Thomson Reuters Embraces Legal Process Outsourcing

Thomson Reuters announced last Thursday that they'd aquired a leading legal outsourcing company, Pangea3, in a move that according to the compnay:

"Gives Thomson Reuters a leadership position in the fast-growing legal process outsourcing market."

Reuters' press release notes that:

• Peter Warwick, president and chief executive officer of Thomson Reuters Legal, said legal process outsourcing will be key to helping law firms and corporate legal departments be more responsive and cost-effective.

• The acquisition is true to their mission to help the legal system perform better, every day, worldwide; we will now bring to the legal marketplace a responsive, high-quality, transformative resource for a broad range of legal support work.

• This is particularly important as law firms and general counsel adjust to the realities of the 'new normal,' where efficiency, quality and responsiveness are paramount," he noted.

• The LPO marketplace is growing at more than 20 percent annually and projected to exceed U.S. $1 billion this year.

The ABA Journal reported that:

"Thomson Reuters already has about 8,400 employees in India, but this would apparently be the first time the company would be providing legal services themselves, rather than just legal information and consulting services to law firms and other legal providers. The move into providing legal services – and, at least in a small way, competing with its own legal information clients – comes at an interesting time, as the United Kingdom readies to allow companies to invest in law firms next year."

It is definitely an interesting development, but one that is clearly consistent with the Reuters' strategy "to develop world-class information, software and workflow solutions for legal professionals around the world."

Because legal process outsourcing fits squarely under the heading of "Workflow Solutions."

Another Step Forward for Legal Process Outsourcing

Forbes reported recently on a key executive migration that speaks to the evolutionary advancement of Legal Process Outsourcing on a couple levels.

David Hickey recently left Winston & Strawn, where he was a partner and Vice-Chair of the firm's E-Discovery Practice Group, to join legal outsourcing company American Discovery.

David Steiger of The Globalized Lawyer says of Hickey:

“I have been following and writing about the legal outsourcing industry since its inception. David is well recognized as a leading expert in the legal outsourcing industry. No one has visited or counseled more legal outsourcing providers than David. His move speaks volumes about the industry as a whole...”

As an expert in E-Discovery, Hickey's move signals another step in the solidification of legal outsourcing for tasks -- like E-Discovery -- that can be accomplished via alternative work models with increased efficiencies and cost reductions without sacrificing quality or data security.

But beyond that, what is even more interesting is that this move signals not just a validation of LPO as a business practice, but it hints at a future role that LPO may cultivate, and that is the role of the subject matter expert. The adviser. The collaborator.

If large-scale document-intensive tasks like E-Discovery and legal research become increasingly the domain of LPO, then the LPO becomes more than just a means of execution; they become a tool for peer-based collaboration, as well.

Big Law ex-patriots cross pollinating with LPO would seem to be the next step in LPO becoming woven into the fabric of legal business practices.

Teaching Project Management

Project Management for attorneys seems to be on everybody's mind right now.

We posted last week about Orrick, Herrington & Sutcliffe creating a career track for legal project management.

This past week, Legal Intelligencer reported on a firm-wide initiative undertaken by Dechert LLP in conjunction with legal consultants Altman Weil to train their attorneys in project management.

The article quotes Altman Weil's Pamela Woldow, addressing a number of topics, including:

Initial Trepidation:

• "I think lawyers like to believe that everything they do is unique and complex and the truth is there are some parts of representation that are complex, but there is an awful lot that is rather easily mapped."

• While litigators often get the blame for being the most averse to using project management because cases can take unexpected turns, Woldow said finance attorneys, though "battle wounded" in the recession, have been the most resistant to the training.

Process:

• The training breaks down a matter from the earliest stages of assignment to the end, with an emphasis on a lot of up-front communication with the client about expectations and defining the scope of the project.

• The training sessions for partners included no more than 20 partners at a time, from varied practice groups. They were brought in for four- to six-hour sessions and taught the concepts of project management and tools to implement it. Lawyers visually mapped out matters related to their practice to see how the process works.

The Changing Landscape:

• "I do spend most of my time with GCs and in-house counsel and the message beyond the recession is that they want their law firms to operate more like businesses and deliver their services more efficiently and cost effectively."

• "From a law firm perspective, this type of process is enormously effective when operating on an alternative fee arrangement because, if they are going to be profitable, they cannot operate the way they have in the past."

• The push for efficiency among large law firms has largely been driven by cost concerns from clients and the need to make good on the alternative fee arrangements that are often seen as a solution to these cost concerns.

• While certain matters may prove more challenging than others in terms of implementing project management techniques... there are enough clients out there demanding these types of services that firms have to embrace this.

