Holiday Wishes

We would like to wish all of our readers a happy holiday season and a prosperous new year. Thank you for your contributions to this blog and the support you’ve given lposouce.com in the past year.

Temerity in the Face of Turbulence

In a recent newsletter Andrew Hedley, founder of the UK legal strategy consultancy Hedley Consulting, discusses changes set to impact the legal market in the UK (US legal firms are also facing similar pressures). One of the core changes, emanating from the cost pressure on law firms, will be in the law firm structure with the most apposite change being the “significant acceleration in the use of legal process outsourcing for increasingly complex work.”

Hedley’ piece is posted in full below.

"The greatest danger in times of turbulence is not the turbulence; it is to act with yesterday’s logic."
-Peter Drucker

The legal sector faces a number of unprecedented challenges in the year ahead. The one with potential to disrupt most widely and deeply is a wholesale move to fixed-fee pricing. Surveys of in-house counsel show that they are resolute in demanding fundamental change over the next twelve months.

Delivering profit from fixed-fee work requires wholesale changes to historic operating models and has far reaching implications.

One inevitable consequence will be the demise of associate lockstep, the process by which salary (and hourly rate) increases are pegged to years of qualification rather than any objective measure of increased ability to add value for the client. Another will be a significant acceleration in the use of legal process outsourcing for increasingly complex work.

An emphasis on better management skills will also be necessary as firms disaggregate the legal process, undertake individual work components at the lowest price point and then reassemble the “legal product” at its point of delivery to the client.

The effect on firm culture, talent management and the psychological contract between partner and associate will be hugely significant. However, these are nettles which must be grasped to emerge from the recession with businesses that are viable in the longer term.

Simply hoping that one can hold out long enough for better times to return is not a strategy. Temerity in the face of turbulence is unlikely to deliver the desired result!

More Than Labor

Outsourcing is more than a cost play or exploiting labor arbitrage. Other very important sources of value to law firms and corporate legal teams are scalability and more on-demand services models.

These strategies allow firms to better allocate firm resources, particularly in volatile times such as today when workloads are highly variable and litigation pipelines are uncertain. What this means is that not all work has to be performed offshore or even very far out of the office to achieve significant savings and strategic advantages.

As these implications are coming together, firms are seeking to explore onshore shared service delivery models that reflect these growing needs for on-demand service offerings. Shared service delivery models include common resources and services that are shared with 2 or more firms. Thus avoiding duplication of non-core, non-differentiating services at a number of separate firms.

In the UK, the shared service model is picking up steam with announcements this past week by several large law firms that they are outsourcing their library services using a shared delivery model.

Cyclical Nature of the Economy

We have also been proponents of the cyclical nature of our increasingly globalized economy. This week, Crain’s Chicago Business featured an article on the growing number of US immigrants “energizing” the US economy.

Ten For 2010: Trending Projections Recognition by the American Bar Association

The Ten For 2010: Top Ten Trends in Legal Outsourcing released last week was recently picked up by the ABA Journal and was one of the top 10 most read articles for the week.

What seems to have caught the interest of many US legal professionals is the idea of the increasingly attractive career path for outsourced legal services. Global-minded and entrepreneurial legal professionals are finding the legal outsourcing sector an attractive alternative to the big law lifestyle. This is not a major portion of the legal workforce, but it is an emerging demographic that we see growing further in the coming year.

An interesting dialogue was also started on the message board below the article. While we do not find that all issues raised in the discussion are of merit, they are still issues and opinions that need to be addressed when engaging in outsourced legal solutions. Some posts to check out include: 21, 22, 27, 36 and 37.

New Year, New Trends: Fronterion Ten for 2010

Since the new year is nearly upon us, we are proud to announce the release of Ten For 2010: Top Ten Trends in Legal Outsourcing – an insider’s perspective of changing industry dynamics for the coming year.

The Ten For 2010 trends report highlights a number of changes set to occur in the industry this year. The most notable of these include:

+ India will remain the dominant destination for outsourced legal services, but increasing interest in South Africa will make it India’s leading competitor for legal outsourcing in 2010.

+ The rise of LPO as an attractive alternative career path for legal professionals as pay and prestige increase.

+ Increased transparency around the LPO industry including the possibility of additional ethical guidance from industry bodies such as the American Bar Association.

+ A shift in the role of the lawyer from providing pure legal advice to managing the procuring of a number of different legal functions both within and outside the traditional law firm structure.

As noted in the release, we feel, “The year 2010 will be an exciting and watershed year for outsourced legal services. The economic volatility over the past year has caused legal professionals to step back and genuinely assess how they are providing and procuring legal services for their organizations. In 2010, legal outsourcing will be an increasingly important factor in these decisions.”

More information is available on our website and at www.fronterion.com/TenFor2010

South African Seminar

As noted in some of our previous blog posts, the recent release of our publication entitled Implementing a Successful Legal Outsourcing Engagement has been well received.

This week, I (Michael Bell, managing partner of Fronterion) presented the increasingly recognized book to the High Commissioner of South Africa during a legal outsourcing seminar hosted at the South Africa House on Trafalgar Square in London.

The event was well attended and included presentations by the High Commissioner as well as other leaders in legal outsourcing organizations based in South Africa. Speakers included representatives of several organizations that were featured in the book such as Exigent and Underwood Solicitors.

Talent Shifts

One trend that we have often noted is how talent continues to migrate from traditional legal and litigation support firms to legal outsourcing vendors.

Globally-minded, entrepreneurial legal professionals have increasingly taken on roles in business development and operations, in both on and offshore capacities for legal outsourcing vendors. The growth in compensation, prestige and expanded career opportunities make positions at outside vendors an increasingly attractive option for legal professionals. The result is a greater depth of skill sets and legitimacy for legal outsourcing vendors. While not a major constituent, it is a growing demographic.

In marked contrast to this paradigm, Clifford Chance recently announced the promotion for two of the most promising lawyers from their offshore knowledge center in Gurgaon, India to associate positions in London and Abu Dhabi.

As noted by Legally India: The starting salary at Clifford Chance's offshoring centre is understood to be around Rs 5.5 lakhs (£7,700) per annum. Starting salaries for a newly qualified lawyer at Clifford Chance in London are currently £59,000 (Rs 45 lakhs) per year.

