- Legal Process Outsourcing
NOV 01, 2016
Legal process outsourcing: what you need to know
As legal process outsourcing gains ground in MENA, what can law firms do to ensure that their legal service provider is a seamless extension of their office? Suhayl Hendricks presents the case for outsourcing as well as insight on how to get it right.
Legal process outsourcing (LPO) is far from a novel concept. In recent years, legal service providers (LSP) have brought about such extensive cost and time efficiencies that a number of global law firms have established their own LPO units (or similar back offices). As of 2013, Clifford Chance had its own offshore center in India, Herbert Smith Freehills had its in Belfast, CMS Cameron McKenna’s unit was based in Bristol, and Addleshaw Goddard had set its outfit up in Manchester.[i] Their experience suggests that they have benefited from greater control of the entire legal review process while still being able to offer the competitive costs of LPO firms based in cheaper jurisdictions. As LPO becomes more attractive to firms in the MENA region, there is no reason why corporates shouldn’t follow suit, optimizing their workflows and turnaround times, reducing the cost burden, in terms of manpower and capital expenditure.
While law firms, especially in the region, are likely to know more about how LSPs work and what services they provide, corporates are only recently looking to streamline processes and the legal function. Some of the legal services LSPs provide to help law firms and corporates manage their work more efficiently include:
· Contract management and review
· Document drafting and production
· Legal research
· Due diligence services
· Intellectual property services
· Risk and compliance services
· Litigation support services
The biggest draw for law firms and corporates is the immense cost saving. Low-cost providers are generally sourced from developing economies such as South Africa, India, the Philippines and other Asian countries, where wages are around 30% to 70% of those in developed countries and overheads are significantly lower.
This reduced cost is passed on to law firms and corporates; total savings on large litigation matters have been reported to exceed 70%. The benefits of outsourcing overflow work are even greater in the current market situation, enabling both in-house counsel and law firms to reduce spend while continuing to add value, meet deadlines, and gain access to external talent.
Upscale and downscale as needed
A completely scalable solution, utilizing an LSP provides flexibility for small- to medium-sized firms or the overstretched corporate counsel. The ability to draw on a large pool of talented lawyers in a different time zone allows teams to respond dynamically, work around the clock and meet previously unattainable deadlines. It enables large law firms with high overheads to be more competitive with costing during pitches, providing them with a competitive advantage; it reduces turnaround time; and, reduces cost per hour of support, as well as the average cost per document.
A more competitive service model
The new generation of lawyers is increasingly less willing to accept the traditionally long hours and pressure placed on junior staff as the price they must pay to reach partner status. The impact of globalization, greater choice and competition is squeezing partner profits and reducing a firm’s ability to offer the sort of pay and conditions required to attract the best talent. LSPs allow firms to outsource the routine, time-consuming and process-oriented work, such as contract review, giving their in-house talent the ability to focus on more complex and high-level strategic work.
While there are obvious advantages for firms and clients alike, the ultimate responsibility for maintaining ethical standards, confidentiality, and assuring quality and accuracy falls back on the corporation or the law firm. While maintaining these standards is critical to a firm’s reputation, it could be argued the same issues are at risk when using in-house lawyers. Decisions need to be made on the following fronts: who to involve and when; how the total work will be distributed among all the potential resources; and how the resources will interact with one another. Here are some checks and balances that firms can put in place to ensure that their LSP of choice acts as a seamless extension of their office:
o Ensure the LSP has comprehensive policies and procedures on client confidentiality
o Check your insurance provides cover for your LSP services
o Always ‘sign off’ on the legal work to be performed by the LSP to uphold your professional responsibilities
o Obtain client consent to use an LSP for their work
o Ensure the LSP has an approved process to perform conflict checks
If projects are adequately supervised by the company or law firm hiring the LSP, with a clearly defined scope of work, and the LSP is able to provide assurances on the establishment of security protocols, and quality of work, LPO can only be a mutually beneficial solution. Perhaps the most critical step to ensuring that outsourcing works and actually carries substantial benefits is doing the due diligence prior to beginning a working relationship with the LSP of choice.
Globally, corporates and law firms have already embraced the LPO trend – in 2009, Rio Tinto, a global mining company, saved USD8 million by outsourcing its legal work to an LSP based in India.[i] In recent years, LPO has gained more traction in the MENA market, and adapting to this thriving business model is likely to allow businesses to exploit efficiencies, expand capacity, and leverage internal resources more productively.
Author: Suhayl Hendricks
Bio: Suhayl Hendricks is a Legal Solutions Consultant at Thomson Reuters, where he works closely with law firms and in-house corporate counsel to implement and refine workflow, research and information solutions for the Middle East and North Africa. These solutions include Legal Managed Services, Serengeti, MatterSphere and Business Development Premier, among others.