It certainly seems that project management is not just a fad with a limited shelf life.

Microsoft Expands Legal Process Outsourcing Initiatives

Legal process outsourcing is one of the more flexible, adaptable trends in the business of law, as it can be applied to tasks as small as individual contract review or as large in scope as all-encompassing departmental or litigation support.

Well, this one is large.

Microsoft recently announced that they are outsourcing multi-jurisdictional legal support work, including legal research.

Why is this significant? Because this is an expansion of Microsoft's earlier test programs with LPO, which means they found the experience efficient, productive, safe, and valuable.

And that is a serious endorsement from one of the most dominant companies on the planet.

Microsoft dipped a toe in the LPO water five years ago when they began outsourcing associate-level IP and patent renewal work to qualified, international attorneys.

If they dipped a toe in the water five years ago, they're wading in now. Because this new agreement is branching out to general legal support work, operating separately from the IP and patent work.

According to Legal Week, "News of the outsourcing comes after Microsoft cut its legal budget by 15% over the last two years, leading to a 5% reduction in headcount. Before the cuts, Microsoft's legal department had an annual budget of $900m (£570m) and 1,050 staff, including 450 lawyers."

Microsoft's arrangement with Indian firm CPA is similar to the legal process outsourcing utilized by mining company Rio Tinto, which involves a team of 18 lawyers handling tasks such as contract review, drafting and legal research.

And this seems to be the sweet spot of legal outsourcing -- utilizing lower-cost yet fully trained international attorneys to complete the more redundant associate-level work, from one-off projects to scalable endeavors featuring teams of attorneys.

A Return To Business, But Not As Usual

We are an optimistic species.

The ABA Journal ran a recent article titled "Managing Partners More Confident, Expect Increased Legal Work".

The upshot of the article is that a recent survey showed that the "confidence index" of managing partners is at a three-year high based on a belief that the worst of the recession is behind us, coupled with an anticipated increase in demand for services.

However, the article then slides in one other bit of information, almost as an afterthought:

"Managing partners aren’t as confident about revenue increases as they are about an increase in demand. The reason is client pressure to discount fees or offer alternative billings."

That's one heck of a caveat.

The literal translation might be: "Business demand will return to normal, but "normal" might have been redefined in the interim."

An interesting parallel can be found in the recent Detroit Auto Show. We all know the automotive industry is the poster child for the economic challenges of 2008/2009, so it was interesting to read this one-two punch from a recent Reuters article:

"In 2009, we discovered we have a new competitor that we have never dealt with before, and it's savings," Jim McDowell, American head of BMW's Mini unit, told Reuters. "Anything that throws major elements of uncertainty in front of the consumer are the kinds of things that could depress sales."

Followed by:

"But ultimately sales will increase because the car fleet is getting older and older," he added.

The parallels between the industries are apparent: Demand will return, but the nature of the game has changed.

The lesson here is that the impact of 2009 is not going to gently fade away. 2009 seems to be solidifying itself as a bell that can't be un-rung.

2009 was traumatic enough -- the ground shook enough -- that our perspective seems to have irrevocably shifted.

Legal Outsourcing Update

The London Times ran a feature Saturday profiling the outsourcing of certain legal tasks.

Obviously, it's no huge disclosure to point out that LegalEase Solutions is a firm specializing in legal process outsourcing. But in terms of the blog, we try to explore all relevant trends in the business of law, of which outsourcing is just one movement.

As frequent readers know, the goal of the blog is to explore the commoditization of certain associate-level deliverables, the breadth that the internet has eliminated traditional office walls, the calls for change to 'business as usual' from clients and corporate counsel, organizational evolutions, alternative billing practices, and other paradigm shifts in the business of law.

But since the London Times article just fell in our laps, let's give it a look.

While the article focused on one legal outsourcing company, the underlying fundamentals apply to all reputable outsourcing firms.

"... an army of young Indian graduates, most of them from the country’s top law and engineering schools, sits before a barrage of computer terminals. Many are working on legal documents digitally accessed from the servers of blue-chip Western clients via transcontinental fibreoptic cables. Others are engaged in research for upcoming litigation to be fought out in American courtrooms, or are analyzing patent filings registered by British companies."

Bottom line: Highly trained international attorneys are performing associate-level work (deposition summaries, litigation support, legal research, preparation of pleadings, contract/document review, and more) at a fraction of the cost of BigLaw associates.

"Together with the fingerprint scanners that operate the locks on the doors, they lend the premises a sci-fi feel."

