. Similarly, a well known in the US, Hilderbrandt Internatioanl recently tied up with
an Indian services company. Office Tiger, to provide such services jointly. However, since statistically most joint ventures fail-especially in India-one needs to be
cautious while treading this path.
Third Party Vendors Providing Services to Law Firms and In-House Corporate Attorneys: Evalueserve is a prime example of a third party provider and currently has over
100 professionals providing legal support services. Evaluserve hires Indian Engineers and lawyers and trains them to become proficient in US Laws and various USPTO, PCT
and WIPO rules and regulations. Integreon is another company that provides Electrocnic Document Management services for the legal services industry and has approximately
80 professionals. Some examples of other Indian Companies that have 20 or less professionals, but are providing such services include Manthan Services, Lawwave, Lexadigm,
Lexworks, Atlas Legal Research Bickel and Brewer, Quislex, Pangea3 and Mindcrest.
Captive Centres: General Electric that has more than 50 IP and other legal professionals working in its Bangalore Center. Although some other big companies are
also trying this model, I believe that this model in unlikely to succeed, unless that corresponding center can grow to at least 100 professionals. Captive centers smaller
than 100 will be unable to provide good career paths to its professionals who are likely to leave quickly, especially because the job market in India is expected to remain
‘hot’ for the next 5 to 10 years in this field.
NOTE: Approximately 98% of all US Law Firms and Legal Service providers have less than 20 attorneys and in fact 76% have less than 4 attorneys. Many such firms are
often faced with ‘feast or femine’ situations, struggling with either too much work or not enough work. Since they cannot afford to keep a large work force on their payrolls,
they face great difficulties hardship when they get a large project that needs to be completed in a short period of time. Such firms usually benefit a great deal by sending
overflow work to offshore providers, who can provide a large number of reasonably experienced professionals with the right domain expertise at a reasonable cost. This can also
help small and mid size law firms level the playing field because it allows them to compete more effectively with larger US based law firms.