Rio Tinto outsources legal work to India
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Mining giant Rio Tinto has embarked on an outsourcing project that will see part of its internal and external legal needs outsourced to India.
A dedicated team of 12 lawyers provided by outsourcing company CPA Global will carry out contract review, drafting, legal research and document review work on Rio Tinto’s behalf. It is estimated that the project will generate savings of around 20 per cent out of the company’s legal cost base.
It is expected that the scope of work will be expanded to include regular legal work currently carried out by both the in-house team and by external legal advisers. Rio Tinto’s advisers in the UK include Baker & Mckenzie, Herbert Smith and Linklaters.
Baker & McKenzie competition partner and relationship partner Samantha Mobley said: “We’ve indicated that we’ll embrace this way of working and hope [as a result that] we’ll receive more projects from Rio Tinto than we have done to date. It’s helpful for all of us because it affects the kind of area in which law firms are being pushed for value for money and it makes us more competitive when tendering for projects.”
A spokesman for Linklaters added: “We have been discussing this with Rio Tinto for some time and are supporting them in their initiative to ensure that legal services are provided in the most efficient way practicable. We see this as something which should help to strengthen our relationship.”
Rio Tinto managing attorney Leah Cooper emphasised that a CPA lawyer would cost around $250 per day, which is “less than a very junior lawyer at a major law firm”.
She added that potential issues of confidentiality and competency that may be involved with having third party providers had been addressed by CPA.
“Our dedicated team sits in a branded Rio Tinto room, literally with fingerprinted access. Nobody else from CPA can get in or out, they don’t have printers,” she clarified.
Readers' comments (6)
Associate ex-US Firm (of Indian origin) | 18-Jun-2009 4:31 pm
If Rio can't even trust its "dedicated team" of CPA lawyers to work on projects with a printer, I wonder how important or substantial the pieces of legal work being sent their way are.
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Regina Nash | 18-Jun-2009 5:47 pm
Trust is very important in any relationship and business is not just business, it involves a personal relationship. Human beings work better when they are trusted, I wonder how Rio expect their so called "dedicated team" to be genuinely honest and trusted?
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Anonymous | 18-Jun-2009 6:09 pm
Especially since corruption there is so rife. Other companies who have outsourced have discovered this to their cost with stories of counting notepad pages out in the morning and back in in the afternoon, bans on mobile phones and employees being targeted by fraudsters.
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jstone@mwe.com, psacripanti@mwe.com | 19-Jun-2009 3:48 pm
I must say I do not fully understand how this works. But is it something we are keeping up on so that we do not get caught out if it really is a wave of the future?
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Christopher Luke | 19-Jun-2009 4:49 pm
I am based in India and work iwith local law firms having been a legal consultant in the UK for 18 years. Anonymous at 6.09 your comments are ill informed.
There are excellent well trained lawyers practising both common and civil law proficiently for international and large Indian companies at a significant cost discount to UK legal suppliers.
If any Managing Partner wants to talk to me please do so and I can give you a practical briefing. Contact: cl@mcauleypartners.com
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Peter Wu | 4-Mar-2010 11:51 pm
Outsourcing to locations with lower fixed and/or variable costs is all well and good, but it still leaves the underlying issue that there are variable costs in the (legal services) supply chain.
What clients are telling their legal service providers is that they want fixed fees - this means eliminating variable costs from the equation.
However, all that's been done here (and all that outsourcing can ever achieve) is that those variable costs have been moved from one intermediary (law firm/inhouse) to another (outsource provider). To be sure, the variable costs have also been reduced for now, but they will inflate again when the outsource providers' own input costs rise as their economies develop.
The only sustainable, long term solution for the elimination of variable costs is automation. Starting from the industrial revolution, automation has been steadily creeping up the value chain, in line with the advancement of enabling technology. We are now able to automate intellectual as well as physical labour.
There's no better illustration of this evolution within a single organisation than Ford Motor Company, which not only uses labour automation to assemble its vehicles, but is now also beginning to use document automation to assemble its legal contracts (using the Exari document assembly system).
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