AN ALTERNATIVE TO MERGERS: Can Mid-Level Law Firms seek to grow by entering into Outsourcing Deals?

The Introduction to this article-“Small and medium law firms looking to expand-An alternative solution to Mergers” is available at:

http://megalpo.blogspot.com/2010/10/small-and-medium-law-firms-looking-to.html>

The first part of this article-“Are Mergers the answer to Mid-level Law firm Growth?” is available at:

<http://megalpo.blogspot.com/2010/10/are-mergers-answer-to-mid-level-law.html>

PART II (A)

CAN MID-LEVEL LAW FIRMS SEEK TO GROW BY ENTERING INTO OUTSOURCING DEALS?

The legal process outsourcing industry across the world is all set for a breathtaking growth in business. We, in the legal world, keep hearing rumors about this ever-growing phenomenon. However, are the biggest potential outsourcers i.e. the law firms confident yet to outsource their ‘basic legal work’ to these providers? Is there ambiguity and seeds of doubt in their mind?

What I will try to establish in this article is whether small and medium law firms can expect to grow by partnering with a legal process outsourcing service provider. I will try to analyze the expectations of the law firms while outsourcing legal work, and make observations regarding the extent to which they are successful in this sphere.  Later, I will tie this up with my initial remarks about- whether small law firms are CONFIDENT yet to outsource their ‘basic legal work’ to these mostly-Indian providers.

As the Business Standard reports, the legal process outsourcing industry “is growing beyond most analyst’s expectations.”[i] Companies like UnitedLex, Integreon, Pangea3 and Mindcrest are receiving more and more offers for legal outsourcing over the last couple of years. And it is not just them. The quest for small yet reliable LPO service providers seems to be the rage of the changing legal world. Companies and corporate entities are outsourcing legal work aplenty, and law firms too are not far behind. In this part of my article, thus, I will try to analyze that one question or doubt which lingers in every law firm’s mind while thinking about outsourcing. Can legal process outsourcing be an effective solution and the right way for expansion and business growth for them?

Before that, I think a general introduction of the concept of legal process outsourcing is necessary. Legal process outsourcing, in brief, is a process by which a company or a firm sends out its basic legal work to foreign shores, to cut costs without compromising on quality. At the moment India looks like the appropriate market for such off-shoring. The kind of work outsourced include drafting, document review, contract management and review, due diligence and legal research- all which are central to the existence of most law-firms- small or large. Hiring junior attorneys for this purpose, which most of the mega-firms do, is simply a waste of talent, money and energy, all three of which can be concentrated elsewhere for the growth of the firm. The Indian legal system is similar to the British legal system, and hence it has been found that Indian lawyers are well suited to these tasks. The list of areas wherein the legal outsourcing industry can expand can go on and on. Instead of going into that I will directly move into some examples of some recent legal process outsourcing deals and then try to analyze whether such a deal will bear fruit for small law firms.

OUTSOURCING DEAL 1: SIMMONS AND SIMMONS AND INTEGREON

 

The large international law firm Simmons and Simmons has signed a one-year contract with India-based legal process outsourcing service provider Integreon. The details of the outsourcing agreement include sending offshore a substantial volume of low-level legal work to India.

“It is an explicit commitment in our strategy to be a firm that is embracing different ways of working… Our clients will appreciate the fact that we have taken measures to cut costs, but at the same time, continue to provide them with efficient and high quality services that can be adapted to their needs,” said Mark Dawkins, Managing Partner, Simmons and Simmons.

 Source: http://www.mpmagazine.com/display.asp?articleid=9A6565B7-7DBF-48ED-BEFE-323CE5AFEA54

As we notice from the words of the Managing partner of Simmons and Simmons, the firm is intent on expansion and growth in business opportunities. As they are a large firm, they look to continue their upward ascent and not remain stagnant without any business growth. The solution that they have come up with is outsourcing their basic legal work to a reliable LPO service provider in India. Integreon, as part of the deal will do a major part of the document production, document review, due diligence and legal research tasks of the larger law firm.  This kind of a step will ensure that Simmons and Simmons can dedicate its energy to increasing its clientele and taking up further ‘actual’ legal work. In this way, they can be assured of growth over the years as they keep outsourcing their basic legal work and continue filling the void so created by entertaining more and more ‘actual’ legal work.