While currently this is an anomaly, I suspect that it will not be the last occurrence. It is also a good indicator of the blurring lines between “us” and “them” – vendor and client. Regardless, as clearly demonstrated by the increase in salary, this is quite an opportunity for the two new associates.

Ethical Considerations in Legal Service Solicitation

Total Attorneys, a Chicago-based legal service and support company that offers web-based software solutions for small law practices and sole practitioners, has meet with tremendous success. This year, they have been named “Number 2” in the Cranes Fast 50, the fastest growing businesses in Chicago.

The firm is currently facing a lawsuit regarding the ethical considerations of soliciting clients on behalf of lawyers over the internet. While not directly pertaining to outsourcing legal services, is an important debate regarding the ethical provisions and the roles of outside vendors who perform the business development function for lawyers.

More information on the case is available in the Forbes article,“Click or Crime?” as well as in the in-depth blog post at Total Attorneys.

A Dynamic UK Legal Segement

It has been another exciting week in the world of outsourcing for the UK legal market.

First, Allen & Overy announced their new outsourcing initiative. The engagement is for litigation support services and structured as a “suite of options [for clients] including offshore outsourcing,” according to litigation support specialist at Allen & Overy, Vince Neicho.

The Allen & Overy engagement is a great example of the growing number of firms who are starting to formally offer outsourcing as a part of their “suite of options” available to clients upon their request.

The second big piece of news out of the UK is word that Lyceum Capital is investing £25 million to fund a new on/offshore legal services vendor Laureate Legal Services (LLS).

This is one of the first big PE deals to come together in the UK as a result of the changing legal landscape and upcoming implementation of the Legal Services Act.

Lyceum managing partner Jeremy Hand provided insight to Lyceum’s investment strategy in the changing legal landscape for our recent book Implementing a Successful Legal Outsourcing Engagement. He is quoted in the book as saying, “In line with our core investment strategy, the legal services sector is large and fragmented, but maintains very high margins. Furthermore, this is an industry where the majority of clients are not happy and partners at law firms typically would not consider their organizations as ‘well-run.’ ” Hand emphasized the importance of firms proactively preparing for the implementation of the Legal Services Act stating, "In this market, the first-mover advantage will be key."+

As capital markets recover, investment opportunities will increase for alternative legal service vendors who provide new and innovative solutions for the delivery of legal services. As these firms seek to leverage first-mover advantage, we may see several similar deals coming together shortly.



+Bell, Michael D. Implementing a Successful Legal Outsourcing Engagement. The Ark Group and Managing Partner, 2009.

Re-Adjustments in US Law Firm Capacity

Due to the rapidly deteriorating economy, many legal firms found themselves dangerously over-capacity in late 2008 and much of the year in 2009. A recent article featured in the National Law Journal presented survey findings from the AM 250 regarding the number of lawyers lost or gained over the past year. The findings concluded, “The total number of attorneys working at the top 250 law firms plunged by 5,259 lawyers. Put another way, it's as if all of the lawyers working at two firms the size of Jones Day vanished in 2009.”

As significant as this figure is, it doesn’t even include the number of legal support personnel impacted by the economic slowdown.

To manage global litigation and economic volatility, it may be a strategic consideration for law firms to develop more “on-demand” models. Designing an “on-demand” model allows the law firm to push the volatility of their fluctuating legal services onto an outside vendor. Due to their diverse client base, vendors are better prepared to handle variability by using the principle of diversification.

Leveraging the same principal of diversification, law firms often act as an outside resource to assist internal corporate legal departments better manage work overflows. As such, why should law firms absorb all of the variability risk of their clients?

Partners Seek New Models but Wary of LPOs - A Holistic Perspective

In a well-presented post on the Prism Legal blog, Ron Friedmann addresses the recent survey by LegalWeek regarding legal outsourcing.

The LegalWeek article, Partners Seek New Models but Wary of LPOs, features a survey of UK lawyers regarding outsourced legal services. The survey shows a reticence of United Kingdom lawyers to use outside and offshore vendors.

In his post, Friedmann provides a more holistic perspective for the survey extrapolations and writes regarding the survey, “My rule of thumb: once a new thing gets to the point that major legal publications run just this type of survey, it almost inevitably means wide-spread adoption cannot be that far off.”

Quantity vs. Quality

Some of the detractors of outsourced and offshore legal services invariably cite quality concerns as a top issue (along with security and reliability). What is often overlooked is that the same issues of managing quality are also quite apparent in the large-scale document review operations performed domestically, as well. The challenges of onshore quality management were outlined in a recent article appearing in the ABA Journal.

The true tipping point for the offshore legal services industry will be when offshore vendors can definitively demonstrate that they are producing superior quality to comparable onshore operations.

With appropriately structured outsourced legal services and discovery engagements, superior quality is attainable as a result of the following:

• A superior talent pool (composed of better educated and more motivated personnel)
• Cost advantages (gained when offshore vendors devote resources more economically toward managing and training staff)
• Process structuring (developed when vendors leverage their service delivery knowledge of outsourced business services to legal services)

These factors can lead to quality, but often do not do justice to demonstrate quality. Perhaps the best way to compare offshore work quality is to try it out first-hand. There are a number of ways to test drive prospective offshore vendors. The most infamous demonstration being the Milbank’s blind survey which resulted with the outsourcing vendor coming out on top on all criterion as compared to the existing internal legal support department.

We have always been proponents of basing alternative legal services delivery on other factors and not simply on cost advantages alone. If the quality is not satisfactory, there are no cost savings in the long run. Furthermore, by focusing only on the cost side of the equation, law firms and in-house counsel are leaving substantial value on the table such as improved services levels, quicker response times, more flexible business models and, most importantly, better quality.

An Academic Perspective and Knowledge Decomposition

Mari Sako at the University of Oxford, Saïd Business School has done some accomplished research on the legal outsourcing industry. She is one of the very few academics that I am aware of who is diving deeply into the legal outsourcing and offshoring industry.

