Legal Services-The Mass-piloting Stage

Legal Services - The Mass-piloting Stage

The concept of global services delivery is high among multinational law firms. Even smaller firms are trying it out. But for the time being, everyone seems to be doing just that - trying it out

by Shyamanuja Das

Global Services

Liberal democracies are obsessed with fairness and justice. As societies evolve, the challenge to ensure justice becomes more and more complex. In a few countries, that challenge is tackled by newer legislations, and implemented by the judiciary, making the judicial system less flexible but simple. But in many others, judiciary evolves independently, drawing on opinion and historical precedents, and is only supported by legislature. While that makes the system respond to the changing needs of the society more effectively, the delivery of justice becomes far more complicated. This system, popularly called the English Common Law System, owing to its origin, is followed by many larger democracies such as the U.S.A., India and U.K.
In countries such as India, that complexity has resulted in delays in judicial processes. In fast-moving nations like the U.S.A, where delay is not an option, it has led to steep rise in cost of legal services. In 2005, of the total $250 billion spent on legal services globally, the U.S.A. alone accounted for $170 billion, according to Forrester Research.
The $170 billion U.S. legal-services industry employed 1.5 million people in 2004, according to calculations based on information available from the U.S. Bureau of Labor Statistics (BLS). Two-thirds of these jobs were in the private sector.

Getting the Numbers Right

Since almost all global-delivery initiatives are driven primarily by labor arbitrage, at least initially, and since many of these services are priced on a time-and-materials basis, quite a few legal job functions are eligible.

Of course, not all jobs can be executed offshore. The category of jobs (See Table 1) that can theoretically be offshored directly include law clerks, paralegal and legal assistants and part of the legal secretaries. Components of some other jobs — including that of researchers and lawyers — can also be done offshore, but that requires careful separation of activities.
According to Forrester, the “offshoreable” legal-services market is about 65% of the total market in revenue terms. According to the firm, the market potential for globally-delivered legal services is $111 billion, out of the total of $170 billion.

That is a theoretical number, however. In practice, a small fraction of that number has actually gone offshore. According to a recent report by ValueNotes, an India-based research firm, the current market size of legal offshoring to India — which, together with the Philippines, accounts for a major chunk of offshored legal services — is $61 million. And the total number of employees engaged in delivering the services is not more than 1,000. NASSCOM — the India’s software and services association — is even more conservative and puts the number at 600–700 workers.

A study of 20 legal services providers by Global Services suggests that the previous estimates are low — there are approximately 2,000 legal-services delivery workers.

And Getting the Definitions Right

Legal Process Outsourcing (LPO) is a vague phrase. Coined primarily by the supplier community, it includes everything from highly specialized legal work such as draft patent filings to highly repetitive, mechanical work like coding of legal documents for electronic storage.
While most larger service providers do include legal-applications coding as part of legal BPO, a significant part of that work performed by smaller companies based largely in the southern Indian cities of Chennai and Coimbatore (that combine it with other similar work in healthcare and insurance domain) never get captured in market studies due to them being at the two extremes of the offshore BPO price band. While the coding type of work fetches an average of $7–$8 and can go down to even four U.S. dollar per hour, a high-end patent research and drafting may be billed at anywhere between $80–$120 per hour, or for full-time employee-based pricing anywhere between $30,000–$90,000.

Making a Market

Many legal service providers consider their clients — the law firms — to be “extremely conservative.” The figures, though, suggest another story. The combined client base (law firms only) of all the legal-services providers that responded to our questionnaire stands close to 400. Even assuming an overlap on the higher side of 50%, that is still a large number.
For an industry that is just about three years old, that number is unusually high; more so, if you consider the small size of the industry and relatively smaller employment levels. “It just proves that law firms of all size have taken the plunge,” says the CEO of a company, which has one of the top American law firms among its clients.


Job Categories

• Number ofJobs in 2004
  Median AnnualSalary ($)
  Arbitrators, mediators, conciliators
  5,200
  54,760
  Administration law judges, adjudicators, hearing officers
  16,000
  68,930
  Court reporters
  18,000
  42,920
  Judges, magistrates and magistrate judges
  27,000
  93,070
  Law clerks
  51,000
  NA
  Paralegal and legal assistants
  224,000
  37,870(Private only)
  Lawyers
  735,000
  126,250(Corporations)
  
  
  99,580(Law firms/private)
  Law clerks
  51,000
  NA
  Title examiners, abstractors and searchers
  61,000
  NA
  Legal secretaries
  272,000
  36,270
  TOTAL
  1,460,200
  
  SOURCE: U.S. BUREAU OF LABOR STATISTICS
  
  
  
  
  
  What is being Offshored?

