The Future of the Legal Profession: Georgetown Ground Zero

This earlier this month I had the pleasure of attending Georgetown’s annual conference. This year’s event, Welcome to the Future: Trends in the Delivery of Corporate Legal Services, was held on March 9th.

In a welcome change of pace, I didn’t have any formal speaking obligations so I was free to take notes and enjoy the range of very impressive speakers from major US law firms, in-house legal teams and innovative legal support vendors.

The conference centered on the trends impacting the future of the legal profession and included lively discussions and debates on key issues such as the relationship between law firms and in-house legal departments, characterizing and defining value, the impact of legal brands and innovation in the legal services supply chain.

The conference’s self-described focus follows: “There is much talk in the air of a revolution in the delivery of corporate legal services – but what’s actually happening on the ground? This intensive one-day conference is designed to provide concrete insights into how corporate legal departments and outside service providers can collaborate to provide valuable and cost-effective legal services.’

Some key takeaways for me included:

Six Sigma and Pixy Dust
Part of the long-standing debate is whether law firms will act more like LPOs or if LPOs will act more like law firms (also recently discussed on an ABA podcast here.

The conference featured a visible example of a law firm acting like LPO. On a very interesting panel, representatives from Seyfarth Shaw and Wolverine Worldwide outlined their approach to a more known productive relationship using enhanced productivity approaches. What is titled ‘Seyfarth Lean’ is the application of Six Sigma lean and Seyfarth “pixy dust.” While there are continuing challenges with adoption internally and issues with compensation systems, the application of Six Sigma is certainly a step toward ‘law firms acting like LPOs’

More details on this arrangement are available in a previous ACC post.

Legal Supply Chain
As firms continue to embrace multi-source, multi-shore legal outsourcing, the mocker “LPO” may take on a new form as the ‘legal supply chain.’ The legal supply chain concept embraces work that is delivered in the most cost effective manner from a variety of sources. (The overall ‘supply chain’ orchestrator is either the law firm or the in-house legal team.) In addition to traditional LPOs, the supply chain also incorporates the likes of Axiom whose founder Mark Harris also spoke on the ‘legal supply chain’ panel at the Georgetown event.

As the closing speaker for the ‘legal supply chain’ panel, Pangea3 Co-CEO David Perla spoke on various LPO topics including:
• The findings from a survey conducted by Thomson Reuters as they were exploring LPOs to acquire. The exercise surveyed why law firms and in-house legal departments worked with LPOs, (Hint: the primary reason was not cost.)
• The three components of quality (people, processes and technology) and how these specifically relate to LPO service delivery.
• How LPOs are not competitors with law firms because the overall pyramid of available legal work is always expanding due to the growing complexity of legal matters and an increasingly regulated business environment.

One of the interesting undertones of the Georgetown event was the dissolution of DC-based Howrey. Partners voted on dissolution Wednesday of Georgetown event. More details and implications on this shortly.

Legal Outsourcing Summit – In Review…

This month, representatives and LPO enthusiasts gathers for IQPC’s inaugural LPO conference in New York City at the Sentry Club. The speaking faculty included representatives from top AM Law firms and multi-nationals such as Microsoft, Pfizer, Nokia, Milbank Tweed, Hinshaw Culbertson, and Mayer Brown, among others.

I had the privilege of chairing the event which included three days of workshops, speakers and interactive sessions.

Highlights from the event included hearing about personal experiences, presentations of case studies and lively discussions by the sophisticated delegation of conference attendees.

Key takeaways from the conference included:
* The importance of taking an active role as the buyer, including the selection, supervision, and management of an outside vendor.
* Shifting work to an outside LPO vendor does not absolve the firm from responsibility for the work and work product.
* Firms are seeking to address similar issues, but are using differing approaches to LPO. Variations includes onshore vs. offshore delivery, captive vs. third-party vendors, the range of outsourced service areas and divergent management approaches.
* Onshore LPO delivery was a reoccurring theme.