Bottom line: Data security and client confidentiality are imperative, and outsourcing firms are completely aware that their success depends on implementing a multiple-level approach to security.

"Much of the work... was once the preserve of trainees and associates at big City law firms. Some of those firms racked up annual revenues of more than £1 billion during the boom years, in part by billing out teams of junior lawyers for up to £300 an hour for even the most routine tasks."

Bottom line: Significant financial savings are possible -- without sacrificing quality -- when international attorneys provide the same deliverable at a cost 50 - 70% less.

LegalEase white papers on data security, ensuring confidentiality, and protecting against conflict can be read here.

Shameless Self-Promotion

LegalEase is pleased to introduce our Legal Process Outsourcing Handbook, free for viewing and/or downloading here.

As increasing numbers of both in-house and firm-based counsel adopt new strategies to respond to the evolving legal marketplace, The LPO Handbook provides a one-stop resource to help you evaluate whether strategic use of LPO is an efficient addition to your business initiatives.

The World Gets Flatter -- Virtual Law Firms

Another dispatch from the front line of the rapidly shifting landscape of legal outsourcing and offshoring.

Virtual law firms are not a new or particularly cutting-edge idea. A wikipedia page on virtual law firms notes that they have been around since 2004. And, if you think about it, even having a wikipedia page probably precludes any sort of "underground" status.

The ABA's Law Practice Today generally characterizes virtual law firms as having the following traits:

1. A stable core group of attorneys
2. Established collaborative relationships with other specialized law firms that possess expertise that’s occasionally needed
3. Technologically linked infrastructure via appropriate computer and telecommunications systems
   
4. Ability to expand and reduce personnel as needed

In other words, we're talking about a team of attorneys -- saving on overhead by forgoing the traditional bricks and mortar office buildings -- networked together via the web.

Some virtual law firms employ attorneys scattered throughout the U.S.. Other virtual law firms, like Rimon Law Group (a firm with a very creative and intriguing billing model that factors client satisfaction), manages to reduce overhead even further by including attorneys who live in locations with lower costs of living -- areas in the United States as well as other countries.

And this makes perfect sense as a business model.

Because virtual law firms employing U.S. attorneys located outside the U.S. are leveraging the exact same dynamic as Legal Process Outsourcing: Work is completed by qualified colleagues who live in areas with lower costs of living, and those savings in overhead translate to lower costs to the client.

An interesting element at play here is the distinction in terminology.

Whereas a network of U.S. attorneys living in different countries is a "virtual law firm", a network combining U.S. attorneys with attorneys trained and accredited in other countries is thought of as "offshoring".

As the lines between old guard legal paradigms and new, global legal paradigms blur, it is likely that the terminology will, too. So, when an LPO engages offshore attorneys to perform some of the more redundant legal processes (litigation support, legal research/writing, contract/document review, etc.), couldn't we just call them "virtual associates"?

The Face of LPO: Sacha Baren Cohen?

And then there are developments that no one saw coming.

A few years worth of both professional and academic studies, articles, and books weighing in on the efficiencies and cost-effectiveness of Legal Process Outsourcing, and the LPO sector received its most high-profile, mainstream splash of exposure this week thanks to...?

Sacha Baron Cohen. That's right. Borat. Ali G. Bruno.

This past week, Los Angeles Superior Court threw out a defamation suit against actor/comedian Sascha Baron Cohen. What is noteworthy about the coverage of the suit's dismissal is the very public recognition and credit being given to the Indian attorneys who contributed to the victory via Legal Process Outsourcing.

One of the most widely read websites covering Hollywood and the entertainment industry, the L.A. Weekly's Deadline Hollywood Daily, quoted one of the defense attorneys saying, "...combining the skills and expertise of U.S. attorneys with U.S. law-trained Indian attorneys has proved to be an innovative and cost-effective way to fight and win the suit.”

To have both the quality of the work and the contribution to success praised so publicly is impressive.

The Wallstreet Journal's website references the case, "Sacha Baron Cohen Uses Outsourcing for the Win," and provide links to other articles discussing the story.

Evaluating What Not To Outsource

Any conversation about which legal processes are prime candidates for outsourcing must also include evaluating work that is less suitable for outsourcing.

Obviously, LegalEase Solutions believes wholeheartedly in the value of targeted legal process outsourcing, but by the same token it would be disingenuous not to acknowledge that some legal work is not efficiently outsourced.

A quick review of work that is successfully and efficiently outsourced provides some broad-stroke common traits: the work is typically less complex, more repetitive, and provides time and cost efficiencies.