Drafting of legal documents



Reviewing of drafts



Preparing summaries of case histories



Preparation of trials



Legal research



Litigation support



Patent research



Drafting of contracts, agreements, briefs



Drafting Wills, immigration law



Corporate transactional services



Legal coding (Objective, subjective)



Review, proof reading



Document management



Legal transcription.

While on one end, top law firms like Milbank, Tweed, Hadley & McCloy; Baker & McKenzie; Allen & Overy; and patent firm Finnegan Henderson have offshored part of their legal and paralegal work to India, many smaller firms have followed suit. “All our clients are medium and small law firms,” says Gururaj Potnis, Head, Legal Services, Manthan Services, Bangalore.
“Despite perceived challenges such as quality, confidentiality and security, law firms have offshored primarily to take advantage of diversity in talent base, time difference and ability to scale up and down as required,” says Puneet Mohey, CEO, Lexadigm Solutions LLC, a legal-services firm headquartered in Grandville, Michigan with delivery facilities in Gurgaon, near New Delhi.

The field has momentum. “This is anything but conservative, considering the fact that the real cost pressure that has acted as the major catalyst for offshoring in most industries is still not there in legal services,” adds Manthan’s Potnis.

Most service providers who complain that their clients are conservative, however, agree that the conservatism in this industry is not because of the usual reasons — ignorance, unwillingness to change and fear of backlash that marks many other industries. It is due to extraordinary levels of concerns about security, and a stricter due diligence process about protecting clients’ data.

While some of the work is fairly high value, a large percentage of the work is still in or just beyond the pilot stage. This explains why an industry serving so many customers employs so few people and garners modest revenue. The industry is still largely in a testing or mass-piloting stage.

Legal BPO Vendors
Company, HQ(Website)

Service Areas

Total Clients(Law firms)

Total Employees(Lawyers)

DeliveryFacilities
Atlas Legal Research, Dallas (www.atlaslegal.com)

Legal research

120 (95)

15 (14)

Bangalore, India
Brickwork Consultancy Services Bangalore, India (www.brickworkindia.com)

Litigation support and electronic discovery, legal drafting/revising of documents, legal research

6 (4)

5 (3)

Bangalore, India
eCase Solutions, Ridgewood (www.ecaseinc.com)

Litigation support and electronic discovery, corporate legal function, legal drafting/revising of documents, legal research and patent research

10 (4)

12 (5)

Gurgaon, India
Genpact, Gurgaon, India (www.genpact.com)

Paralegal, litigation support and electronic discovery, corporate legal function, legal drafting/revising of documents, legal research and patent research

6 (NA)

25 (10)

Gurgaon and Hyderabad, India
Integreon, New York (www.integreon.com)

Paralegal, litigation support and electronic discovery, corporate legal function, legal drafting/revising of documents, legal research and patent research

23 (18)

105 (30)

New York and Los Angeles, Mumbai, India
Intellevate*, Minneapolis (www.intellevate.com)

Paralegal and patent research

87 (62)

127 (22)

Minneapolis, Minnesota and Noida, India
Lawwave, New York City (www.lawwave.com)

Paralegal, litigation support and electronic discovery, corporate legal function, legal drafting/revising of documents, legal research and patent research

10 (6)

25 (10)

New York and Chennai, India
LegalEase Solutions, Detroit (www.lgles.com)

—

33 (30)

14 (12)

Detroit and Cochin, India
Lexadigm Solutions, Grandville (www.lexadigm.com)

Litigation support and electronic discovery, corporate legal function, legal drafting/revising legal function, legal drafting/revising of documents, legal research and patent research

250 (200)

20 (15)

Gurgaon, India, Grandville, Philadelphia, Columbus
Lexwerx*, London (www.lexwerx.com)

Paralegal, litigation support and electronic discovery, corporate legal function and legal drafting

1 (1)

2 (2)