We see this conference emerging as a cornerstone event for the industry. Stay tuned for any details on upcoming events.

For more information on this year’s Legal Outsourcing Summit event click here.

Thomson Reuters-Pangea3 Deal Raises Competitive Pressure

There’s no doubt that legal process outsourcing is changing the delivery of legal services. Thomson Reuter’s acquisition of Pangea3 last November has further fueled the LPO discussion and sparked debate among industry experts about the ethical implications of Thomson delving into competition with its client base, especially since Pangea3 plans to open more offices in the U.S.

In a recent article in the ABA Journal, several industry commentators, including myself, point out that the Thompson-Pangea3 deal has raised the competitive pressure for law firms both large and small. Innovative law firms will adjust their market approach and leverage LPO as a cost-effective way to accomplish repetitive and process-based work.

The full ramifications of Thompson Reuters backing an LPO will become clearer throughout the year. However, as clients grow more reluctant to pay top fees for commoditized, repeatable work, law firms must evaluate whether forming LPO partnerships will help them deliver services more efficiently.

Stay on Top of LPO Regulation in 2011

After flying under the radar for several years, legal process outsourcing (LPO) has finally caught the attention of regulators around the globe. In the three main LPO markets – the United States, the United Kingdom and India – there is the potential for rule changes which could place outsourcing agreements under increased scrutiny or even have a material impact on the ability of law firms and companies to send legal work to external providers.

For example, Connecticut has introduced a bill designed to prevent law firms and corporations from offshoring the drafting, reviewing and analyzing of legal documents to workers overseas. Under the bill, proposed by Connecticut state representative Patricia Dillon, "unlicensed'' offshore workers who engage in these activities for clients in Connecticut could be charged with unauthorized practice of law. If the bill is passed, there is the risk that other US states may pass similar laws.

Fronterion’s January newsletter focuses on the changing regulatory landscape for legal outsourcing in 2011. To keep up to date on the changing ethical and regulatory environment in the coming year, sign up for our newsletter by emailing forefront@fronterion.com, visit the LPO Ethics Resource Center, and review our most recent press release.

Also, to learn more about legal outsourcing strategies, be sure to register for this new LPO conference scheduled for February 14-16, 2011 at The Sentry Center in New York, NY.

LPO Conference Hits New York

Mark your calendars, a new LPO conference titled, “Examining Legal Outsourcing Strategies and Deciding What Fits Best for Your Company,” is scheduled for February 14-16, 2011 at The Sentry Center in New York, NY.

This conference, one of the first major LPO events in the United States in some time, will discuss how legal process outsourcing is fundamentally different from other types of outsourcing and will address the unique considerations inherent in LPO.

I am chairing the event and will host a distinguished line-up of speakers from organizations such as Chrysler Latin America, Integreon, Clifford Chance, Pfizer, Microsoft, Nokia, Milbank Tweed, Wilmer Hale, Shapiro Sher Guinot & Sandler, Hinshaw & Culbertson LLP, Wachtell Lipton Rosen & Katz, Kaye Scholer LLP and Mayer Brown.


The conference will cover a laundry list of LPO issues and will help you:
Understand your obligations as a legal professional when outsourcing;

Assess outsourcing for contract management, a top emerging service area in 2011;

Understand the legal outsourcing options available to your company;

Learn the key factors to consider before making a decision to outsource;

Understand the scope of required conflict checks in an outsourcing arrangement;

Strengthen communications and clarify expectations between your company and the outsourced entity; and

Address the scope and content of required confidentiality agreements and their limitations.


As a pre-conference warm-up, the conference website features several interesting podcasts by conference speakers including interviews with Lucy Bassli of Microsoft, Mark Ross of Integreon, and Cathleen Pedersen of Orrick. The Bassli podcast is of particular interest and outlines Mircosoft’s work outsourcing contracts with Integreon as announced earlier last year.

