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.