I had the pleasure of speaking with Sako recently. Our conversations and the basis of her work are summarized well by her article in July issue of Communications of the ACM.

The article provides a very grounded perspective on the drivers and challenges of outsourced legal services. One of the most interesting topics touched on by Sako includes knowledge decomposition, which means breaking legal work into constituent components. While desirable, it is often challenging to do so effectively in practice. In particular, I enjoyed her reference to the parallels of Frederick Taylor’s scientific management since many function areas of professional services are standardized and can be broken down into the basic process and knowledge components.

We agree that managing the knowledge breakdown is a challenging component of all types of outsourcing engagements, particularly complex knowledge-driven processes such as legal services. These challenges can be overcome through planning, foresight and appropriate time and resource investment to ensure the best transitions when outsourcing.

Legal Rebels

This week featured two days of publication postings and interactive web meetings between some of the legal profession’s vanguard thinkers - legal rebels, if you will.

Following are the most interesting excerpts from some interesting pieces written by very prolific thinkers on the legal industry as well as personal contributors to our most recent book. First, is a quote from Larry Ribstein followed by some provocative thoughts by Bruce MacEwwn. In addition, an excerpt by Richard Susskinds, mainstay of change happening in the legal industry.

Larry Ribstein: Ethics Rules Are Spinning BigLaw Into ‘Death Spiral’

“Ethical rules governing lawyers are designed to maintain the illusion that law practice is something other than a business…. The forces dispelling this illusion include increased market pressures on clients to hold down costs, increased media attention on the law business enabling clients to peer into the formerly black box of law firms, heightened global competition in legal services, a robust outsourcing market, and the expanded role of in-house counsel.”



Bruce MacEwen: It’s Time to Abolish the Role of the State Bar

“As a card-carrying capitalist, I believe in the virtues of states competing amongst themselves to provide favorable business environments for purposes of their choosing. Delaware has famously done it for incorporating the Fortune 500, South Dakota for credit card processors, and Nevada for gaming companies (and, time was, divorcees).”

“Why not incite competition among states for law firm LLC/LLP incorporations? Let firms—and their individual practitioners—choose what jurisdiction they wish to be subject to. Perhaps New York or California, or Wyoming, would decide to grant its lawyers US-wide practice rights. Full faith and credit clause, anyone?”

“Does this call for abolishing the role of state bar associations? Precisely. Beyond the role of attempting to perpetuate outmoded notions of territorial guild societies, what is their role? (I told you this harked back to feudalism.)”

“Isn’t it time, in our BlackBerry/iPhone/WiFi/time zone-irrelevant world, to be able to choose where our firms are ‘incorporated’ and where we are ‘admitted to practice?’”


Richard Susskind: Disaster Ahead for Lawyers Unwilling to Change

“Invariably, general counsel tell me they are now under three pressures: to reduce the size of their in-house teams; to spend less on external law firms; and to find ways of coping with more and riskier legal and compliance work than in the past.”

“To achieve the efficiencies needed, I say that legal services will evolve from bespoke service at one end of a spectrum along a path, passing through the following stages: standardization, systematization, packaging, and commoditization. Many new ways of sourcing will emerge (outsourcing, off-shoring, sub-contracting, co-sourcing, and more) and these will often be combined in the conduct of individual pieces of legal work. I call this multi-sourcing.”


These ideas confirm the importance of being aware of how changes in the legal landscape impact your law firm or business and making appropriate adaptations to strengthen your position.

More background on the ABA series is available at Legal Rebels.

Outside Counsel Spending Projected to Drop by 4.3 Percent Next Year

An article featured on Law.com states “A new study projects a 4.3 percent slide in corporate spending on outside counsel next year, on top of this year's 10.8 percent drop.” The study was performed by BTI and exposes the problem with high levels of over-capacity facing the domestic legal industry (and many other industries, as well) in the global economic downturn (hopefully, now the rekindling of a sustainable recovery).

Fortunately, economic indicators are starting to show a greater balance between supply and demand for legal services. As BTI President Michael Rynowecer said in the article, “The fact that we're seeing a couple of practices showing a pickup would suggest that we may be nearing equilibrium, at least for the moment.”

The study suggests “modest growth” in several legal sectors such as, “3.4 percent growth in regulatory work; 2.3 percent (growth) in litigation; and 1.4 percent (growth) in intellectual property litigation.”

These demand dynamics impact the overall legal outsourcing industry. If there is less work to go around, despite the cost saving functions of outsourcing/offshoring, outside vendors domestically and abroad are often those most affected in diminished demand. As the demand for legal services shifts toward equilibrium and beyond, we expect to s an increase is work for legal services vendors as well.

As noted previously on our blog, what is good for law firms is also good for legal outsourcing.

Legal Globalized

To say that legal outsourcing is inextricably linked to international business would be an understatement.

Many opponents of any kind of offshoring – from manufacturing to large-scale document review – seek to highlight the number of jobs “lost” to outsourcing. What is also overlooked is the number of jobs created by outsourcing and other forms of international trade. A recent article in the Chicago Tribune, A Rebalancing Act, states, “With American consumers cutting back in response to the recession, many U.S. companies increasingly are looking outward, toward fast-developing countries like China, India and Brazil. But instead of seeing those countries primarily as cheap producers of goods, both American manufacturing firms and giant multinational corporations see them as potential customers for U.S. products and services.”

I’m always amazed by the number of domestic US and UK products I see used at legal outsourcing vendors during my on-site assessments. Offshore lawyers work on Dell computers and run Microsoft windows while sitting on IKEA office furniture. And during lunch at their offices, I am routinely offered refreshments of Coca-Colas and Pizza Hut pizza.

By definition, trade is beneficial to both parties involved and legal outsourcing is no exception. As noted by the article, perhaps the next biggest market for domestic law firms are markets located in offshore locations such as India, Philippines and South Africa. Opening up the Indian legal system to outside law firms has been on the table for the past several years. Lord Bach has one of the more informative dialogues on this topic.

One thing that we have seen time and time again in our increasingly global world is to never say never.

UK Legal Outsourcing

In a recent article by Richard Brent of Managing Partner entitled, Out of sight?, Brent writes about a number of the high-profile legal outsourcing deals that have taken place over the last several months.