If you have any interest or involvement in legal outsourcing, you won’t want to miss this event.

Top 10 for 2011 – Annual Trending Release

Today we’re releasing our annual trending report on the legal outsourcing industry - Ten for 2011: Top 10 Trends in Legal Outsourcing in 2011.

The report was featured by the ABA Journal - Legal Outsourcing Consultant Predicts More Onshoring - which highlighted both the onshore developments as well as greater transparency by major US firms.

Today's Fronterion Forefront newsletter features our assessment on our predictions from last year. To sign up for the newsletter email: forefront@fronterion.com


Ten for 2011 Release Details

Fronterion, the leading international consulting firm for outsourced legal services, today has released its second annual report outlining the prospects for the legal process outsourcing (LPO) industry in the coming year.

Following a breakthrough year for LPO in 2010, the Fronterion Ten for 2011: Top 10 Trends in Legal Outsourcing for 2011 reveals the most important trends in legal outsourcing for the next 12 months.

A significant prediction for 2011 is a rise in the use of onshore LPO providers, those who deliver services from low-cost domestic locations in the United States and Europe. Attracted by significant savings in such locations, combined with the benefits of servicing clients within the same time zone, law firms and LPO vendors will continue to invest in onshore services alongside traditional overseas options.

Next year also looks to be the year that local regulators and trade bodies definitively respond to the way outsourcing is changing legal services across the globe. There are significant ethical and regulatory issues attached to legal outsourcing. For example, how do firms demonstrate adequate supervision when work is performed by an LPO vendor? Who is liable for the work done by LPO lawyers? And, how much should law firms charge their clients for work done by LPO providers on their behalf?

The American Bar Association is currently consulting with its professional members concerning changes to its draft rules, while the United Kingdom’s Solicitor’s Regulation Authority is considering a major of review of LPO in response to the growing number of firms sending legal work to outside providers.

Another key trend is greater transparency. The first major US firm will go public with its LPO arrangements next year, something those in the US legal industry have been unwilling to do until now. The increasing application of technology, which allows LPO providers and law firms to work together more closely, will be another growing trend in 2011.

More consolidation is likely, following the example of Thomson Reuters who acquired Pangea3 last month in the largest deal ever seen in the legal outsourcing market.

Using its unrivalled access to LPO firms and their clients, Fronterion again set out its predictions for 2011. Fronterion managing principal Michael Bell said: “This year, we’ve seen many of our 2010 predictions unfold in the industry. For example, we projected LPO would become an increasingly valid career path for young lawyers. Both in low-cost jurisdictions and in parts of the US and Europe, LPO firms have been ramping up their operations to meet increased demand, and at a time when traditional law firms jobs have been harder to find.”

“We see 2011 as a pivotal year for legal outsourcing as it continues to develop from a niche practice to a truly global industry.”


Fronterion’s Top 10 for 2011 are:

1) A Fundamentally Changing Legal Profession. Continued downward pressure on costs and the globalisation of legal services provide a perfect environment for LPO. Those who refuse to engage with LPO will increasingly become a minority - the industry can no longer be ignored.

2) Enterprise Approach. Many firms already outsource legal work at partner or department levels. However, LPO is more effective and efficient when a firm implements a firm-wide or ‘enterprise’ approach, led by senior management.

3) Onshore Expansion. The growth in onshore and hybrid on-offshore delivery solutions will begin in earnest in 2011. This trend will be equally prevalent in the United States and United Kingdom, with LPO providers and firms already building capacity.

4) Expanding Client Geographic/Jurisdictional Reach. Demand for LPO services will spread to new markets. In the US, law firms in Texas, the Midwest and the Pacific Northwest are potential growth markets for LPO. In the UK, regions outside of London are also emerging growth markets. However, continental Europe will remain a challenging environment for LPO.

5) Progressive Value Proposition. LPO providers will have to offer more services and a more progressive value proposition to remain competitive. Alongside traditional litigation support, LPO vendors may also have to offer contract portfolio servicing, compliance, diligence, human resources, medical and broader legal support functions.

