Reducing Legal Costs

While it may not help you reduce your additional girth from that extra large serving of Thanksgiving turkey covered with mashed potatoes and gravy, this conference will help you trim your legal spend.

ALM is hosting their second annual Controlling Legal Costs conference in New York this December 8th-9th.

I will be moderating a panel on LPO featuring prominent legal counsel from Abbott and CA. Some of the discussion points for the panel include:

1) What are the value-adds and considerations for general counsel when outsourcing and offshoring? Many legal professionals assume that all “outsourcing” is performed offshore and that the only value provided by LPO vendors is low cost labor. What is the value of a “managed review process,” technology integration and expanded capabilities. What is the purchasing decision process of general counsel on the panel. How did they make their decision to outsource on or offshore? What value were they seeking from their LPO engagement and what were they seeking to avoid?


2) What are the trends for LPO and the specific approaches by GC’s in the coming year? Where do the panelists see their work with outsourcing trending in the coming year? What are the panelists' thoughts on industry trends, GC’s LPO strategies and ethics/regulatory changes.

I believe there is still some room at the conference. Contact the organizers if you’re in the area and interested in attending. Additional details available here.

Alarmist Intelligencer

This week’s Legal Intelligencer features an interesting and insightful, albeit alarmist, article on the changing competitive pressure created by the rise of LPOs. Much of the piece is well-written and I fully subscribe to the statements about the bolstering prevalence of LPO vendors, the permanence of LPOs’ value proposition, and the increasing disaggregation of legal services, among others.

That said, I may raise a wry eyebrow about these things:

Alarmist projections: We’ve been around long enough to see a number of these pronouncements come and go. True, LPO is a very significant and growing trend. It has profound implications for the relationships between law firms and their clients, but I don’t project the “end of lawyers” or apocalyptical demise of the legal profession. The global legal market is estimated to be approximately $400 billion (roughly 60% of it is located in the US). While projections may vary, the global LPO market is currently pegged at $440 million. Total market penetration of LPO: ~0.1% of the entire global legal sector. These numbers may not fully reflect the impact of legal outsourcing and the shifts in client buying preferences, but it does provide some perspective.

Dramatic schisms between law firms and clients: We certainly don’t view LPO as a wedge between with law firms and clients any more than contract attorneys or e-discovery vendors harm those relationships. While some firms will poo-poo LPO, the majority of top US law firms are working with LPOs in various capacities, even if not stating their involvement publically (see study findings here).

Tidy market position statements: Does profiling the market approach of a single LPO vendor illustrate what’s going on in the entire market? Does the stance of a single law firm say everything about LPO relationships? Personally, I’ve never found neat and tidy statements accurately reflect the reality and complexity of market forces. Not all LPOs are created equal and there is not a homogenous approach to the market, as implied by the article. We have seen vendors evolve to different strategies and services as they support different corporations, and law firms. For a contrasting view of the strategic approach published in the article, see a counter-post by Ron Friedmann of Integreon. Friedmann raises an interesting point that LPOs create diversity in the legal sector and that, “diversity is a key element of a healthy ecosystem.”

Ironically, as Bruce MacEwen (fellow Adam Smith Esq. partner to Janet Stanton quoted in the Intelligencer article) noted in the foreword of my book, “I may disappoint you to report that what I believe is far more parochial: the adoption of outsourcing will be firm by firm, activity by activity, year by year. Like much of the march of progress, change will be less drastic in the short run than many imagine, and more revolutionary in the long run than most can foresee.”

In closing, LPO is an option that law firms can offer to their clients or an alternative resource available to corporate legal departments. In the short run, the legal profession isn’t “falling apart,” but in the long run is the rise of LPO domestically and around the global more revolutionary that most can foresee? I would say yes, but don’t take my word for it.

Work It Out: Tri-party Line

Conversations between general counsel and their law firm counsel regarding LPO are increasingly important. These discussions should include when and if to utilize an outside LPO vendor. That topic is the central theme of my recent article in Berwin Leighton Paisner’s “Work It Out” journal.

The article is entitled, Tri-party Line: The integration of outside vendors into the delivery of legal and support services is one of the most significant developments affecting the legal profession...

The piece highlights issues that in-house legal teams should address and pitfalls to avoid when working within the tri-party relationship. As noted in the article, “The two primary challenges are managing the tri-party relationship – between in- house team, the law firm and the legal outsourcing vendor – and ensuring ethical compliance and adherence to professional standards by all parties.”

Attorneys in law firms and in-house counsels need to anticipate and prepare for these types of relationships which will be increasing in number in the future at LPO becomes a more common practice.

C5 Conference Wrap-up

While a bit thinly attended in comparison to previous events in London, the C5 Legal Process Outsourcing conference was certainly a success in terms of discussion and speaker caliber.

