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."

ROI for Law School Downgraded

A few months ago we discussed the return on investment for law school tuition. Now, according to U.S. News and World Report, those numbers are looking even worse.

To put it simply, both sets of numbers are going in the wrong direction: Tuitions are increasing to unprecedented heights, while job prospects are both diminishing and paying less.

More money spent for less return can't be a good thing.

The problem starts with tuition, for which U.S. News cites ABA statistics:

• Average tuition at private law schools was up six percent in 2008 to $34,298

• State schools were up nine percent to and average annual cost of $16,836

• At Yale Law School, number one on the most recent U.S News ranking, tuition is $48,340 a year. The lowest tuition for a top 10 law school is at the University of California at Berkeley, which is in seventh place and charges in-state residents $35,907.

Now combine those numbers with dwindling returns, and the equation really goes down hill.

According to a separate U.S. News article, first-year associates at large law firms can expect to make $106,500 to $131,250, down 5.1 percent from last year. At midsize firms, associates can make between $71,500 and $100,750, and at small firms they might make from $49,750 to $73,000.

However, anecdotal reports indicate even those numbers are inaccurate, coming in significantly higher than real-world reports.

Reports from Manhattan, which historically would land at the higher end of the salary scale, say small firms are starting at $42k and midsized firms are offering $55k.

Job postings for small firms in Chicago are reportedly significantly less than that, starting in the mid 30,000 range. And this is without benefits.

However, the discrepancies might be explained by the source of U.S. News's salary statistics: Robert Half Legal, which is an attorney placement firm. If they are basing their statistics on their clients' salary offerings, then it's a safe assumption they are dealing with firms who can afford to pay the additional 20-25% of a first year associate’s annual salary that placement firms typically charge as a placement fee.

And this would argue for the anecdotal reports that those figures are out of step with real world offers.

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.

Adjusting to Fewer Associate-Level Positions

As noted recently in the ABA Journal, many large firms are delaying hiring new associates, and some are putting their summer apprenticeship programs on hiatus altogether.

Obviously, though, a decreasing number of entry-level associate positions doesn't necessarily mean there is less associate-level work to be done.

That's why one of the major challenges facing firms today is reshaping business practices to accomplish associate-level work without charging clients senior-level rates.

One of the solutions many firms are turning to is the flexible use of off-site associates for legal research.

An example of this trend is LegalEase's own Research Pathfinder, a program that offers thoroughly researched breakdowns of all relevant case law, statutes and any other opinion, law review, and any secondary research related to a specific legal issue.

All within 24 hours and all for a $250 flat fee.

LegalEase's Research Pathfinder applies two levels of quality checks by U.S. attorneys to our network of global attorneys to provide the 24-hour turnaround.

You can view additional information on LegalEase's Research Pathfinder 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 Managing Onshore Attorney - Part II

Law.com's Legal Blog Watch summarizes a recent study of emerging trends for contract lawyers conducted by The Posse List. In regards to Legal Process Outsourcing, they write:

"Though firms are under pressure to cut costs, data security and quality of work are two key deterrents to sending projects to India. Still, Bufithis notes that "off-shoring is not going away." It's moving toward a blended approach, with a first pass at review in India followed by second review in the United States."

Here is another acknowledgment that the blended onshore/offshore model provides the benefit of a second layer of quality control and oversight from the onshore attorneys, and it dovetails nicely with the second part of our conversation with Managing Onshore Attorney, Chris Crawford.

Q: Generally, what is the breakdown in terms of the percentage of work executed by the offshore attorneys and the percentage executed by the onshore staff?

A: “It can really vary. Depending on the complexity of the work, it ranges from 10% onshore to 90% onshore. The benefit to the client is that the cost does not change whether the work is performed by a U.S. trained attorney or an India trained attorney.”

Q: What are the types of work that you have seen translate successfully to being outsourced?

A: "India is a common law country, and the attorneys there have all gone to law school. So they can be trained to do any legal work that a U.S. attorney can be trained to do. We have successfully assisted law firms and corporations in many areas of the law including research and writing, contract drafting and review, discovery and document review, drafting of motions, briefs, and pleadings, as well as all general paralegal services."

Q: What are the educational backgrounds of the offshore attorneys?

A: “All Indian attorneys have graduated from an accredited Indian law school, which requires either three or five years of schooling, depending on the law degree obtained. We only hire those that have graduated within the top 10% of their class.”

Q: How are the attorneys trained once they join LegalEase?