6) Increasing Technology Applications. As a result of the growing importance of technology, LPO vendors will use technology as a key selling point. Technology platforms will be used to offer diversified services and as a means for vendors to further embed themselves in client organizations.

7) Dynamic Vendor Landscape. The unprecedented growth and industry consolidation initiated in the fourth quarter of 2010 will continue to shape the dynamic LPO vendor landscape in the coming year. Overall, these consolidation trends are positive for the industry as vendors emerge stronger, more capitalized and, most likely, considerably larger.

8) Public Acknowledgement. The growing acceptance and adoption of onshore and offshore LPO will become more visible in the coming year. This will become increasing prevalent in the US, where in past five to six years, corporations and law firms have remained virtually silent on all LPO related matters.

9) Divergent Vendor Approach. Competition means that LPO vendors will have to differentiate themselves from each other in terms of services offered and delivery models. No dominant model exists (yet) and a range of different approaches will emerge next year.

10) Ethical Guidance. Regulatory bodies start to address the changing legal landscape. In the US, ethical commentary is expected from the ABA’s Commission on Ethics 2020. In the UK, announcements are expected from the SRA and the Law Society. Other jurisdictions that have been silent so far may follow suit, such as Australia, Canada, and South Africa.

For the full Fronterion Top 10 for 2011 report visit www.fronterion.com/tenfor2011/

ABA Draft Ethical Amendments Release

Perhaps the most influential announcement on the topic of LPO made by the ABA following the 08-451 Formal Opinion publication in August 2008, the Commission recently proposed minor changes to existing ethical guidance.

The ABA 20/20 Commission recommends modifications to the commentary of the Model Rules 1.1, 5.3 and 5.5.

Basically, this is what we expected, but it does provide some additional clarity about the Commission’s outlook going forward.

These proposed amendments are to be debated over the next 6 to 8 months with a possible final presentation to the ABA House of Delegates during the annual meetings in August 2011.

More details on the announcement are available here

For more background information on the announcement and the ABA 20/20 Commission check out Fronterion’s LPO Ethics Resource Center.

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.

ABA Favors Less Invasive Approach to LPO

This past week I had the opportunity to address the ABA Commission on Ethics 20/20 during their October 15th meetings. We see the decision to abandon significant rule changes regarding LPO as a very positive development.

More details about the Commission and the meetings are available on our LPOethics.com website. The article, ABA Abandons Significant Rule Changes, includes an insightful summary of the proceedings.

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.

Good News Growth

The ABA Journal reports law firm summer associates are being retained at a high rate this year. That is great news for lawyers and clients.

While many practice groups are beefing up their staffing, legal outsourcing is also a way for firms and general counsel to expand legal capacity without becoming over-extended. Everyone hopes the economy is on the upswing for good, but no one knows at what the pace of expansion will be or how long it will last. LPO has a unique value-add in comparison to contract attorneys and it provides variability to an otherwise, very fixed cost business model of law firms.

Fronterion “Wall of Silence” Survey Round-up

Our survey findings released this past week have captured the attention of a number of online publications and blogs. The survey results seem to have number of people hypothesizing why US firms are so hesitant to acknowledge or deny their use of LPO vendors, even on a confidential basis. Based on our experiences, we would purport that uncertainty with ethical guidelines is one of the key drivers to this silence. Worries of negative press may be another.

Below is a short news round-up.

ABA Journal

Above the Law

About.com

Fronterion Announcements: Study findings and LPOethics.com launch

We are proud to announce two very exciting developments at Fronterion this week.

The first is the 2010 Global Sourcing Study: AM Law 50, which polled 30 of the top 50 US law firms concerning their positions on legal outsourcing. The findings were reported on in today's ABA Journal, Are Top US Law Firms Outsourcing Some Legal Work? 83% Won’t Say.