Conversely, it follows to reason that the first area of work that is best kept solely in-house are cases dealing with complex, uniquely fact-driven subject matter. A prime example would be IP litigation.

Work that has a very high level of complexity and case-specific data can practically become its own field of study, which means that the amount of time required to bring outside attorneys up to speed would outweigh the potential reduction in costs.

If you are an attorney who has identified additional legal work that is not appropriate for outsourcing, feel free to contribute to the discussion in the comments area.

Trend Spotting

There is an interesting trend developing lately in terms of how large law firms are adapting their business models to incorporate LPO. Interesting, because it's evolving in a way few had predicted.

If you sort legal offices into three general categories, they shake out like this: In-house corporate counsel, large corporate law firms, and small/medium sized private practices. In many peoples' minds, the most likely LPO early adopters would be the in-house corporate counsels, because the culture of big business has already embraced outsourcing an array of other back office functions. That is, for corporations there is less of a mental shift required to see the value in LPO. Additionally, corporate attorneys already outsource significant amounts of work to outside counsel. Again, no change in worldview required.

Many industry watchers then site the small and midsize firms as the next enthusiastic users of LPO, thanks to the ability of an LPO to provide flexibility, e.g. overnight turnaround, ultra affordable pricing, and scalability to support peek demands on a smaller firm.

The sector that many thought would be the slowest to embrace LPO was the well established, conservative larger firms. The conventional wisdom was that these firms, with their seasonal hiring patterns, established hierarchies, and entrenched billable hours model would be the slowest to evolve based simply on inertia.

So much for conventional wisdom.

The trend that we're seeing take root is that of large firms actively aligning with an LPO to then present their services to corporate counsel in a convergence that benefits each party. The large firm gains an advantage over their competitors with the significant savings the LPO provides; the LPO benefits by the association with well established domestic firms; and the in-house counsel enjoys the dual benefit of cost savings managed by a firm with whom they already have a business relationship.

And it doesn't seem unreasonable to conclude that the driving force behind the trend is the recent financial crunch, which has forced corporate counsel to demand changes from the firms they traditionally hire.

Protecting Client Confidentialy through Personnel Management

We've discussed the tangible, hard-wired aspects of protecting client confidentiality through data security -- the systems an LPO needs to have in place to control data collection, as well as access and utilization.

The other aspect of protecting client confidentiality is a bit, well, squishier. It's not the binary, flow-chart dictated, password protected black and white of data systems. Instead, it is the softer science of personnel management and all that it entails -- personalities, histories, and motivations.

Softer, yes, but no less demanding and integral to the ethical obligation of ensuring confidentiality. So, to fully realize the duty of confidentiality, an LPO needs to compliment data integrity with a multi-faceted approach to personnel management.

Employee Vetting - The first step, clearly, is the completion of a thorough background and reference checks, as well as confirmation of professional standing.

Contractual Provisions - Each employee - onshore and offshore - must be subject to Confidentiality and Non-Disclosure Agreements.

Education and Training - Admission to the Bar in most jurisdictions is contingent on passing the Multistate Professional Responsibility Examination, so it reasons to follow that offshore attorneys should be proficient in the same model rules.

Business to Business - An additional mechanism that can be employed is an individual confidentiality agreement between the LPO and counsel.The ABA strongly advises these agreements, and the Association of the Bar of the City of New York (Ethics Opinion 2006-3) recommends “contractual provisions addressing confidentiality and remedies in the event of breach, and periodic reminders regarding confidentiality.”

Corporate Culture - Another consideration for an LPO is cultivating a corporate culture that puts a premium on low attrition. A stable work force to some degree reflects company loyalty, and it can mitigate confidentiality risks by minimizing the number of former employees in circulation


Just like data systems need ongoing QA efforts, personnel protocols also need periodic reinforcement to be maximized. Personnel management within an LPO -- in the service of protecting client confidentiality -- must be understood to be an continual process.

The Paperless Office and Data Security

There are a number of components to ensuring data security within an LPO. We’ve discussed the importance of onshore servers for housing all data.

One fundamental purpose of the onshore server is to allow offshore access to information without actually capturing that information. Furthering the safeguard against third-party personnel capturing any data is the implementation of the paperless offshore office.

Obviously, the paperless office has no, um, paper. In the event that any paper or writing instruments are occasionally necessary, it is an important requirement to shred the paper at the end of every shift and collect all writing instruments.

