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!!

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

SourceBook:

SourceBook:

Meteoric Growth in LPOs in India: Sanjay Kamlani

Pangaea3 co-founder Sanjay Kamlani has given his forecast that the Indian LPO industry which is a provides for 15,000 jobs as of this year, shall grow by 100% in the next one year, thus giving rise to a total of 30,000 jobs by next year.

He said that the LPO industry has grown by 100% in the last one year and he expected such meteoric growth to continue for the next few years. He also said that the legal services industry in USA and the UK was estimated to have a value of $400 billion, of which just $1 billion was outsources, thus leaving immense scope for the sector in India.

UnitedLex Ranked Top 5 by Black Book of Outsourcing

U.S. full-service legal services outsourcing provider, UnitedLex has been ranked 4^th in the Top 50 Outsourcing Service Providers by Datamonitor’s Black Book of Outsourcing. The survey is the leading independent benchmark for customer satisfaction in the outsourcing industry.

UnitedLex provides solutions in the fields of litigation, electronic data discovery, document review, contract review and management, intellectual property, legal research, immigration and law firm support.

SourceBook: A New LPO Information Service

SourceBook: A New LPO Information Service

A new section is going to be started shortly on MegaLPO blog, called SourceBook. It shall provide information on the recent happenings in the LPO sector, both in India and across the world.

AN ALTERNATIVE TO MERGERS: Small and Medium Law Firms Looking to Expand- An Alternative Solution to Mergers

SMALL AND MEDIUM LAW FIRMS LOOKING TO EXPAND- AN ALTERNATIVE SOLUTION TO MERGERS

How small and medium law firms can grow with the help of a supporting Legal Process Outsourcing Unit.

INTRODUCTION:


Most law firms always wish to expand and encourage growth of business. What mid-level law firms do is that they merge with other similar firms in the hope of creating a larger and better collaborated firm. However, that is not the only alternative available to them. In this article, I will try to put forward my view of the alternative- how small and medium law firms can grow with the help of a supporting Legal Process Outsourcing Unit.

Mergers are not the only hope for medium law firms.
There is an alternative!

In this regard, I shall be writing this article in three major parts. The first part of it will look into the law firm mergers over the last few years and what the firms look for while merging with another similar or a larger firm. The second part will try to analyze the alternative, the possible greater growth of law firms if they outsource to LPO’s. The analysis in both these cases will be theoretical, though some areas will be spiced up with the use of statistics. In the third part, I will try to analyze the two alternatives, with respect to different benchmarks and try to ascertain which the better option for mid-level law firms is.

Written by:

Anagh Sengupta


Part I 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 of this article- "Can Mid-level law firms seek to grow by entering into Outsourcing Deals?" is available at

 <http://megalpo.blogspot.com/2010/10/alternative-to-mergers-can-mid-level.html>

P.S. The other parts of the article will follow soon.

JOB OPENINGS IN LEGAL PROCESS INDUSTRY

The current growth of LPO, suddenly provided a new drift in the legal sphere whereby it provides law firms, corporations and small legal entrepreneurs to obtain operational and administrative work from foreign vendors. This system has considerably provided huge growth in the recent few years within the United States and the UK, and offers exclusive way for firms and corporations to get the administrative as well as legal services that they need, including document review, legal research, patent services, and drafting of pleadings and legal briefs.

Keeping in view, the main purpose of legal process outsourcing is to lower the work costs as much as possible and provided them with the same quality of work. It has proven to be quite successful for LPO industry in countries like India and the Philippines and small countries of South East Asian region, offering their services to anyone who needs them.

Some experts predict that the key growth area in the LPO industry in upcoming days includes document review, legal research intellectual property services and other legal services. However, existing outsourcing firms have started focusing on the legal markets of South Asian countries, Korean and other countries legal markets.
Like any other outsourcing sectors, an LPO reduce down the costs and takes the burden off the client. The success point of any outsourcing service provider and for an LPO is the manpower.

In today’s LPO industry sector due to its emerging growth, it has been seen that the job opening in legal sector has increased in considerable percentage. There are also diversified jobs in LPO ranging from senior legal executive, legal associates and many more designations. According to market research, the basic entry level salaries ranging from Rs 9000 – Rs 20000 depending on the firm. With gaining sufficient experience the salary may rise to Rs 30000 – Rs 50000 per month.


In this competitive new legal world, LPO had captured a lot of fame in global legal market. There has been considerably inclination from domestic law firms to an increasingly competitive global marketplace with enormous scope and job opportunities. The clock is ticking fast and with time LPO’s in India will be a much sought after industry to work with. Keeping in view, all the new services being developed and the increased popularity of this type of service acquisition, it appears that legal process outsourcing has a very promising outlook for the next five years at least

SETTING UP FAILURE? IS INVESTING IN THE LPO INDUSTRY A MISTAKE?

