The adoption of outsourcing legal functions is booming, especially for offshore service providers. An article in the Deccan Herald points out there are more than 140 legal outsourcing companies in India, some charging one-third less than American law firms’ hourly billable rate. And they’re recruiting North American and European lawyers with experience.
How long will this movement last and how far will it go? The Deccan Herald says it’s “here to stay.”
But a New York Times blogger points out a potential problem that has already impacted other business processes commonly outsourced to India.
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The title of the New York Times blog post, “Keeping Legal Work from Moving to India,” suggests a premise that off-shoring is something to be avoided. I disagree. Instead, I agree with the American Bar Association Formal Ethics Opinion 08-451, in which the ABA Ethics Committee found that “[t]he outsourcing trend is a salutary one for our globalized economy.” In the Opinion, the ABA Committee noted that “outsourcing affords lawyers the ability to reduce their costs and often the costs to the client,” allowing law firms to better represent clients “effectively and efficiently.”
In fact, I’m one of those U.S. lawyers who outsourced themselves to India. I did not do it for lack of a job elsewhere. I’m a Columbia Law graduate and one of the founding partners of a successful New York and London based media law firm. I went to India enthusiastically, to take part in a much-needed revolution in the way legal services are delivered in the West. This revolution involves much more than document review and clerical work. It includes legal research, contract drafting, writing the first drafts of litigation briefs, and a host of other sophisticated services performed by outstanding, U.S.-law-trained, Indian attorneys.
Imagine a new legal landscape where high-quality services are affordable. Imagine deals getting done, because the attorneys don’t kill them, with overlawyering and overcharging. Contemplate court cases and other disputes being resolved on their merits, rather than simply on the basis of whether one side cannot or will not pay the absurdly high costs of litigation. Think about legal professionals located in places that suit the interests of clients, rather than in the most expensive parts of the most expensive cities in the world. Consider the resultant savings when legal bills are based on services, not real estate. Envision deals and cases staffed by the most talented and enthusiastic lawyers available. Open your mind to the possibility that some of those lawyers are in India. I know from experience that they are.
And consider the fact that this kind of outsourcing actually creates more legal jobs in the West, rather than cutting them. Every time a deal is done, or a litigation is waged, because legal services are suddenly affordable, it means more work for the Western lawyers involved in supervision, editing, negotiating, and/or appearing in court. This is not only a dream. It is happening every day, thanks to legal outsourcing in India.
For example, a Fortune 100 client of my law firm specifically requested that the legal research and analysis needed for a series of multi-million-dollar deals in the U.S. be done by Indian attorneys at our offshore operation in Mysore. This is a situation where, if not for a Western law firm’s off-shoring capabilities, no lawyers would have been hired, because typical Western legal fees would have made it prohibitive. The work would have been done either in-house, or not at all. Because the India team made it possible for the deals to happen, Western law firms ultimately got more business, handling the otherwise non-existent transactions.
A similar phenomenon has happened in litigation, where corporate clients have chosen to defend themselves against meritless lawsuits, using both U.S. and Indian lawyers. The most high-profile examples are some of the cases filed in Los Angeles against comedian Sacha Baron Cohen. They have been dismissed instead of settled, because of the successful teamwork among attorneys in the U.S. and India. Without legal outsourcing, there might have been no U.S. lawyers hired for any significant litigation work at all, because frivolous cases often are settled at the outset, just to avoid the usual U.S. litigation costs. The off-shoring of legal work is leading to an unprecedented new breed of benign tort reform, as defendants facing bogus or inflated tort claims are choosing to litigate and win. This in turn discourages such claims. And the money that otherwise would be spent by defendants on nuisance payouts can be plowed by corporations right back into the U.S. economy.
In what seems to be the rough equivalent of a “man bites dog” story, the ABA Journal reported correctly last month that highly trained legal process outsourcing (LPO) attorneys at our India operation have been even been correcting grammatical and other mistakes of partners and associates at one of the top 100 law firms in the United States.
That unusual assignment did not happen because the U.S. lawyers were incompetent. The client’s motivation was to save costs, by eliminating a layer of large law firm review, while at the same time providing a high-quality second look. In addition, most of our Indian lawyers are preparing to become admitted to practice law in U.S. jurisdictions. When that happens, the “Buy American” critics who say that only U.S.-admitted lawyers are capable of doing U.S. legal work might be further confounded. They will have to argue that it is not good enough to hire U.S.-admitted lawyers — they must be U.S. lawyers in the U.S.!
20 years ago, Indian software giant Infosys had only one client, and its founders struggled in poverty. At that time, Western IT industry experts probably thought it was impossible that a country such as India would become a huge center for software development. Only ten years ago, who could have predicted that Indian lawyers by the thousands would be performing document review for U.S. law firms and their clients? Looking back, those apparently impossible occurrences, now that they have happened, somehow seem inevitable. The same will be true for legal research, the drafting of contracts and litigation papers, and other high-value legal work that Indian companies can provide, and already are providing, at a high level of quality and speed, and at dramatically lower cost.
It is true that salaries and expenses in India are rising. But also rising are the skill sets of the Indian attorneys. Meanwhile, the cost of our office building in Mysore, India is still 1/43rd the cost of comparable space in Manhattan, and housing and other living expenses there remain so low that the Indian attorneys have a standard of living that would be the envy of some young New York associates, yet they receive less than one-tenth the salary.
Does any of this threaten the very 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.
Some law firms are embracing the change, and reaping rewards from it. One example is our own law firm. As a result of setting up our own legal outsourcing company in India, our law firm is receiving 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.
Russell Smith
SmithDehn LLP
SDD Global Solutions
http://www.sddglobal.com
high-end legal outsourcing
It’s after a very long time that someone voiced out the other side of the story and very rightly so.
As part of the Indian society we have witnessed that the society, at its very core has adapted itself to perform at pace with the fast moving developed economies and deliver services at par with the defined standards.
In the era of Globalization it’s only fair that opportunities are promoted which in turn would benefit the overall growth of all and mere geographical boundaries should not be an excuse to hinder this process.
Legal outsourcing may also have impacts on the entire jurisprudence system of a host country. Many companies that choose to outsource shift their operations to countries whose judicial system is similar to that of America’s (for example, the Philippines has a hybrid common law-civil law system). See also: http://lawblog.legalmatch.com/2010/09/03/outsourcing-lawyers-leaving-is-here-to-stay/
I don’t think there’s any question that LPO is here to stay. It’s early days, but the growing deregulation and globalisation of the legal profession is driving down price, and while increased efficiency (see here: http://intelligentchallenge.wordpress.com/2009/11/26/the-size-0-law-firm/) is one response, it is unlikely to (on its own) provide the type of long term cost savings that clients are demanding and law firms need. Don’t get me wrong, I think the key word in LPO is “process”, and not all law is suitable for process-type structures, but once those that are suitable are identified, the location and cost base of that processing is a natural place to look for greater savings.