Wednesday, November 25, 2009

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.

Monday, November 23, 2009

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.

Friday, November 20, 2009

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.

Sunday, November 15, 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?

Tuesday, November 10, 2009

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.”

Monday, November 2, 2009

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.