Friday, 6 August 2010

Legal Outsourcing to India Attracts Lawyers from West

(Lotus Temple in Delhi)
The New York Times has published an insightful article on legal process outsourcing (LPO) to India (which my colleague, Oliver Phillips, has extracted below). Every member of the legal profession and those interested in it should read it. This is a real future, not the only one, but definitely part of it.

The gist of the article is that LPO has become an unstoppable force and has now reached a level of maturity that Indian LPO firms are hiring western lawyers.

Here is Leah Cooper's experience:
Leah Cooper left her job as managing lawyer for the giant mining company Rio Tinto in February to become director of legal outsourcing for CPA Global, a contract legal services company with offices in Europe, the United States and India. Before hiring Ms. Cooper, CPA Global added lawyers from Bank of America and Alliance and Leicester, a British bank. The company has more than 1,500 lawyers now, and Ms. Cooper said she planned to hire hundreds in India in the next 12 months.
Admittedly, Cooper is one of the early acolytes of this movement and therefore proselytizes forcefully. But, as I mentioned in a post on the ILEC IV Stanford conference, David Wilkins at Harvard has been researching this area and he agrees that it is a fundamental change in the lawyering process.

What is changing is that instead of being seen as an inferior form of life, LPO companies are now attractive to lawyers. This is comparable to two earlier movements.

For a long time inhouse lawyers were considered second class citizens of the legal profession. Now look at their power, authority and clout compared to private practice lawyers. No one considers them inferior now.

Software development is another comparator. For a long time companies in Silicon Valley took Indian programmers because they were good and cheap. Then Indian software companies started growing and moving into Silicon Valley. Indians were being hired in San Jose and Bangalore as well as Americans.

I imagine similar things will happen to LPO companies, especially when the big consulting firms move in as they will.

If you want to judge the reaction to this movement, read some of the 219 comments attached to the article: I'm afraid they are rather forlorn and reactionary.

All of this is augmented by an article in the Economist on law and globalization which looks at restrictive practices by countries (eg. India, Canada, China) wanting to limit international lawyers.

Finally, this all fits in with the moves towards global liberalization of services, including legal services that I commented on below. Lawyers and the legal profession must start thinking creatively how they want to meet this new world. 

1 comment:

Peter said...

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).