One high point was the discussion on captive delivery centers led by three very knowledgeable men who are involved in the field of outsourcing. These included Evangelos Apostolou (BT Vice President and Chief Counsel APAC who established and managed the BT legal outsourcing captive in Delhi – including the recent transfer to UnitedLex), Mark Ford (director of the Clifford Chance Knowledge Centre), and Paul Rawlinson (Global Chair of Baker & McKenzie’s IP Practice who oversees Baker & McKenzie’s global delivery of IP services).

A key theme arising from the discussions was the perspective that LPO is one of a suite of cost saving measures available to general counsel. Of the conferences that I have attended, the C5 conference provided the most insight into the in-house legal teams’ outsourcing perspective (both to LPO’s and their outside counsel). Prominent general counsel speaking at the event included Richard Reade of ISS, Richard Tapp of Carillion, David Symonds of Tyco, Stephan Regius of Borealis AG, Pavel Klimov of Unisys, and previously mentioned Apostolou of BT.

The smaller event size allowed for some highly interactive and insightful discussions on issues ranging from pricing, oversight responsibilities, day-to-day challenges of managing global service delivery and ethical issues surrounding outsourced legal services.

My thanks go out to all of the speakers at the event for sharing their insights, to C5 for the privilege of chairing the conference proceedings, and to all participated who made the event a fruitful one.

Leveraging Outside Vendors

Featured in the Spring 2010 International In-house Counsel Journal is an article titled “Leveraging Outside Vendors in a Changing Legal Landscape” authored by Richard Reade, UK General Council of ISS and me. The ten page article covers many key topics regarding the current state of the LPO industry. It’s a good read for those just getting familiar with the LPO industry or those who are already involved and need to gather more information.

The article covers these topics:
• Setting the stage (background information)
• Cost pressures
• Risk management
• Outsourcing profiles
• A structured approach to LPO
• Sourcing opportunities
• Offshoring opportunities and challenges
• ISS UK sourcing innovations
• Tips and best practices

It was my pleasure to work with Richard Reade on this article. He has been involved in legal outsourcing since early 2008 when he established an innovative outsourcing solution with a team based in India and London. Richard is also a frequent speaker on the topic and nominee for in-house legal innovation awards.

The article will be published in it’s entirety in the June addition of the International In-house Counsel Journal.

Two’s Company, Three’s a Crowd

The last several weeks, we’ve seen a number of press releases regarding the vendor relationships with the software giant Microsoft.

The announcement-spree was kicked off with a release by CPA Global reporting that Microsoft is currently employing a “team of between three and five qualified lawyers at CPA [that] are handling multi-jurisdictional legal support work, including legal research… in CPA's offices in Gurgaon.” This was the second major public release by CPA after the Rio Tinto engagement in June 2009.

Coming quickly on the heels of the CPA release was a separate release from Integreon. The details of the release reported Integreon to be the “exclusive provider of offshore managed document review” on behalf of Microsoft. This was one of the first major corporate engagements publically announced by Integreon.

The contract management portion of the Integreon-Microsoft engagement is reported to be handled primarily by Intgreon’s onshore delivery facilities in Fargo, North Dakota with “eight full-time contract specialists.” This is reflective of the importance of onshore-offshore engagement structures for legal outsourcing engagements as reported in the recently released Fronterion 2010 Global Sourcing Study and also featured in The Lawyer.

While not a legal service engagement, the third and most recent vendor announcement came from Infosys. It is reported that Infosys is servicing Microsoft to “manage internal IT services for Microsoft worldwide” including “IT help desk, desk-side services, and infrastructure and application support from multiple global centers.”

Who knows who will be next in the Microsoft vendor release bonanza?

The “Process” in Legal Process

A recent blog post by general counsel legal consultant Rees Morrison outlines an insightful definition of “process” in legal process outsourcing.

The original reference was a quote by the general counsel of GenPact featured in the European Lawyer Issue 92, Jan. 2010. Per Morrison’s post and the European Lawyer regarding the definition of process when delivering legal services, “[t]here needs to be a process, it should be routine and people should be able to use a set of rules and guidelines in dealing with the work.”

We certainly agree that outsourcing legal services should not be delivered in the same manner as legal work performed by domestically qualified legal professionals.

Ensuring appropriate amount of structure or “process” surrounding a legal outsourcing engagement allows the firm to leverage economies of scale as well as ensure adherence to appropriate ethical standards when sourcing to non-domestically qualified personnel.

Furthermore, only leveraging labor arbitrage without the help of a supporting process is often unsustainable and leaves a significant amount of value on the table for the contracting law firm or general counsel.

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.