But the paperless office goes further than that, encompassing a complete defense against any method of capturing data, including:

• Restricted computer functionality for individual computers with limited user rights and disabled media drives and USB/printer ports
• Secure individual computers with PC firewall and antivirus protection
• External internet access restricted to certain sites/computers within office locations
• Network monitoring and tracking capable of producing audit trail records of all files accessed on the server and logs of all incoming and outgoing mail from the servers
• A secure internet network incorporating Proxy/Firewall NAT and Port filtering
• The prohibition of cell phones and cameras in any area where client work is processed

Onshore Servers and Data Security

During March we’ll be discussing part two of our series Ethical Imperatives For An LPO: Protecting Client Confidentiality. And a key component to protecting confidentiality is data security.

For U.S. attorneys considering the value of outsourcing legal work to an LPO, there is one question that must come first regarding data security: Are the LPO’s servers on U.S. soil?

All other security safeguards come second.

When all data is stored in onshore servers, offshore attorneys are only accessing the data to complete the work, and not holding or storing the data on offshore computers or servers.

Why is this so crucial? Because data stored on servers is subject to the state and federal laws applicable to the physical location of the data. That means for data housed on domestic servers, U.S. law applies. In the rare event of some sort of breach, the originating counsel needs to retain as much recourse as possible, and part of that includes U.S. jurisdiction over the server.

Data stored on offshore servers puts the data beyond the jurisdiction of established U.S. security laws. In this instance, the originating counsel would have uncertain control over investigating and/or enforcing security concerns.

Additionally, while the risk of third-party data security breaches (that’s a lot of syllables to say “hacker”) is the same regardless of the server’s physical location, the United States’ long-arm statutes allow plaintiffs to extend personal jurisdiction throughout the country. Just one more advantage to requiring onshore servers from your LPO.

Conflict Checking Request Form

LPOs have a professional and ethical duty to the counsel they support to protect both counsel and the counsel’s clients from conflicts of interest. The ABA’s Model Rule of Professional Conduct 1.7 states: “A legal outsourcing company should have a conflicts checking procedure in place that… includes avoidance of a concurrent conflict of interest with a client already engaged, and avoidance of a significant risk that the representation of one client may be materially limited by responsibilities to another client.”

In order for an LPO to thoroughly vet potential or perceived conflicts, the LPO needs a comprehensive Conflict Checking Request Form to capture sufficient information to populate cross referencing. Conflict checking should comprise information about counsel’s firm and participants, the counsel’s client, a business’s history and participants, as well as an overview of the case at hand.

Counsel Information

• Firm name
• Firm’s counsel involved with the case
• Associates or paralegals involved (including maiden names if possible)
• Adverse Party’s Counsel’s Firm Name

Counsel’s Client Information

• Names of all involved parties (including maiden names if possible)
• Family members
• Names of adverse parties

For corporate or business entities, also include:

• Corporate and business names
• Any trade or alternative names under which the entity carries on business
• Names of the parent company or controlling shareholder of a corporate client
• Business names of any subsidiaries or other relevant affiliated companies
• Names of officers and directors of the corporate client, any subsidiaries, and the parent company

Matter

• Description of Matter that will include an overview of the case or complaint.

LPO’s obviously serve the counsel who partner with them, but they also, by extension, serve the counsel’s interest in their client. To act as a complete outsourcing partner, the LPO must take conflict avoidance as seriously as counsel does, and a thorough Conflict Checking Request Form is a crucial component of that obligation.

Protecting Attorneys' Ethical Obligations

Every business assesses the obstacles in its path – hurdles that can range from a crowded marketplace to shifting customer trends to a lack of eyeballs. From the perspective of a Legal Process Outsourcing firm, one of those hurdles is attorney reticence.

In-house counsel and firm-based attorneys both share a strong and altogether appropriate sense of loyalty to their clients. So when an attorney weighs the pros and cons of outsourcing legal work, the scale looks a little something like this: On one side is the efficiency and significant cost savings that every client is looking for, and on the other side is the nagging twinge of concern that outsourcing could expose their client to certain risks, like conflicts of interest.

Attorneys work hard to ensure that neither their firm nor their employees have any competing interests that would conflict with the best interests of their client. And attorneys have every right to expect an extension of that trust from an LPO.

That's why it's crucial for an LPO to step up and 1) acknowledge those concerns as legitimate, and 2) proactively take every step to protect both the original counsel and the counsel's client.

In-house and firm-based counsels’ conservative approach to LPOs makes sense when you consider the relatively young nature of legal outsourcing. Other business process outsourcing areas have decades of history and a track record that can be evaluated, whereas LPO is relatively new to the game. So, it makes sense that attorney trepidation stems from lack of familiarity.

That’s why one of the first orders of business for an LPO – and a mandate at LegalEase Solutions – must be protecting the ethical standards that counsel promises their clients.