Complete findings and analyses are available in the 2010 Global Sourcing Study: AM Law 50 report. Contact GlobalSourcing@fronterion.com for additional details. The press release - WALL OF SILENCE SURROUNDS NASCENT LEGAL OUTSOURCING INDUSTRY – highlights the findings from the study. As reported in the press release, “while many US law firms are using outsourcing providers for the first time, few are willing to admit it in public, leading to a culture of secrecy around an increasingly important development within the legal services industry.”

Our second announcement is the launch of the LPO Ethics Resource Center at www.LPOethics.com. As reported on the website, “The LPO Ethics Resource Center is a free resource that allows legal professionals to keep abreast with up-to-date information on the ethical policies and opinions relevant to outsourced legal services. This site compiles all of the latest information and breaking news regarding legal process outsourcing into one convenient resource.”

The resource is targeted for legal professionals in both the US and the UK.

We are very excited about making Resource Center available due to the expected number of developments in legal outsourcing ethics in the forthcoming 12 months.

More details on both announcements will be provided later this week.

LPO Encore

Law 21 author Jordan Furlong outlined some good thoughts on the legal outsourcing industry in his recent post, The Evolution of Outsourcing. In particular, I appreciated his points about what he described as the LPO “encore” – innovation. More details are available on Law 21.

The post was met with the predictable Above the Law blog snub – complete with apocalyptic tidal wave picture in the event the ominous commentary was not entirely clear. For a more complete perspective on the Furlong piece, the Above the Law commentary is an interesting read.

Lone Star Sourcing

In addition to the number of other ethical organizations looking into the implications of legal outsourcing, it appears that Texans are studying these issues, as well. As reported by the Fort Worth Business Press, the State Bar of Texas’ 2010 annual meeting being held this week in Fort Worth will address legal outsourcing, among other issues impacting legal professionals.

More information is available through the Fort Worth Business Press.

Orrick and the Death of PPP?

The firm Orrick Herrington & Sutcliffe recently announced that they are no longer publically providing their annual profit per partner numbers used in industry rankings such as those performed by the American Lawyer.

While firms’ reporting mechanisms are not major differentiators, we do applaud firms that are now starting to take a longer-term perspective of their organization than the annual profit per partner rankings. A longer-term perspective allows for more strategic planning and market innovation (which may include, but is not limited to, further investment in longer-term investments like outsourced legal services initiatives).

More details are available in an article featured in ABA Journal.

WilmerHale: Washington Post

Firms are leveraging new ways of working to be more efficient. So, it’s no surprise WilmerHale's plan to move organizational support services to a less expensive location was further reported by the Washington Post today. WilmerHale plans to open a “business services center” in Dayton, Ohio. Initially, the center will handle technical support services, but the article states on-site document review capabilities are expected to be offered in the near future. Will other large law firms choose onshoring over offshoring their lower level legal and legal support services? We’ll have to watch and see.

Note that I was quoted in the Washington Post article which is now available online.

WilmerHale Insourcing

Some interesting new insourcing developments occurred this week with the D.C.-based law firm WilmerHale. The firm is launching an onshore delivery center in Dayton, Ohio which will provide a host of support services.

According to the official press release posted on the WilmerHale website, services to be performed include traditional back office services such as “finance, human resources, information technology services, [and] operations.” Additional services to be performed also include traditional legal outsourcing services such as document review and management.

The stated goal of the initiative is to “provide improved efficiencies for administrative teams and the firm, and reduce significant operational expenses.”

This announcement directly affirms the findings and projections of our 2010 Global Sourcing Study, which is currently available online at: www.fronterion.com/globalsourcing2010/

As noted in the Global Sourcing Study, legal outsourcing vendors will face increased indirect competition if law firms do indeed become more efficient on their own. It will be interesting to see if similarly positioned firms in high-cost jurisdictions seek to improve the competitiveness of their firm through consolidation and domestic cost arbitrage.