SETTING UP FAILURE? IS INVESTING IN THE LPO INDUSTRY A MISTAKE?

Are new LPO providers wasting time and resources? Is the LPO Industry A perceived goldmine or an exploited one?

A criticism of the opinion (“How to start up your own LPO: and how not to”) by Sanjay Bhatia of SDD Global which appeared in legallyindia on 22^nd July, 2010 (available at: < http://www.legallyindia.com/201007221127/Legal-opinions/opinion-how-to-start-your-own-lpo-and-how-not-to>)

Should entrepreneurs think twice before looking into the booming LPO sector?

Investor's dilemma? 

The depiction of the dwindling legal process outsourcing industry as projected by Sanjay Bhatia of SDD Global in his article which appeared in legallyindia is not totally true. Indeed, upto a certain extent, we have to agree that not all the LPO’s generating all over the country are capable of achieving a very high quality status. The major reason that Bhatia points out in his opinion is that nowadays it takes more than a simple ‘office, staff and a website’ to start up an LPO. He believes that the boom in the LPO industry is over and we are now just looking at the fading end of it, to which some young entrepreneurs are falling prey to. To this I disagree. The industry, unlike what Bhatia says, is still in its nascent stage. It is growing and growing fast. Some LPO companies have established their credibility in the market. But can’t others? Bhatia’s article is a discouraging one for these new entrepreneurs. But how much of his reasoning is correct is what I shall try to analyse.

Of course, a newly set-up LPO needs clients. But isn’t that true for all enterprises? To be successful in any field by providing a service or creating a product, a company needs clients and customers respectively. That the western companies have to be ‘inspired’ to outsource their work to India is nothing new. Any client in any sector has to be inspired in one way or the other for them to take the services offered. The LPO sector is no exception. The attraction of being able to outsource work at low prices is always there. However, the credibility as well as the experience of the companies being outsourced to has to be looked into by the outsourcers.

Bhatia, in spite of all this, rightly states in his article the most important things to be kept in mind while opening a new LPO. However, the context or the picture that he projects is seriously erred.

ESSENTIAL COMPONENTS OF A NEW LPO:

Effective management is essential.
However it is not mandatory that it
should be US/UK based. 

1. A management team: Bhatia says that a LPO’s success is determined by whether it has ample US or UK qualified lawyers or not. In this regard, I wish to point out that having a management team comprising of US and UK lawyers is not an absolute necessity for setting up a successful LPO. Instead of having an ‘US or UK experienced’ management team, a LPO could do with a simple management and then for each project get guidance from the company which is outsourcing work to it. For example, say an US law firm L is outsourcing work to an Indian LPO A. By my logic, I think that A’s management staff does not necessarily have to be US- based for them to progress well. By no means will the presence of an US lawyer boost the credibility of the LPO. Firm L will not outsource even if A has five US lawyers in its management. This is simply because firm L, to get it work done properly, does not require an US lawyer on the managerial board of A. The lawyers of L can itself assist A as to what work is to be done and how. The work of an LPO is such that all that is needed is a dedicated team which meets deadlines. Foreign firms, companies and attorneys are already aware of the talent in legal research that the Indian students and graduates possess. They know that harnessing that will be  a boost for their organization for the simple reasons that i) they get it cheap and; ii) they get quality work. A firm can collaborate with an LPO with regard to what work has to be done and instruct it at every level. No foreign managerial board members are required to enhance credibility. There cannot be ‘communication lapses’ because there is a constant touch between the LPO and the client. The only factor essential on the part of a LPO to establish itself as a ‘serious player’ is to show dedication and hard work and slowly gather the interest of clients. Only this can lead to a further and further increase in the number of clients.

The Indian Staff chosen has to be competent
 enough to handle the project; their English
has to be good. This is a necessity.
And it is not impossible.

2.        A competent Indian Staff: It is true that, as Bhatia says, a competent staff is essential for the LPO’s success. I completely agree with him in this regard. And in fact, here even he agrees that ‘…All said and done, it is the quality of the work product that determines an LPO's success.’Bhatia are actually not so. First of all, let us try eliminating the number which will not go to an LPO for looking for work unless it is a very high-paying one. These include the graduates from the National Law Universities and the other top level law schools like Symbiosis, ILS, Amity etc. Say there are about 20-25 such Universities around India. Cumulatively, that comes to around 2000 students graduating every year. These students form the higher end of the economic pie who will sacrifice their LPO jobs to wait for law firm jobs. Let us add another 3000 to this pie from all other colleges. Thus, according to Bhatia’s estimate we are left with another 75,000 Indian lawyers. It is not true that the available recruits are the ones who are disastrous at English and cannot be hired for an LPO. Bhatia correctly points out that, in an LPO industry, writing skills occupy the forefront. However, he portrays a very wrong picture when he says that the remaining Indian lawyers/law graduates are grossly incompetent for this purpose. This is an insult to their education for the past five years. Among these remaining 75,000, even on an approximate, there are at least 20,000 odd graduates who are good at English and know the basic law well. The efficiency of the LPO will be determined by who they hire and they have to choose well, because even these 20,000 per year is sufficient to cater the needs of the rising LPO demand in the worldwide legal industry. These, along with a few proficient supervisors, can control the problem of the ‘misplaced comma’ which Bhatia concentrates on so much in his article. Precision is necessary and such precision can be obtained by what resources India has. The industry is not as bleak as Bhatia projects it, but choosing must be accurate in order for it to grow.