The article touches on several of the case studies that we included in our recent publication Implementing a Successful Legal Outsourcing Engagement such as Pinsent Masons and Osborne Clarke. These case studies are highly fascinating and hit on a number of very common challenges that need to be overcome to ensure a successful legal outsourcing initiative.

During a recent trip to London, I also had the pleasure of meeting Brent, as well as several other people profiled in the article.

Definitely an interesting read on dynamics in the UK legal market.

Slaughter and May

The banner announcement this week of Slaughter and May’s decision to consider outsourcing legal and legal support services is just one more example of UK firms becoming more public about their involvement in outsourcing.

Several articles on the topic include another from The Lawyer and LegalWeek.

It appears that increasing client pressure and the upcoming enactment of the Legal Services Act in the UK are requiring firms of all sizes and practice focuses to explore alternative service delivery strategies, including but not limited to outsourcing to offshore vendors.

Fronterion Groundbreaking Publication Release

We have long felt that there is a noted dearth of information out there regarding the nuts and bolts of outsourced legal services. This was the prime motivation for this blog – to serve as a pragmatic source of reference for legal professionals facing legal outsourcing decisions. While we strive to make this blog valuable to our readers, there is only so much that you can say in a blog.

This week we have released a nearly 200-page book on the legal outsourcing industry published by the international legal publisher Managing Partner and the Ark Group. We are very excited about the publication as one of the seminal pieces on the industry. A link to the book can be found at: Implementing a Successful Legal Outsourcing Engagement

Whether you are currently outsourcing, considering outsourcing or your clients are inquiring if you do so, this informative report serves as a highly pragmatic and comprehensive reference guide for legal professionals making decisions regarding a legal outsourcing engagement. Major subject areas include, but are not limited to:

+ The profound changes occurring at law firms that set the stage for the emergence of legal outsourced services;
+ The recent economic events that are shaping the industry;
+ An analysis of the outsourcing service opportunities and operating models currently available;
+ The potential benefits of outsourcing and how to recognize and measure these benefits;
+ Ways to define, design and ensure quality for an outsourcing engagement;
+ How to select a vendor, navigate the negotiation process and manage the vendor relationship;
+ Risk management techniques and a guide to ethical compliance;
+ Contracting considerations and important terms and conditions; and
+ How to overcome specific outsourcing challenges and avoid common pitfalls.

The book also includes valuable insight from a number of the leading experts in the US and UK legal outsourcing arena. We are all very excited with the book as unique and influential publication.

Further information about the book is available through the Managing Partner or from the Fronterion press release today.

Multi-Sourcing

In the much-publicized deal of the summer (2009), the Rio Tinto legal outsourcing engagement continues to pick up steam. With what has been noted as a successful endeavor with an Indian legal outsourcing vendor is now potentially being expanded to another vendor located in South Africa. This strategy is called a multi-sourcing outsourcing engagement.

Firms seek the benefits of a multi-sourcing engagement when looking to access niche vendor expertise (known as “best-of-breed” sourcing), leverage around the clock service delivery (known as “follow-the-sun” sourcing) and secure great business continuity through multiple vendors.

A multi-sourcing strategy presents challenges to legal professionals such as greater management and governance costs, increased complexity when forming tight vendor relationships and in work flow difficulties when service deliverables are co-dependent on a more than one vendor. While all of these challenges can be overcome, they must be appraised and planned for appropriately.

Without delving too much into detail here, you can read in greater depth the benefits and challenges associated with single versus multi-sourcing in our upcoming publication Implementing a Successful Legal Outsourcing Engagement.

Another important point made by the unnamed source in the article is that firms use their offshore vendor to better support, not replace, their domestic legal team. “This is not about taking quality legal work away from the UK. It’s about cost efficiency and outsourcing clerical work that can be done elsewhere,” stated the source in The Lawyer article.

At Fronterion, we have always been firm believers that slashing headcount for short-term financial gain is neither advantageous to the long-term competitiveness of the firm nor financial viability of such a legal outsourcing engagement.

Worst Is Over According to PWC

While some heralded the recent economic challenges in the US and UK as a basis for growth in the legal outsourcing industry, the actual outcome has been less than expected. Many vendors in growth positions have not been immune from challenging economic times, either.

When litigation and transactional work dries up, domestic legal firms work to keep their own staff busy before using an outside vendor either domestically or abroad. General counsel who have the same or even increased legal requirements in economically challenging times are often forced to delay or forgo legal services due to internal capacity and budget restraints. While client pressure on their legal counsel can have a positive impact on outsourcing, many times firms don’t even have time to consider augmenting their staff with an outside vendor during arduous periods.

What is often lost is that what is good for domestic US and UK legal professionals is also good for legal outsourcing industry. And vice versa.

A well-structured legal outsourcing engagement helps firms proactively manage risks previously uneconomical to pursue. It helps firms direct and allocate internal resources and provides better support to internal personnel. In short, legal outsourcing is not a zero-sum game. This is true for both the buyers and providers of outsourced legal services.

Recent economic volatility has highlighted many benefits of working with outside vendors. In addition to cost savings, outsourcing enables firms to manage variability better, improve client servicing, and initiate transformational change without expenditures among others. Current increased client cost sensitivity is another positive outcome in favor of outsourced legal services.

As organizations see a pick-up in their work dockets and more stable financial conditions (as noted by PWC), law firms and corporate counsels are now able to focus on more proactive organizational initiatives such as a new or expanded outsourcing engagement to better support their staff. We are looking forward to it as well now that the worst is behind us.

Opinion: Outsourcing the core

In an opinion piece featured in Managing Partner magazine entitled, Outsourcing the Core, Andrew Hedley discusses some of the dynamics and challenges facing legal professionals in the UK – particularly as they relate to outsourced legal services.

The points that I enjoyed most were his thoughts on the factors which impact market penetration for outsourcing legal services.

1. Technology: Technically speaking, it might be argued that a couple of factors have constrained development in the past for all but the most straightforward of work. These are shortcomings in communications technology, and a paucity of the advanced project-management skills needed to disaggregate a legal service, have the constituent parts handled independently, and then reconstitute the service at the point of delivery to provide a seamless client experience. Such technical and management challenges can now be overcome.