—
Manthan Services, Bangalore, India (www.manthanservices.com)

Paralegal, litigation support and electronic discovery, legal drafting/revising of documents, legal research and patent research

22 (18)

120 (80)

Bangalore, India
Mindcrest, Chicago (www.mindcrest.com)

Litigation support and electronic discovery, corporate legal function, legal drafting

15 (4)

45 (43)

—
OfficeTiger, New York (www.officetiger.com)

Paralegal, legal transaction support services, legal drafting/revising of documents, legal research and patent research

9 (5)

550 (60)

Chennai, India and Manila
Prolifus, New Delhi, India (www.prolifus.com)

Paralegal, litigation support and electronic discovery, legal drafting/revising of documents, legal research and patent research

12 (8)

28 (10)

New Delhi, India
Quislex, New York (www.quislex.com)

Litigation support and electronic discovery, corporate legal function, legal drafting/revising of documents and legal research

18 (8)

35 (32)

Hyderabad, India
SPI, New York(www.spi-bpo.com)

Paralegal, litigation support and electronic discovery

105 (50)

700+ (15)

Texas, Metro Manila and Pondicherry, India
Variante Global, New York (www.varianteglobal.com)

Paralegal, litigation support and electronic discovery, corporate legal function, legal drafting/revising of documents, legal research and patent research

30+(around 20)

40 (20)

Gurgaon, India
* Captive operations

Note: Total clients include corporate legal departments

SOURCE: COMPANIES



Some Law Firms that have Offshored


Finnegan Henderson



Milbank, Tweed, Hadley & McCloy



Allen & Overy (My source)



Schwegman, Lundberg, Woessner and Kluth



Kelley Drye & Warren



Eversheds

Baker & McKenzie



Hammonds Direct



Stites & Harbison

BJ Macfaralne & Co



Bickel & Brewer.

This path of evolution is characteristic of the risk-averse legal-services industry. Most other industries have seen a few champions that have pioneered the model while others have followed. In legal services, even smaller firms, that have vague ideas about global services delivery, do not want to miss the bus. “Some customers think that these complex processes can be performed offshore with minimal investment in training and selection of staff,” says Liam Brown, CEO, Integreon, NY, one of the biggest offshore legal-services firms with delivery facilities at Mumbai, India. “There are others who are too conservative with an it-can-never-be-done-in-India attitude. You try to find customers somewhere in the middle, who are open to leveraging India and who also take the time to really understand what can be done, how quickly and what investment needs to be made in process mapping, selecting the right staff and training to get there.”

Some law firms have understood these realities a lot better than others. The small and nascent legal-services market has its own captives. In fact, Dallas, Texas-based Bickel & Brewer, that is widely acknowledged to have pioneered the India-offshoring model way back in 1995, had started as a captive. Since then, it has spun off that subsidiary to an independent company called Imaging & Abstract International, based in Hyderabad, India. Others who have followed this model include London-based BJ Macfarlane & Co, which has a subsidiary called Lexwerx Ltd. in New Delhi; and Schwegman, Lundberg, Woessner and Kluth, PA, a Minneapolis, Minnesota-based patent firm that has a subsidiary called Intellevate in Noida near New Delhi. Today, Intellevate is clearly the leader among offshore-services firms providing patent research. This model has its own challenges. Most law firms, unlike other companies in different industries, still do not know how to do business in India, as foreign law firms are not allowed to operate directly in India. “The challenges of starting and operating a business in India can be a challenge,” says Steve Schley, VP, Sales and Marketing, Intellevate.

While all the vendors serve both law firms as well as corporations, law firms clearly lead, both in terms of actual work offshored and mindshare, though there are companies like Genpact, the erstwhile GE subsidiary, that does work on behalf of corporate legal clients. Many technology companies like Microsoft and Cisco work with Indian firms to do patent research — so do some pharma companies.

Half-filled or Half-empty?

With merely 1,000–2,000 workers and modest revenues between $60–$70 million, is legal-services offshoring a classic case of much ado about nothing? Or is it that with 200 odd law firms trying it out, offshoring could change the way the domestic legal-services industry operates forever?

Unlike many other industries — like technology— legal services is still way behind what the analysts like to call the “threshold.” Offshoring in legal services is astonishingly widespread; but it is not even knee-deep.