Training is a requirement for
the success of any LPO.
Such training has to be provided
by the client's themselves.

3.        Training programmes, which is better if provided ‘in- house’: Again, I have to agree that what Bhatia points out is indeed correct for the functioning of the LPO. It has to be trained to do the client’s work. However, that does not mean that the LPO employee has to be aware from before as to what the ‘intricacies of the US law’ is. On the other hand, it is simple supervision on the part of the client which will pay heed to this. The client will train the employees with regard to what work is expected to be done for them and how. Their training will be with respect to that specific project and not the intricacies of US law. However, this topic has been quite well dealt by Bhatia while analysing the ‘micro-level’ training, and I will not differ much from what he has stated. This kind of ‘in-house’ training by the client is absolutely essential and important for both the client as well as the LPO. There is no reason why both will not be happy to include this as a basis for their mutual growth.

It is true that a lot of importance is placed on quality of work. However, it is equally true that India is capable of handling such work and it new LPO’s with a proper management can proceed to capture the market of outsourcing in India. The bleak and dwindling image of the LPO industry as projected by Bhatia is not at all true. His component break-up and analysis of the essential for a new LPO in the industry is perfect. But his reasoning behind disregarding them in the Indian context is flawed. His article is discouraging and the picture portrayed is not at all true. The industry is rising and will continue to rise over the next decade. Employees have to be chosen correctly, proper supervision and management needs to persist. But all these are factors which are intrinsic for the growth of any company in any sector. None of the LPO entrepreneurs are wasting their time. They have to look for the best resources to tap into. Business will come. Credibility will be established. Work will be outsourced and managed. Lawyers will be employed. And the LPO industry will continue to grow.

Written by:

Anagh Sengupta. 

THE LARGEST MAY NOT NECESSARILY BE THE BEST: Outsourcing can bring about the maximum potential in mid-level law firms.

THE LARGEST MAY NOT NECESSARILY BE THE BEST: Outsourcing can bring about the maximum potential in mid-level law firms.

“Size may no longer be everything. In fact, it may not be anything at all.”

An Analysis of the second part of the article ‘Outsourcing- The New and Improved Business Model Big Law Needs’ in AmLaw Daily (By Stephen Harper)

The piece by Stephen Harper is available at:

http://amlawdaily.typepad.com/amlawdaily/2010/08/harperoutsourcing.html

In the second part of his article, Harper makes a very interesting observation. He says, one of the biggest positives of legal process outsourcing is that it portrays a scenario in which mid-size law firms with ‘talented senior attorneys’ may rise up to the level of the monster law firms all over the world. Assisted by effective talent in research and other zones like document review, contract drafting and due diligence (which are the basics for most LPO’s), these talented but mid-level law firms may dedicate their valuable time solely on their clients and their cases without paying much attention to these ‘menial’ tasks. This can enable them to provide the same or even better quality work than that which is provided by most mega law firms. As it is well known that these huge law firms mainly use their junior attorneys for doing these kinds of basic work, the mid-level law firm can easily outsource such work to an LPO in India, who will have the expertise to deal with the work given to them.

A talented LPO, thus, can assist a mid-level law-firm to achieve new peaks and work at their maximum potential. As Harper notes, this might very well slow down the growth rate of large law firms and foster more effective competition in the legal market. It can also open a whole new arena of law firms to choose from for the client who mostly want the best. The largest then, may not be necessarily be the best. Top clients may migrate towards smaller firms with a more talented pool of resources, if they find them well assisted by an LPO. The attorney’s of these firms will not have to tire themselves with ‘mind-numbing’ tasks. They can rely on the LPO’s to do this work and can dedicate their time to other brain-consuming tasks.

A partnership with an LPO thus, will enable these mid-level law firms to compete more effectively in the big arena. Not only law firms, but also attorneys with a lot of clientele can outsource their ‘menial’ work to these LPO’s and make more and more thriving business. The mega-firm concept may vanish altogether and soon may well be replaced by the firm or attorney assisted by LPO concept. As Harper states, an altogether ‘new business model’ may develop in which quality and not quantity occupies the front-seat. A change may soon come about in the legal industry. Outsourcing can change the entire dynamics of market control and can foster much improved quality in the legal field.

Written by:

Anagh Sengupta,

The first part of the article is available at: http://megalpo.blogspot.com/2010/09/no-more-menial-jobs-young-associates.html