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Opportunities in legal process outsourcing

The costs of hiring legal services in the United States are very high. To minimize them, companies and law firms in the country are looking into outsourcing. Benefits include speed, flexibility and expertise in particular fields.

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  • India is one of the countries where part of the legal work is mostly being sent.
  • One of the potential risks involves data protection.

According to the United States Chamber of Commerce, the US justice system is the world’s most expensive, with a cost in 2010 accounting for almost 2% of this nation’s GDP. The organization’s website affirms that “lawsuits cost small businesses $105.4 billion in 2008—money that could be invested in more jobs, higher wages, or better benefits.”

However, the outsourcing of specific tasks is not new to the US economy. This has previously occurred in other fields such as in the textile industry and even call centers. And now, “legal jobs are no longer the exception”, says Lee A. Patterson, expert subject-matter attorney. “Work done by paralegals, office assistants and even attorneys is being outsourced to India and other nations, where business costs are lower and the finished product is usually equivalent to what would be produced in the United States.”  

Mark Tuft, professor from the University of San Francisco, agrees with Patterson: “The classic law firm business model is being challenged. Firms are under increasing pressure to reduce internal costs of performing routine legal services not only in the current economic downturn but also as a means of surviving in the long term.”

But not only legal firms are beginning to outsource tasks: companies are also seeking to delegate their legal services areas to other locations: “lawyers are not the only ones who know about legal outsourcing,” says William Pfeifer –an attorney and columnist on this subject-: “many Fortune 500 companies have taken notice of the cheap billing rates for lawyers overseas, and have cut out the middleman (the US firm) in favor of dealing directly with the legal outsourcing firms.” 

Outsourcing advantages

Every author agrees that the first and foremost advantage of outsourcing legal services is cost reduction. According to statements made to Forbes magazine by Leah Cooper –director of an outsourcing firm-, “in the area of document review, for example, “we have delivered savings of up to 80% for clients versus the cost of review performed by their retained counsel.” Patterson provides equally impressive figures: “many Indian attorneys only charge US$20 an hour for legal research. As the price of legal research at an American law firm is often around US$200 an hour, it is very easy to see why legal outsourcing is such a rapidly growing phenomenon.”  

But in addition to this great cost factor, Sally Kane, director of several legal magazines, affirms that there are other three significant advantages in outsourcing legal work. First, says Kane, North American firms and companies can access outside talent in areas lacking human resources “For example, litigation firms lacking litigation support expertise may outsource certain aspects of litigation support, such as coding and document review, to niche providers.” Second, outsourcing can enable reduced turnaround time in certain areas: “The use of a combination of onshore and offshore teams can also allow organizations to complete a project in a shorter time frame.” Finally, outsourcing enables legal firms and companies to be more flexible, “leveling the playing field with larger firms”, if the case requires few staff, the company can use its own employees but if it is a bigger case, it can rapidly set up a work team to step up to the occasion.

Possible solutions to some problems

Discussions on legal services outsourcing usually include two potential problems regarding this practice. 

The cost of an overseas attorney can be approximately U$S 20 an hour against U$S 200 an hour average in the United States

The first results from regulations stipulating that only US attorneys can provide legal counsel on US laws. But as William Pfeifer mentions, “restrictions on unauthorized practice of law are avoided by simply having U.S. in-house counsel or a local law firm review and approve the outsourced work.”  

The second potential problem is related to the spatial relationship between attorney and client and the protection of information handled throughout the case. But there are also ways of avoiding these hurdles. Ben Kerschberg, in a Forbes magazine article, suggests two: on the one hand, “memorializing contractually the precise nature of such relationships, as well as the parties’ explicit understanding of where liability lies should the issue arise” and on the other hand, “LSO providers that take quality seriously should be certified by the International Organization of Standardization (“ISO”).” 

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Kane, Sally. Top advantages of outsourcing

Kerschberg, Ben. Legal Services Outsourcing (LSO) -- Maximizing Comparative Advantage. En Revista Forbes, 16 de mayo de 2011.

Patterson, Lee. Outsourcing of Legal Services: a Brief Survey of the Practice and the Minimal Impact of Protectionist Legislation. En Richmond Journal Of Global Law & Business, vol. 7, 2008.

Pfeifer, William. Legal Outsourcing - What is Legal Outsourcing? A Cost-Saving Strategy or a Threat to Lawyer Income? 

US Chamber of Commerce Website

Tuft, Mark. Supervising Offshore Outsourcing of Legal Services in a Global Environment: Re-Examining Current Ethical Standards. En Akron Law Review, vol. 43, 2010.

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