2. Perceptual: What remains is the emotional barrier of managing so much of the legal process at arms length within a profession in which many partners have been reticent to let work leave their own desks, let alone firm, country or continent. At an organisational level there are also issues of trust, confidence and client confidentiality that will need to be overcome. At what point will economic imperatives overcome these social and management impediments?

Too many times firms concentrate on overcoming the former challenge while in many ways disregarding the latter. Equal, and in some situations greater, emphasis should be placed on ensuring the internal buy-in and managing expectations for changes within the organization.

As Hedley concluded, “I believe these changes are inevitable. How far-reaching they will be, and over what timescale, are the key issues law firm leaders will need to consider when deciding on the best approach for their individual organisations.”

Conversation with Doug Hubbard

Quality is a big point of differentiation between outsourcing vendors. But how can law firms and corporate counsels determine that their prospective vendor can deliver on quality? Moreover, how can contracting firms manage quality of their outsourcing vendor even if the processes are not performed under their direct supervision.

The key for managing quality is measuring quality. To measure quality, it needs to be explicitly defined. More succinctly: Defining Quality => Measuring Quality => Managing Quality

This past week I had the pleasure of speaking with Doug Hubbard regarding his thoughts on measuring and defining quality. Doug is the author of the very insightful book, How to Measure Anything. Below are some of his thoughts from our conversation.

“When measuring quality, the most important thing is recognizing that quality is not ‘intangible’. Rather, quality is quite tangible and has observable consequences. If it didn’t have observable consequences, why would we care so much about it?”

Hubbard believes that lawyers should excel at defining quality: “At its core, the practice of law is defining legal issues. For example, it is the lawyers’ job to explicitly define each clause in a client contract,” he stated. “It’s all about avoiding ambiguity. The same principles and skills can be used to define quality.”

Defining quality invariably requires defining errors so they can be avoided. “To define quality requires defining what an error means and the appropriate scope of that error,” Hubbard explained. “Events defined as errors can’t be so rare that the error rate is consistently zero. This is misleading about the underlying risk of error. By measuring lower consequence-higher frequency errors, one can use these findings to make more accurate assessments of quality, as the low consequence errors are often indicative of high consequence-low frequency errors. For example, in space travel, if one were only to measure the loss of a crew member as an error, for the first Space Shuttle missions the risk of error would appear to be zero. But if one were to measure the number of high frequency-low consequence errors such as the number of times an O-ring burned through or when foam fell off the external tank, this error rate would be much more indicative of the actual risks.”

Following the same principles outlined by Hubbard, lawyers cannot define errors purely by high-consequence-low-frequency errors, such as avoiding a malpractice lawsuit or sidestepping a default judgment. These events occur infrequently and often do not directly correlate to quality. Rather, when creating a quality management system, legal professionals must use as a barometer high frequency-low consequence errors such as a typographical error or missed redaction.

*These above quotes and others also appear in our upcoming publication, Implementing a Successful Legal Outsourcing Engagement. More details on the book to follow.

A Broken Business Model?

While I do not think that the law firm is fundamentally “broken” nor do I profess the end of lawyers, below are some interesting points from an article published in the National Law journal titled “A Broken Business Model," by Joel Henning.

There is a lot of talk about moving away from billable hours, but alternative fee arrangements are neither new nor making much headway. Greater use of contract lawyers, offshoring, fewer equity partners, a cutback in associate salaries and more differentiation in associate pay and promotions — are all being discussed and even modestly implemented. But all of this has been around for at least a decade, and none of it has so far done much to make clients happier either about their legal bills or the quality of the services they pay for.

The concluding statements of Henning’s article note that law firms need to be run from more of a business perspective.

I particularly enjoyed the article since it emphasizes that outsourcing or other cost saving measures are not the solution in and of themselves. Rather outsourced legal and legal support services are component of a multipronged approach so for legal firms to better serve their clients.

The Billable Hour Debate Is Not About the Billable Hour

Another interesting blog post by Bruce MacEwen on the Adam Smith Esq. site - The Billable Hour Debate Is Not About the Billable Hour. The post addressed the ensuing debate of the “demise” of the billable hour. It is very interesting how Bruce reframed the debate as a basis of trust and not the other typical issues that cloud the dialogue.

Definitely worth a read.

Who Will Dominate Offshoring in 2020?

While reading through the interesting article in BusinessWeek - Who Will Dominate Offshoring in 2020?, written by Noshir Kaka, director at McKinsey based out of Mumbai, one point caught my attention in particular.

India graduates three million students every year, while the entire outsourced service industry employs 2.1 million in total. Therefore, India is effectively utilizing only 10 percent of their available workforce. Room for expansion is huge.

Kaka also discusses difficulties in the education system as well as language barriers, which are concerns for potential service buyers in more effectively utilizing this vast talent pool.

In our experience, we have seen the same trends with the legal outsourcing industry in India. We hear the often-quoted statistic that India produces approximately 80,000 legal graduates every year. But across the board, vendors typically recount the difficulties of recruiting qualified staff. In higher-level service areas such as legal outsourcing, based on our experience with a number of Indian LPO vendors, we see a significantly lower utilization rate for law graduates than the 10 percent noted by Kaka.

For the legal outsourcing industry to continue on its current growth trajectory, an increase in the supply side of the labor equation will be critical.

UK Openness

I just wrapped up my UK trip. While there, I met with a number of very intriguing firms in the industry. The US and UK have comparable levels of legal services outsourcing, but firms in the UK are markedly more open about it as compared to their US counterparts. I am not sure of the reason for this trend.

While I have a number of theories, I suspect that the upcoming Legal Services Act is influencing firms to be more open about the changes taking place at their organizations.

ABA Outsourcing One Year Aniversary

Today marks the first anniversary of the American Bar Association’s Standing Committee on Ethics and Professional Responsibility issuing of their Formal Opinion 08-451 Lawyerʼs Obligations When Outsourcing Legal and Nonlegal Support Services.

