Law firms mull outsourcing

Law firms mull outsourcing
Offshore
By Deirdre Gregg
Puget Sound Business Journal (Seattle)


Updated: 8:00 p.m. ET July 2, 2006
The next industry to be affected by offshore outsourcing could be legal services.

Some local law firms are looking at the possibility of outsourcing legal services to save money and keep clients' costs down, although none so far appears to have actually done so.

A few weeks ago, Seattle-based Perkins Coie LLP formed a task force to look into offshore outsourcing. The group will likely develop some initial recommendations in the next few months.

Meanwhile, Seattle-based Lane Powell PC sent a vice president to a conference focused partly on outsourcing in New Delhi to gather information. And a few clients of Stoel Rives LLP have expressed interest in the subject.

"The legal industry is really one that historically has been reluctant to endorse change, but ... my instinct is that this is going to impact us in the same way that computers impacted lawyer productivity, that it could be that significant," said Hugh Totten, a partner in the Chicago office of Perkins Coie.

Nationally, many more law firms are considering how they might cut costs by moving portions of work to other lower-cost markets, particularly India, although few seem to have done so.

Some observers predict that outsourcing of legal services, which can range from work typically performed by paralegals to that usually done by attorneys, will accelerate as law firms respond to clients' desire to manage their costs.

"We think some (law) firms will jump out ahead and realize some significant cost savings" through offshore outsourcing, said Michael Short, vice president in the Washington, D.C., office of legal consulting firm Hildebrandt International. "In the highly competitive world of law firms, that's going to require countermoves."

Forrester Research, a market research firm based in Cambridge, Mass., has estimated that as many as 40,000 legal services jobs may move offshore by 2010, according to a 2004 study.

Meanwhile, several big corporations, including Microsoft Corp., have already outsourced some patent research work to India. Since fiscal 2004, Microsoft has been working with Intellevate India on patent research and proofreading of issued patents.

To be sure, legal services offshoring may not grow as rapidly as some expect. Most of the work that is being outsourced today seems to involve repetitive tasks in such areas as research or litigation support, and some sources don't think legal outsourcing will expand beyond those areas. Others say they have concerns about the quality of outsourced services and any liability firms might incur if an offshore attorney makes a mistake.

But it's certainly a hot topic in the legal industry, and it's not hard to see why. Published reports say legal work outsourced to India can cost one-quarter to one-third as much as the same work in the United States.

India has emerged as a primary destination for legal services outsourcing for several reasons. It has:

significantly lower costs.
highly educated, English-speaking lawyers trained in a system based on British common law, and,
a 12-hour time difference that lets U.S. attorneys request a task when leaving at night and have it completed by the time they return in the morning.
At Perkins Coie, the Puget Sound region's biggest law firm, a task force held its fourth meeting on outsourcing opportunities on June 28. Chicago partner Totten has scheduled half a dozen meetings with legal services vendors to hear about their services.

Totten said his group is still in the initial phases of investigating the topic, but thinks it could be mean substantial change for the industry.

Rob Gray, practice management director in the Portland office of Stoel Rives, said the firm has explored the possibility of outsourcing, but hasn't yet found options that meet its quality criteria.

"There's certainly interest in the legal market to explore those options," he said.

Gray said a handful of clients have asked about offshore outsourcing, and some have even considered it for their own in-house legal work.

"If you can overcome quality issues, there may be a way to deliver services to clients at higher value," he said.

Lewis Horowitz, vice president of Lane Powell, is somewhat skeptical about legal outsourcing.

"We're not hearing from clients that they want it. What we're hearing from is the marketers in India of these services, who are telling us our clients want it," he said.

In March, Horowitz attended a meeting of the World Law Group, a network of 48 independent law firms that Lane Powell belongs to, in New Delhi. For one full day out of the three-day conference, he and representatives of other law firms watched presentations from overseas legal services vendors. He said many of the services were offering the type of work that's now done by the firm's paralegals.

"They may still be more expensive than doing it in India, but there's also an advantage to having them down the hall," he said.

Still, Horowitz said, there are niches where outsourcing probably makes good economic sense.

On a national level, Hildebrandt's Short said many of his company's law firm clients have expressed interest in outsourcing. Hildebrandt has been keeping its clients apprised of the legal outsourcing market in India, and decided to form a partnership with one such service provider, OfficeTiger.

Short said law firms today are facing significant competitive pressures. Clients are saying they want to cut costs, and are segmenting work between different firms -- for example, using one firm for high-level work and another for commodity-level work. And law firms are competing with each other in a more sophisticated way than they've done in the past.

"As with anything in the law firm world, it's experiencing a slow start," he said. "But as the success is proved to other law firms, it will gain momentum very quickly."