A: “LegalEase has its own six month training program, designed by a Harvard Law School graduate. All LegalEase attorneys must complete that training program before working on live projects. This program is designed to teach the attorneys the major distinctions between U.S. and Indian law, and to give the Indian attorneys an opportunity to further hone their writing skills.”

Q: How do you address ethical concerns, e.g. how do the off-shore attorneys ensure confidentiality and conflict checking?

A: “All attorneys working for LegalEase sign confidentiality agreements. In addition, most clients require that LegalEase employees sign confidentiality agreements before commencing work on a project. Regarding conflicts of interest, we have an internal conflict checking system to ensure that we do not undertake work that would present a potential conflict of interest with another client.”

Q: How do you guarantee client satisfaction?

A: “We have always provided our clients with a 100% satisfaction guarantee. If the client is for some reason dissatisfied, we only ask that they provide the reason for the dissatisfaction and give U.S. an opportunity to re-work the project until it is to their satisfaction.”

You can read the first part of our conversation here.

The Onshore Attorney's Role in the Review Process

When United States attorneys evaluate the efficiencies and savings of outsourcing certain legal tasks, they find themselves weighing the merits of two different LPO business models: The entirely offshore model versus the blended onshore/offshore model.

While an entirely offshore model connects the client directly with the offshore office, the blended onshore/offshore model inserts a layer of United States based attorneys to work with the client and shepherd each project.

This layer of onshore managing attorneys serves a number of crucial functions, including project management, quality control, and as a liaison directly from one U.S. attorney to another.

LegalEase's managing onshore attorney, Chris Crawford, recently explained the organizational structure and the managing attorneys role in the workflow and review process. Here's an excerpt from that article.

When a client approaches an LPO with a blended onshore/offshore model, how is the work organized and what is the workflow process?

“Initially, the client will contact the U.S. office about a project. A U.S. based attorney will then get the client specifications for the project, including all facts, documents and directions needed to complete the project. The U.S. based attorney then reviews the project, doing preliminary research and drafting as necessary. He/she then assigns components of the project to the offshore attorneys with specific instructions for the completion of the project.”

What is the review process?

“The U.S. and offshore team work together to complete the project, much the same way an associate and a partner would work to complete a project at a law firm. There is a constant, open line of communication between the two offices for feedback and to answer any questions that may arise. Once the project is complete, a U.S. attorney gives it final review and approval for delivery.”

Media Round Up

LegalEase Solutions and one of the company's founders, Tariq Hafeez, were profiled recently as a Michigan based business in the Ann Arbor Business Review. A few of the topics touched upon...

The ABA's approval of legal process outsourcing:

"He said the industry was boosted by an August 2008 ruling from the American Bar Association's ethics committee outlining lawyers' responsibilities in outsourcing, but deeming it morally acceptable.

The practice is allowable, the panel found, if the participating lawyers "adhere to ethics rules regarding competence, supervision, protection of confidential information, reasonable fees and not assisting unauthorized practice of law," according to an ABA statement."

Perceptive challenges still facing LPOs.

"Hafeez said confidentiality and quality are the two issues prospective clients hesitate most about. He said the company's internal processes of training the lawyers in India and doing all quality control in Ann Arbor should calm those fears."

Efficiencies and cost savings.

"Like most outsourcing, the business model is relatively simple - use offshore employees for repetitive and less complex tasks at lower costs. In LegalEase's case, Indian lawyers fluent in English and trained in American law can take care of legal research, drafts of pleadings and document review, among other services, at $60 per hour or less, Hafeez said. "

To read the complete profile, click here.

Also, this blog itself received a nice recognition from oDesk.com as one of the 100 Best Outsourcing and Offshoring Blogs and Resources.

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.

India Business Law Journal

There was a very comprehensive overview on the state of the Legal Process Outsourcing market in the March issue of the India Business Law Journal. Industry leaders from top LPO's were interviewed, including LegalEase Solution's CEO Tariq Akbar. Here are some of the highlights of the subjects addressed, as well as observations about the industry quoted from the article:

• The cost factor. "Corporations are no longer willing to pay the high fees that are traditionally associated with the review process,which accounts for around 60% of litigation costs."

• Process efficiencies. "Once a project is underway, clients see other benefits like process efficiencies, quality improvements."

• Climbing up the value chain. "Once clients are comfortable that the quality of outsourced work is not compromised, it allows them to transition significantly more work both in terms of value and quantity."

• Crisis-driven demand. "The events occurring in the global economy are unprecedented … they are forcing companies of all sizes in all industries to ensure that they are spending every penny wisely."

• Outsourcing decision makers. "The major decision makers are the end clients of the law firms – the corporate legal departments who now want a lesser burden on their resources."

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

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.