While we have not seen the tsunami flood of work sent offshore as some predicted, this past year has seen an increase of interest in and implementation of outsourcing. Firms may not be rushing to announce that they are outsourcing (particularly in a down market), but it is being done in increasing volumes. Outsourcing legal services is not part of the mainstream of common law practices yet, but it has gained considerable awareness and credibility in the legal community. Furthermore, we have noted great strides and increasing maturity of the vendors in the space, as well.

Due to quite a number of disruptive economic challenges and the proximity of core law firm functions, legal outsourcing is still in its early to mid-stages of development. Economics, client pressure, and changing dynamics in the legal industry will continue to drive outsourcing trends upward for this coming year and beyond.

No One Cares About My Office In Kuwait

This past week there was an interesting article in the ABA Journal - originally appearing in the Legal Intelligencer.

The article notes a trend of lawyers migrating from megafirms to mid-size firms that have more competitive fee structures and lower firm overhead.

According to the article, a departing lawyer was quoted saying, "My experience was it was difficult to engage local businesses with a higher rate structure. There were people down the street that could do the same thing I could at a cheaper rate."

"Somebody from Lansdale didn't necessarily care that I had an office in Kuwait."

Law firms need to better understand what is valuable to their clients - I misalignment of the firm and clients need is disservice to partners in their firm. The debate goes beyond whether firms should have offices in geographically disparate locations around the world.

The primary consideration being, that law firms need to ensure that they maintain low cost structures as to be competitive when working with clients. Otherwise, talent my jump ship... hopefully not the Kuwait.

Wealth of Flexibility

When facing uncertain times, traditional wisdom says to put your money into hard assets. (Note that gold continues to peak over $900+ this week). But when organizations are facing uncertain times their best asset is flexibility.

Across the legal industry we have seen a number of firms making “FTE adjustments” while recently some firms are actually hiring (albeit small) numbers of lawyers and support staff. (It helps when you have a client portfolio.) A major challenge in a fluctuating economy is the variability of the workflows and uncertain levels of litigation moving through the pipeline.

For firms facing these challenges, the "gold” is being able to take on work as it comes, but not retain large fixed costs to do so. Flexibility has long been a great strategic consideration when outsourcing to an onshore vendor (staffing firms) or offshore vendors (legal outsourcing firms).

As we continue to see how the economic situation shakes out, flexibility is the name of the game. The lean and highly-effective practices will benefit the most as the economy picks up steam.

EquaTerra Survey Findings: Outsourcing Up

The following are some of the most recent findings by the research group EquaTerra. While the survey findings are focused on more general outsourced services, it does demonstrate that the first movers are now engaging outsourced solutions to survive the lengthening economic downturn.

Demand for Outsourcing Increases as Organizations Seek to Cut Costs – EquaTerra 2Q09 Survey: The latest EquaTerra’s 2Q09 Advisor and Business/IT Service Provider Pulse Survey cited an increase in the demand for global outsourcing services from organizations seeking options to reduce operational costs. The survey also revealed that the ongoing economic slowdown has shifted the key aim of majority of outsourcing buyers from realizing competitive advantage to surviving in this environment. Stan Lepeak, Managing Director of Global Research for EquaTerra, stated that the current economic conditions have made cost savings the key reason for outsourcing services.

Among the key findings, about 46 percent of EquaTerra’s client-facing advisors reported increased outsourcing demand and about 65 percent of outsourcing service providers reported continued growth in their new deal pipeline during 2Q 2009. Moreover, about 58 percent respondents stated the current economic environment as the reason behind the increase in outsourcing, reflecting a quarter-on-quarter increase of 20 percent. Additionally, majority of respondents cited transition-related issues as the leading reason behind the failure to meet clients’ outsourcing objectives.

One interesting point to note are the "transition-related issues" cited by survey respondents. Based on our experience, these types of challenges are a result of a number of factors, but primarily poor planning in the front end and lack of continued management support after the deal. Therefore it is important to take a holistic perspective at the earliest stages for sourcing engagements.

Fronterion Texas Bar Article: Technology & Outsourcing

Check out the July Texas Bar Journal featuring an article on legal outsourcing titled, Outsourcing & Technology.

The article hits on some of the core considerations with technology issues for successful legal outsourcing engagements. Of course we may be somewhat biased after authoring to article.

If you have any questions or comments on the article, please join in the dialog about outsourcing and technology by writing us at blogger@fronterion.com

The 4th of July and Future of Legal Services

This past week we celebrated the 233rd anniversary of American independence.
Our country was founded on the principles of personal and religious freedom and also on capitalism. Some referred to it at the time `as the “grand experiment” and we have seen it work.

The basis of capitalism is the private individual using resources most efficiently to produce what the buyer wants. It’s about giving the greatest value to the client at the lowest cost. And the beauty is that both producer and consumer win in the free marketplace.


Another important factor in a capitalistic society is the forward-looking approach. Americans have not accomplished what we have by looking backwards. We did not waste resources protecting the typewriter and covered wagon industries. (Or if we did, it didn’t help!) Dramatic and seismic changes invariably occur in every business. When change is embraced, it leads to new, exceptional and dynamic industries such as the personal computer and automobile industries, respectively.


While the recent economic climate is forcing many to consider making challenging decisions faster than they have been made in the past, these changes are not directionless. The outcome of many current tough choices remain yet unseen. What will happen to the newspaper publishing industry? How will the automotive industry re-emerge from the brink of insolvency? And in our situation, how will the legal industry forever be altered?

Outsourcing legal services is now inextricably linked to changes in the legal space, and only time will tell how it will all play out. With the strength of our capitalist spirit, the result will be better than we can even imagine today. We look forward to the unfolding of the ‘grand experiment” of legal outsourcing.

Happy Fourth of July.

From Rio to Delhi

The big news in the outsourcing industry as of late is a deal between Rio Tinto and CPA Global. While it is a big win for CPA, the most exciting aspect of the engagement is the stance of Rio’s outside counsel.

According to Legalweek, Rio Tinto’s managing attorney Leah Cooper said, “Of course, I’d have much preferred if a law firm had come to me and said, ‘Hey, we’ve just entered into an arrangement with a low cost provider that’s going to save you money,’ but that didn’t happen.”