OUTSOURCING DEAL 2: PINSENT MASONS AND EXIGENT

Legal process outsourcing is not unique to India. Other countries with efficient legal education systems are also slowly being converted into legal process outsourcing hubs. Take this example of the law firm giant Pinsent Masons tying up with the South Africa based LPO service provider Exigent. Exigent is mainly a litigation support service based in Cape Town in South Africa.

“We have built a strong relationship with Exigent over the past few years, perfecting a flexible document-processing service for our firm.  We are now building upon this foundation in developing our data review service,” is what litigation head of Pinsent Masons, Nigel Kissack has to say while justifying such a path-breaking move.

Source: http://www.mpmagazine.com/xq/asp/txtSearch.outsourcing/exactphrase.1/sid.0/articleid.346392F1-A2BD-4234-AE4D-C31480635D03/qx/display.htm

From the words of Kissack, we can easily interpret that the firm is going into such a deal solely because it is willing to expand its data-review services. The contract with Exigent will allow them to gather valuable research, considering its faith in Exigent’s document-processing service, as well as concentrate on all other spheres of business development. Exigent is expected to perform data review as well as e-disclosure work for Pinsent Masons. In this way, Pinsent Masons can cater to the needs of its clients better as it can spend more time on the subject.

ARE THE OBJECTIVES OF SMALL AND MEDIUM LAW FIRMS ACHIEVED THROUGH AN OUTSOURCING DEAL?

In the last part of my previous article, I had identified the reasons or objectives behind a small law firm going for a merger. I had listed the following objectives: Expansion of Business opportunities, Growth and increase in man-power. These are undoubtedly the most important factors influencing small law-firms to go for mergers with other law firms.

As I had already indicated, mergers are not the only hope. A close look at the examples that I have cited will show you the reason. Both the examples are of comparatively larger firms. Small law-firms have not explored much into this sector. Do they fear to? Possibly.

However, as the above two examples clearly illustrate, legal process outsourcing can prove to be an enticing option for small law-firm growth. With this kind of deal, of course with quality LPO’s, the small law firms can achieve what they hope most for- expansion of business opportunities. Not only that, but also such a deal implies a substantial increase in reliable manpower. Growth is the ultimate objective in a small law-firm’s mind and providing growth seems to be the ultimate goal for legal process outsourcing service providers. It is definitely a new concept but it is worth the risk for small and medium law firms to enter such outsourcing deals with reliable LPO providers. Through this process they can concentrate their energy on other areas of growth and simultaneously get their 'basic legal work' done offshore. The pros of investing in this sector, as I have analyzed are much better than the cons of the same, at least for small and medium law firms. The comparison of the two alternatives, mergers versus legal process outsourcing, keeping select bench-marks in mind, will be done by me at a later date. (in the conclusion to this article)

This brings me to the next and final question posed in this part of the article.

ARE SMALL FIRMS CONFIDENT ENOUGH TO OUTSOURCE?

The answer is again a flat NO. Not yet. Yet, as I have already indicated in my article, they have no reason not do so. The outsourcing deal for them implies a fulfillment of all their objectives. Their business opportunities can expand many-fold, their deficit in man-power shall be met, the work capacity of the firm is set to rise, and cumulatively, the profits are expected to soar. The only thing lacking in small law firms when they try to come to a decision about outsourcing is: CONFIDENCE. Nothing else.

It is this confidence that needs to be cultivated and it can be done. It just needs a beginning. As soon as a few come forward, the rest will follow. And it is not just law firms. Legal Process Outsourcing is being looked at like a god-sent opportunity for corporate entities to cut down on legal costs. This part will be covered by me in my next post (Part - II B of this series).

The predictions about the potential growth of the LPO market are usually positive and often very attractive. The small law firms have to grab hold of his enterprising industry and growing market and cling to them for a soaring upward growth and expansion in business. Their costs are set to be reduced and their business and cumulatively profits set to expand. Isn’t that what every ‘firm’ wishes to achieve? Yes, and even without exaggerating, the LPO industry is definitely an yes for all small or medium law firms in case they want to grow to newer and greater heights!

Written By:

Anagh Sengupta.

P.S. The next part of this article will follow soon. Happy reading!!

---

[i] http://www.business-standard.com/india/news/legal-process-outsourcingfirm-footing/395185/