Thursday, August 05, 2010

Outsourcing to India Draws Western Lawyers

outsourced The New York Times:

India’s legal outsourcing industry has grown in recent years from an experimental endeavor to a small but mainstream part of the global business of law. Cash-conscious Wall Street banks, mining giants, insurance firms and industrial conglomerates are hiring lawyers in India for document review, due diligence, contract management and more.

Now, to win new clients and take on more sophisticated work, legal outsourcing firms in India are actively recruiting experienced lawyers from the West. And U.S. and British lawyers — who might once have turned up their noses at the idea of moving to India or harbored an outright hostility to outsourcing legal work in principle — are re-evaluating the sector.

The number of legal outsourcing companies in India has mushroomed from 40 in 2005 to more than 140 at the end of 2009, according to Valuenotes, a consulting firm in Pune, India. Revenue at India’s legal outsourcing firms is expected to grow to $440 million this year, up 38 percent from 2008, and should surpass $1 billion by 2014, Valuenotes estimates.

“This is not a blip, this is a big historical movement,” said David B. Wilkins, director of Harvard Law School’s program on the legal profession. “There is an increasing pressure by clients to reduce costs and increase efficiency,” he added, and with companies already familiar with outsourcing tasks like information technology work to India, legal services is a natural next step.

So far, the number of Western lawyers moving to outsourcing companies could be called more of a trickle then a flood. But that may change, as more business flows out of traditional law firms and into India. Compensation for top managers at legal outsourcing firms is competitive with salaries at midsize law firms outside of major U.S. metro areas, executives in the industry say. Living costs are much lower in India, and often, there is the added allure of stock in the outsourcing company.

Right now, Pangea3 is “getting more résumés from United States lawyers than we know what to do with,” said Greg McPolin, managing director of the company’s litigation services group, who divides his time between India and New York. ...

Many legal outsourcing firms have offices around the world to interact with clients, but keep the majority of their employees in India; some also have a stable of lawyers in the Philippines. Thanks to India’s low wages and costs and a big pool of young, English-speaking lawyers, outsourcing firms charge between one-third and one-tenth what a Western law firm bills per hour. ... Even white-shoe law firms like Clifford Chance are embracing the concept. ...

Many corporations agree that outsourcing legal work, in some form or another, is here to stay.

“We will continue to go to big firms for the lawyers they have who are experts in subject matter, world-class thought leaders and the best litigators and regulatory lawyers around the world — and we will pay a lot of money for those lawyers,” said Janine Dascenzo, associate general counsel at G.E.

What G.E. does not need, though, is the “army of associates around them,” Ms. Dascenzo said. “You don’t need a $500-an-hour associate to do things like document review and basic due diligence,” she said.

More on this here.

The legal industry is certainly in the midst of some large changes in the way it has traditionally functioned.  This being just one of many changes that are occurring as client’s willingness and ability to pay has weakened in the face of the recent economic climate.  These changes are forcing law firms to become more efficient and cost-effective. 

Long-term, this should lower the cost of legal services and promote greater competition among law firms.  Overall this is likely to be a good thing for consumers of legal services and for the economy as a whole.  Short-term, it is likely to make the market for legal jobs even more intense and painful – particularly for recent law school grads.

I wonder if some aspiring entrepreneur will take advantage of this situation and set-up outsourced legal services to make it easier for solo practitioners to get into business (although this is going to be much easier for experienced attorneys than those freshly out of law school).  You might run into some ethical issues involving client confidentiality, but with some care and ingenuity, those issues could probably be overcome.  With the increasing number of young, bright law graduates with non-ideal employment prospects, this might help create a climate allowing smaller, low-cost law firms to start chipping away at some business of the big law firms.  In time, who knows?  Maybe this kind of law firm model could do to law what the mini-mills did for steel?

(HT Paul Caron)

6 comments:

Triya said...

Outsourcing may be one thing. However, its not likely that Indian lawyers will welcome foreign competition in India. See this economist story. http://www.economist.com/node/16693882?story_id=16693882

Russell Smith said...

I'm one of those U.S. lawyers who outsourced himself 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.

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 a 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.

On the subject of document review, the claim that sending this "grunt work" to India deprives young U.S. lawyers of training opportunities is inaccurate. I've been practicing law for 25 years, in firms both large and small, and I can tell you that no serious legal training takes place while stuck in room with boxes of documents (or computers full of the same). If you want to provide a meaningful opportunity for young associates to grow, then train them how to do deals, how to argue in court, how to supervise cases, and how to provide legal advice. None of those things can be done for U.S. clients by legal outsourcing companies in India.

Russell Smith
SmithDehn LLP
SDD Global Solutions
http://www.sddglobal.com

Russell Smith said...

I'm one of those U.S. lawyers who outsourced himself 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.

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 a 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.

On the subject of document review, the claim that sending this "grunt work" to India deprives young U.S. lawyers of training opportunities is inaccurate. I've been practicing law for 25 years, in firms both large and small, and I can tell you that no serious legal training takes place while stuck in room with boxes of documents (or computers full of the same). If you want to provide a meaningful opportunity for young associates to grow, then train them how to do deals, how to argue in court, how to supervise cases, and how to provide legal advice. None of those things can be done for U.S. clients by legal outsourcing companies in India.

Russell Smith
SmithDehn LLP
SDD Global Solutions
http://www.sddglobal.com

Anonymous said...

Many U.S. legal firms choose to outsource their operations in countries that have legal systems similar to that of the U.S. For example, the Philippines has a hybrid common law- civil law system that makes it somewhat easier for legal firms to adjust. Legal outsourcing could possibly lead to more hybrid-type judicial systems. See also:
http://lawblog.legalmatch.com/2010/09/03/outsourcing-lawyers-leaving-is-here-to-stay/

IT outsourcing services said...

It is a great job, a consulting firm in Pune, India. Revenue at India’s legal outsourcing firms is expected to grow, i really like it

bradwilliam said...

India’s BPO industry has evolved and matured to present higher-end services that require judgment-based analysis and domain expertise, rather than function-specific, rules-based performance parameters alone. As service providers strive to offer end-to-end services, we see BPO falling into different segments. At one end of the spectrum is the traditional rules-based transactional outsourcing; while at the other end is judgment-based transaction processing and full-service business process outsourcing.

India has won its spurs as the world’s outsourcing destination of choice. Currently the country has a commanding share of the global outsourcing market.

India is undoubtedly the most favored IT/BPO destination of the world. This raises the question why most of the big MNCs are interested in outsourcing their operations to BPOs in India. The answer is very simple- India is home to large and skilled human resources. India has inherent strengths, which have made it a major success as an outsourcing destination. India produces the largest number of graduates in the world. The name of India has become synonymous with that of BPOs and IT industry hence the name BPO India.

Besides being technically sound, the work force is proficient in English and work at lower wages in comparison to other developed countries of the world. India also has a distinct advantage of being in a different time zone that gives it flexibility in working hours. All these factors make the Indian BPOs more efficient and cost effective. In order to meet the growing international demand for lucrative, customer-interaction centers, many organizations worldwide are looking to BPO India.

http://phykon.com/