It was also interesting to note that Rio planned to use the CPA team to support not supplant their existing legal team.

“Any good business makes sure its legal team is aligned with the company’s overall needs, but we will not cut legal jobs as a result of outsourcing. The team in India is there to support, not to replace,” said Cooper.

Corporations are now finding new ways to reduce costs - at times going around their traditional legal counsel. It will be interesting to revisit this engagement after it has had some time to mature.

Tech Considerations When Sourcing

To complement my previous 6/9 post regarding technology and outsourcing, I had a couple of follow-up points about issues to consider when framing up your new engagement. Outsourced legal services are in many ways different from mechanized business process outsourcing (BPO) services. Trust me, the difference in legal sourcing is a whole other blog post. Service delivery models, personnel requirements, service solutions, and quality metrics are much different in legal sourcing. But, for the time being, take my word for it.

One area of legal outsourcing that is very similar with other forms of outsourced services is technology integration. The steps to ensure successful technology integration are fairly well established across a broad base of service functions; be it outsourcing accounting functions, medical transcription or for our purposes - legal services. Based on what we have seen, challenges may still arise when working with legal outsourcing vendors. The reasons are typically two-fold:

1. Some of the smaller legal outsourcing vendors may not have top quality infrastructure or robust process policies as compared to larger more established vendors.

2. For larger engagements or first-time outsourcers, many technology integration issues simply get lost in the shuffle.

Legal outsourcing, if done correctly, can be technologically secure and safe. The keys are taking the time to fully assess your provider (including some sort of on-the-ground due diligence) and being very meticulous throughout the entire integration process.

ABA 2009 Annual Meeting: Chicago

Mark your calendars. The American Bar Association (ABA) is holding its annual meeting in our very own Chicago this July 30th through August 4th. As usual, there will be a solid line-up of speakers, CLE courses, and vendor exhibitions along with plenty of “networking” events to go around.

To our out of town guests, please keep me apprised of your travel plans, as I would love host any of you during your stay in our lovely city.

For more information check out the ABA site (www.abanet.org/annual/2009) or contact ABA directly at abanet@xpressreg.net.

Article Sneak Peak

I recently wrapped up an article for an unnamed bar publication to be published this July. The article covers the intersection of technology and legal outsourcing. As a sneak preview to the article, here are some of the highlights.

The benefits of outsourcing legal support services come in three main areas: direct/indirect cost savings, strategic opportunities and technology benefits. Tech benefits include better utilization of existing technology applications and new solutions offered by the provider.

The article is a nuts and bolts outline guide to legal outsourcing engagement technology component and what legal firms need to look for when sourcing to outside vendors.

Keep an eye out for the article in its entirety in July.

Richard Susskind

Richard Susskind’s keynote address is now available on the ABA Tech show site: http://www.abanet.org/techshow/docs/2009/keynote.mp3

For those of you not familiar with Susskind, he is a noted visionary in legal services space and author of The End of Lawyers. As with all good messages, this one bears repeating.

One of the key points of his address that I particularly noted was that with the standardization of legal services, the client benefits in three ways. First, direct costs go down. Second, costs become much more predictable. Cost predictability is increasingly more important to clients. Finally, and most intriguing to me personally, the quality of services actually increase. The reason for this is that when certain services are standardized, many experts are brought together to pool their expertise leading to much more comprehensive solutions than would otherwise have been possible with a single lawyer.

Overall, the address is very thought provoking about the future of legal services and is definitely worth checking out.

Total Practice Management Conference Update

This Thursday and Friday I attended the inaugural Total Practice: Get a Life conference in Chicago as blogged about previously. I was very impressed with the conference speakers and content of the presenters.

In addition to wide range of pertinent topics across the legal industry, the conference included a panel segment on legal outsourcing domestically and abroad. While the outsourcing discussion remained at a fairly high level, the attendees were very attentive and interested in the opportunities available.

Put this one down for your calendar next year.

Zeughauser Perspective

The following article was published in Bloomberg on the state of US law firms: http://www.bloomberg.com/apps/news?pid=email_en&sid=a3Sz69kiPmYQ

There is some interesting insight by Kent Zimmermann of the Zeughauser Group as it relates to various avenues of cost saving avenues that still allow firms to retain top talent.

The Zeughauser Group typically takes a pretty hard-nosed approach to protecting the bottom line. As part of this tough medicine, Kent urges that, “cost-conscious firms to cut salaries, outsource more associate work to India, skip a year of attorney hiring and identify underperforming attorneys, practice groups and offices.”

One reoccurring theme throughout the second quarter is that firms are increasingly open to a multi- faceted approach to cut costs and retain profitability.

Chicago Conference

For our Chicago readers, here is an interesting legal conference geared towards sole practitioners and mid-sized law firms. The conference is hosted at the Hyatt Regency on Wacker on May 27-28. I anticipate that spaces may still be available.

In regard to conference topics, outsourcing is definitely on the table. It is encouraging to see interest in alternative legal services solutions from a spectrum of law firm size and practice areas.

Total Practice Management Association (Total PMA) did an excellent job lining up some interesting and diverse speakers. I am looking forward to it. Here is the link to the conference presenters: http://www.totalpma.org/events/get-a-life-2009/speakers/default.aspx.Hope to see you there!

Haste Makes Waste & Risk Management

I just arrived back to the United States after another quick, but busy trip to India.

Looking back on the provider assessments from the trip brings to mind the fact that organizations should not rush head-over-heels into a new outsourcing engagement.

While it is certainly possible to sign an NDA with a provider and begin sending work over immediately, it is not recommended for numerous reasons. Furthermore, it may also be the provider’s responsibility to put the brakes on a new engagement to ensure that all of the necessary bases are covered. This is a great opportunity for the provider to demonstrate their willingness to invest in a long-term relationship with the client and not merely a string one-off assignments.

This is not to say that entering into an relationship with a provider should take eons. However, by taking the time to agree on engagement specifications before entering an agreement will allow quicker response times in the future.

