Monday, October 11, 2010

Industry Projections Gone Rogue…

A consultant to the legal industry posted a slightly abrasive, but seemingly unexceptional blog post about the various industry trends “chipping away” at the traditional law firm staffing model. The post cites legal outsourcing as a one of several triggers for massive job losses at the top 200 US law firms:

“Legal process outsourcers are gaining traction, especially with clients. For sake of argument let’s say there are currently the equivalent of 1,000 outsourced lawyers (there are probably more than that just at Pangea3, Integreon and CPA Global right now). If this number increases five-fold, which is slower than the growth rate over the last few years, that will result in a shift of 5,000 lawyer jobs.”

The seemingly unexceptional blog post took some heat for the validity and rigor of the employment projections including criticism by industry blog Above the Law as reported by the ABA Journal. For an industry as dynamic as LPO, estimates are notoriously difficult to peg without highly detailed knowledge of the industry. I take less issue with the projections suggested as I do with the misconceptions of the projected job “shift.”

Are the projected 5000 new jobs in the LPO industry directly correlated to a 5000 job “shift” (read lost, redundant, right-sized, etc.) at top US law firms? Is it economically sound reasoning to assume that economic interactions are tit-for-tat? In short, no.

Does the increase of LPO mean that there may be marginally less demand for legal support staff for certain low-value service areas? Perhaps. Alternatively, doesn’t allowing firms to offer new services so clients can economically litigate and conduct transactions also increase the demand for the services of law firms, and thus the demand for lawyers? Absolutely.

The blog comment also contains underlying connotations that all LPO is performed offshore, but onshore LPO is positioned to be one of the most significant developments in the legal profession during the suggested 5-7 year timeframe.

In short, we recognize that industry projections can be challenging, but underlying economics of competitive commerce in any industry should never be seen as tit-for-tat.