First LPO conference creates debate
23 November 2009 | By Luke McLeod-Roberts
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Leah Cooper has become something of a celebrity in legal circles. A few months ago she noticed that the team she runs in her capacity as managing attorney at global mining company Rio Tinto was overburdened with menial tasks. But she was unable to justify recruiting further staff in the current economic climate.
The solution was to sign up with a legal process outsourcing (LPO) provider - in this case CPA Global - to create a team of 15 Indian-based lawyers responsible for research, legislative tracking and analysis, and document drafting. This has revolutionised the way her team works: it is now able to concentrate on areas in which it adds value while saving $8m (£4.77m) a year.
But Cooper is adamant that the profession is following suit rather than taking the lead on outsourcing. “This isn’t innovative. This has been around a long time. Legal services is late to the party,” she told delegates at The Lawyer’s inaugural conference on Legal Process Outsourcing and Offshoring last week (17 November).
Her brusque comments may have dissuaded any private practice attendees from trumpeting their own innovations on embracing LPO and business process outsourcing (BPO). But they would have struck a note with the LPO providers present, many of which have been selling similar services to investment banks and other professional services outfits for several years, but have more problems touting it to the legal profession.
Trying to market outsourcing from a purely costs perspective is a no-brainer. On average it generates a 30-50 per cent cost saving, as Rio Tinto’s experience shows. The reason that law firm management has been slow on the take-up is more to do with security concerns, quality control and, perhaps, prejudice.
It is fair to say that the security concerns have largely been addressed. Pinsent Masons uses LPO company Exigent to operate a data room in Cape Town that does not have any photocopiers or printers and has secure access. This is typical of the measures taken to prevent breaches of confidentiality.
Whether the buyer is in-house or private practice, an interface has to be created between the two business functions, and ‘planting’ managers with knowledge of how the outsourced function operates helps create a joined-up team.
It is much more difficult to address prejudice. As one representative from an LPO provider told a round-table discussion at the conference: “[For a corporate client] how different is working with an outsourcing company to working with an external law firm? Is it that they don’t want to work with another organisations or is it that it’s based in India?”
It is true that for some buyers Delhi or Mumbai may be a step too far. That is why LPO companies offer a spectrum of alternatives, including South Africa (same time zone), New Zealand (similar culture, and lots of the country’s lawyers have worked in the UK) or even onshore locations with lower cost bases, such as Fargo in North Dakota or Bristol in the UK. Obviously there is a trade-off between cultural similarity versus cost savings.
But some delegates felt that much of the aversion towards India is based on outmoded preconceptions that overlook the dynamic, highly educated workforce and growing sophistication of the country’s biggest cities.According to director of Clifford Chance’s Knowledge Centre Mark Ford, much more pertinent issues are the lack of other European languages spoken in India and cultural differences over how work is managed.
Clifford Chance’s Knowledge Centre, which is based in Delhi, houses 21 offshore staff established as a ’captive LPO’ operation to provide legal support services to the magic circle firm on a global basis. This captive model helps address any quality control issues, real or imagined, as the firm recruits and trains the staff itself. But there is a much greater outlay in terms of initial investment, particularly as all staff are seconded to the UK for a period.
Ford told the conference that problems sometimes arise over how instructions are received and queries are put back.
Also, with less complex legal work going abroad, delegates asked whether firms risked doing trainees out of a job.
“It has implications for training,” admitted Lovells investment banking and funds litigation partner Neil Mirchandani, whose firm was one of the first to outsource onshore through Its ‘Mexican Wave’ arrangement for Prudential’s property work. “Some LPO work is that which trainees cut their teeth on. Maybe we’ll move into a model more like the US, where firms bring on more experienced lawyers.”
Firms may struggle to persuade trainees and junior associates to send work elsewhere during a recession, when they are eager not to be underutilised.
Nevertheless, Mirchandani believes the change in UK lawyers’ focus is irreversible. “What’s moved offshore I don’t think will ever come back to England,” he said. “I don’t see us ever competing with India in the next five years on a cost-per-document basis.”
His views no doubt reflected those of many of the attendees. Outsourcing and offshoring is undeniably cheaper and the quality of the individuals may be just as good. But because of limited opportunities for career progression, fewer employee benefits and less varied work, there will always be retention issues. Clifford Chance’s Knowledge Centre employees typically stay for less than a year. The firm has recruited two of the team as associates to the LLP, but this is a rare reward.
And if those working in the offshore or outsourced entity are less committed, there is a risk that quality might suffer too. LPO/BPO is certainly here to stay, but associates should not get too worried about the future of their jobs just yet.
Aspects of the business are carried out by a third-party vendor, usually at a reduced cost to the buyer.
Aspects of the business are carried out overseas. This may be done by the firm itself and its subsidiaries, or by a third party.
The practice by which national firms such as Addleshaw Goddard, Pinsent Masons and Wragge & Co leverage off their regional offices to provide a lower cost base for City-sourced work.
Legal process outsourcing (LPO)
The outsourcing of front-office legal work, such as document and contract review and drafting.
Business process outsourcing (BPO)
The outsourcing of back-office clerical work on legal matters and support services, including accounting, HR, IT and marketing.