Risk management is essentially planning ahead. Some of the areas that I have seen organizations skip on the outset that resulted in unnecessary challenges down the road are as follows:

• Understanding the providers true capabilities and core competencies
  
• Defining engagement contingencies and escalation processes
  
• Designing specialized queues for varying service requirements
  
• Designating and enabling process owners and service champions
  
• Implementing and integrating technology solutions
  
• Defining data use, sharing and retention policies

As Benjamin Franklin once noted, “A stitch in time, saves nine.”

Challenges resulting from these areas is assuredly repairable, but any benefits of rushing into the relationship will be lost or greatly reduced when dealing with these issues on the back-end. 

Chennai and Culture

I just arrived in Chennai, India. The weather along the coast here is a bit humid, but the coastline is spectacular. The breakfast in southern India is one of my all-time favorites.

Arriving in southern India from the northern regions by Delhi is a good demonstration of the geographic diversity of India. The India as we know it today was established as recently was mid-ninetieth century. Therefore this large country is comprised of many diverse and varied states. I never would have believed this until coming over and seeing it for myself.

It is critical to understand the cultural implications resulting from the regional location of a current or prospective legal outsourcing provider. These implications are manifested in the methods of training and managing an offshore team. There are too many aspects to dive into at this point in time, but geographic differences is something that should be an additional consideration for legal outsourcing clients. 

Update from Gurgaon

I am writing from Gurgaon (high-tech satellite city of Delhi) today conducting additional due diligence on provider firms. Fortunately, being in meetings throughout the day keeps me out of the scorching mid-day Indian sun this time of year. I have always been impressed with the real estate boom in Gurgaon – if you have the chance, search online for the buildings going up in the area. Truly astounding.

Continuing from my last post, I wanted to highlight the additional areas of risk and risk management as it relates to performing effective due diligence on a legal outsourcing provider. Financial viability is certainly a core factor, but should not be the only determinant when making provider selection decisions.

After performing a number of on-site due diligence reviews, we keep coming back to the same key areas as follows:

• Personnel competency and continuity
  
• Security measures from both a technical and process perspective
  
• Executed and documented client service offerings
  
• Organizational longevity and capacity

It is important not only to check the box in these respective areas, as it requires truly digging down beyond the marketing hype to determine what the provider is actually doing.

In many regards, highly-successful legal outsourced services providers are more security-focused than their onshore counterparts. The key is seeking out these security-oriented firms that have a strong match to your service requirements. Furthermore, if you feel that not all of these or other areas were fully covered during the initial due diligence assessment, performing a supplementary, post-deal provider “check-in” is also a sensible component to manage the provider relationship. 

Growth of the Industry

Fronterion’s latest research, conducted in Q1-Q2 2009, indicates that more than 170 firms are currently offering offshore legal services. This number may further increase if less stringent provider parameters are applied. Based on our interactions with a number of these firms, a majority indicated potential growth in the near and mid-term. The growth of the industry is not without cause, as legal outsourcing continues to generate interest and excitement on both the buyer and provider-side.

The challenge is translating this “interest” into dollars and in turn sustainable cash flows. Based on our due diligence assessments, we find it imperative for contracting legal organizations to assess the financial viability and longevity of a prospective legal outsourcing provider. Prudence should drive the review of the prospective provider’s financial structure, client base, risk exposure, organizational track record and reliance on external funding.

The ability to meet SLA’s today does not ensure the viability of a long-term collaborative relationship necessary for a successful and mutually beneficial legal outsourcing engagement.

The 4 Points of LPO

LPO Source is a platform to assist firms to become well-informed purchasers of outsourced legal services. By offering insights from our on-the-ground experience, LPO Source is a valuable resource to firms that are already outsourcing or are considering outsourcing legal services in the future. LPO Source also provides updates on important happenings in the legal outsourcing industry.

The integrity of the reporting for the LPO Source is ensured through our independence from all provider firms. We feel that there is a need for an unbiased perspective on the market from someone who has been to these places and reviewed a number of offshore providers firsthand.

Based on our research and interactions with client firms in the U.S., the following are the four most discussed areas in the legal outsourcing industry.

LPO ≠ BPO

Legal process outsourcing (“LPO”) is different than other general outsourced business services (“BPO”). The primary differentiators is the legal domain expertise required by the offshore provider for a successful legal outsourcing engagement. It is critical for the offshore team to demonstrate a strong understanding of the legal domain. Whereby ensuring that all relevant legal issues are understood and addressed appropriately.

Growth Not Cataclysm

The legal outsourcing industry is a rapidly growing industry – we have seen the growth firsthand, but claims predicting the end of the domestic legal profession are a bit exaggerated.

Legal outsourced services support, not supplant, domestic legal professionals. Large numbers of legal professionals are not having their jobs taken away due to outsourced legal services. Legal services performed offshore are almost exclusively low-level, high-volume work, typically not performed by lawyers. Furthermore, there is not a mass exodus of recently out of work lawyers packing up in hopes of better prospects in offshore locations.

ABA Endorsement

The American Bar Association (“ABA”) provided insight and direction for the legal outsourcing industry with the Formal Ethics Opinion 08-451: 451 Lawyer’s Obligations When Outsourcing Legal and Nonlegal Support Services published August 5, 2008. The ethics opinion was a major advancement for the legal outsourcing industry, but the ethics opinion also places a lot of responsibility on the contracting firm.

Organizations must take the appropriate steps to ensure that the offshore provider is competent and secure. Obligations to contracting firms extended beyond the initial due diligence to the ongoing oversight throughout the engagement.

Not All Providers Are Created Equal

While there are a number of highly capable legal outsourcing providers, not all are created equal. Providers have different capabilities, areas of expertise, methods of delivering services and levels of security. All of these factors have far-reaching implications that need to be accounted for during the due diligence and on-going relationship management stages.

A buyer of legal services should not outsource on the assumption that the offshore provider can stretch to meet their legal outsourcing needs. Provider capabilities and security need to be demonstrated and confirmed before outsourcing decisions are made.

A Blog is Born....

Welcome to a brand new blog dedicated to sharing our expansive knowledge, insight, and musings about Legal Process Outsourcing (LPO). Noticing that there were not any independent, unbiased LPO sources in the blogosphere, we decided to create this site.