Legal Outsourcing to India will Dramatically Increase

Los Angeles, CA 90017

November 11 2005

Outsourced services and manufacturing to India is not new. For the year ended March 2005, India earned $6.7 billion in U.S.-based outsourcing services, such as software and technology call centers. Legal services are next. NASSCOM (the National Association of Software and Service Companies - an Indian industry organization) recently estimated that the amount of U.S.-based legal outsourced work is currently worth about $60 to $80 million annually, but this will soon increase to $3 to $4 billion. The research firm, Forrester, provided similarly dramatic estimates. Forester estimates that legal outsourcing to India is currently less than 12,000 jobs, but is estimated to grow to 29,000 jobs in 2008, 35,000 jobs by 2010, and 79,000 jobs by 2015. Two-thirds to three-quarters of these outsourced legal jobs are likely to go to India. More importantly, the sophistication of work going to India is increasing. Until now, the bulk of legal services work consisted of paralegal, secretarial, and litigation support. However, the Indian firms are now offering more valuable services such as: Contract review and monitoring Document review for due diligence Patent drafting Simple filings Legal research Rates for outsourced legal jobs vary widely depending on the nature of the services provided, but range from $12 to $125 per hour. Generally, the rates for Indian legal workers are about 10% to 20% of their U.S. counterparts. Indian outsourcing offers the following economic advantages: A significant wage differential – Indian firms report paying legal researchers around $12,000 per year. There are also savings in perks, overhead, and working conditions since Indian lawyers do not have the prestige that attorneys have in the U.S. Time zone differences, which allow overnight turnaround and 24x7 operations These advantages are not without challenges, but none of these challenges are insurmountable. The most important challenges to Indian legal outsourcing include concerns about data security, conflict of interest rules, and the need for Indian lawyers to also pass U.S. bar examinations. Interestingly, the need for Indian-based lawyers is being addressed through American law schools and U.S. immigration policies. Some Indian-based legal talent is schooled in the U.S., but American education visas allow these students to stay in the U.S. for only a short time after graduation. The newly-minted Indian lawyers return to their homeland, where the best jobs are working for Indian legal outsourcers. The supply of cheap Indian labor is not likely to end soon. English is the language of business in India. India has 200 million English-speaking college-educated workers, most still in their 20’s. More than 200,000 Indians graduate law school each year, five times more than in the U.S. As with most emerging service industries, there are no identified industry leaders. The participants include: About a dozen operators that have no other service lines beside law - These include Pangea3, Atlas Legal Research, Intellevate, India Legal, ALMT Synergies, Lexadigm, and Lawwave. About 50 broader-based outsourcers that have a legal group - These include Evalueserve, Integreon, Office Tiger, and Manthan Services. In-house law departments of some multinational firms - Reported examples include DuPont, General Electric, United Technologies, Bayer, Microsoft, Cisco, Oracle and Sun. The impact on the legal job market is obvious. However, like most changes, other consequences are not so obvious. Here are some of the changes that might occur as outsourcing becomes more widespread: If the cost of litigation is reduced, this could encourage U.S. firms to become more litigious. Small firms, when backed by outside affordable resources, might become more competitive and able to take on larger cases. Fulcrum Financial Inquiry is a financial consulting firm that serves the legal community with damages analysis, forensic accounting, and appraisal capabilities
Trish Bongiovanni (dnolte@fulcruminquiry.com)Office ManagerFulcrum Financial Inquiry LLP1000 Wilshire Blvd Los Angeles, CA 90017 Phone : 213.787.4111 Fax : 213.787.4141
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