Outsourcing legal work to India is no longer a novelty. It’s a reality.
Outsourcing is the contracting out of an internal business process to a third party organization. Almost every organization outsources in some way. Typically, the function being outsourced is considered non-core to the business. It has become very common in the modern 21st century economy. The definition of outsourcing includes both foreign and domestic contracting, which means relocating a business function to another country. Financial savings from lower international labour rates is a big motivation for outsourcing. Although outsourcing has been around as long as work specialization has existed. In recent history, companies began employing the outsourcing model to carry out narrow functions, such as payroll, billing and data entry. But some organizations outsource whole operations. These processes could be done more efficiently, and also more cost-effectively.
Currently, outsourcing takes many forms. The most common forms are information technology outsourcing (ITO), business process outsourcing (BPO), Knowledge Process outsourcing (KPO), and Legal Process Outsourcing (LPO).
Legal Outsourcing refers to a law firm or corporate legal department obtaining legal support services from an external law firm or legal support services firm. Legal Outsourcing is also known Legal Process Outsourcing. When the LPO provider is based in another country the practice is called offshoring and involves the practice of outsourcing any activity except those where personal presence or contact is required e.g. appearances in court and face-to-face negotiations. It is a very recent phenomenon which has in few years gained huge momentum. The work is done by experienced paralegals and attorneys using industry standard databases like Lexis-nexis and Westlaw. The main criteria for deriving value from such services are the level of maturity of delivery processes of the service provider. Also sufficient control should be exercised on the operations to ensure that the work is delivered to the level of expectation of quality of the client and the data is secure.
The first firm to do legal outsourcing in India was Bickel & Brewer in 1995 with its office, I&A International, in Hyderabad. It dealt with digitalization of the legal documents and creating searchable databases. Later on it hired lawyers to review documents produced in lawsuits. In 2001, GE was the first company to offshore or outsource its in-house legal work in India. Since then a lot of companies have entered the arena in one form or other. Most of the Companies dealing with Indian LPO’s are generally US or UK based. Latest figures show that this industry will generate more than 80,000 jobs in the next eight years.
There are plethora of services which are being provided by the Indian based LPO. The key being – contract management, document review, legal research, deposition summaries, litigation documents, patent renewals, patent analytics, IP support services, data verification, IP records, patent research, trademark renewals, trademark watching, digital content watching, trademark search, and so on. These services can be categorized under two categories:
1. Manpower intensive functions – Such as legal transcription, document conversion, legal coding and indexing, document review etc.
2. High-value services – They include patent and general legal research services like freedom-to-operate search, patent assessment, patent portfolio management, statutory and case law research, due diligence services such as technical, legal and financial analysis of companies for mergers and acquisitions, and contract drafting and review of contracts.
Why India Is Being Considered?
The Corporate legal departments are one of the major clients of LPO’s in India. According to AT Kearney’s annual global services index, India is the current global capital for outsourcing. Legal services in India have steadily grown in the last five years and the country has become one of the best Legal Process Outsourcing (LPO) destinations in the world. The Economic Survey 2012-13 that Finance Minister P Chidambaram presented in parliament showed legal services had grown at 8.2 percent annually from 2005-06 to 2011-12.
First of all, the key consideration among corporations world over is the reduction of costs though not at the expense of quality. Indian LPOs have, in such a scenario, provided cost-effective solutions while maintaining expected or higher quality levels and in some cases even exceeded the quality provided by in-house teams. A balance between cost-and-quality aside, there are other advantages that vendors located offshore are able to provide to their clients.
Secondly, The time difference between India and the United States allows for work to be done overnight, and many people in India's enormous workforce are college-educated and English-speaking. There is a day time when there is a night in US, hence, Attorney, while leaving the office, instruct his counterpart in India to do research on specific legal issues and he can have the complete research done on his table in the early morning. Having more than 900 law schools with around 2,00,000 students graduating each year, India has no shortage of English speaking attorneys.
And lastly, in terms of brainpower and English fluency, there is no reason why Indian lawyers can't do much of the work that U.S. lawyers are currently doing. India's legal system is based on English Common Law, Indian legal training is conducted solely in English, Appellate and Supreme Court proceedings take place exclusively in English, and legal opinions are written exclusively in English. Virtually all Indian lawyers are conversant with the UK legal system.
There are several key advantages gained by using a LPO service and these advantages include the following:
· Cost-Effective. Depending upon the type of legal service being outsourced, a law firm or a corporate legal department could achieve as much as 30% to 80% in cost savings by outsourcing legal support work to a firm based in a lower cost market like India.
· Flexibility. Rather than hire full-time or even temporary in-house support staff to deal with the ups and downs in workflow, LPO firms can be utilized on an as need basis. Furthermore, LPO firms can allow a law firm or corporate legal department to tap into expertise that they may otherwise be lacking in-house.
· High Quality Legal Support. Given the differences in salary and overhead structures, many LPO firms employ fully licensed attorneys rather than just paralegals or legal secretaries.
· Increase Efficiency. LPO firms utilize low cost professionals as well as specially designed software that automates and streamlines repetitive tasks, especially tasks that involve significant amounts of paperwork and documents.
· Leverage Time Zone Differences. North American or European based clients have the ability to have work completed on a 24 hour basis or during the night.
· Optimize Costly Resources. For law firms, expensive resources in high cost markets are freed up in order to focus on high margin fee generating work rather than repetitive tasks while corporate legal departments are able to focus more attention to their core competencies rather than on handling legal paperwork.
There are various disadvantages of the LPO’s which creates a hindrance while outsourcing the work to other countries:-
· Local Laws
One of the most common hindrance which outsourcing countries generally encounter are local laws. As many countries have strict data protection and privacy laws, the service provider and the buyer are legally bound to share equal legal responsibilities. This increases the liability on the buyer to save their business from civil penalties of that particular country. Hence, it is advised to the buyer that they should research on the country and if the local laws of that country are a hindrance, then find another service provider to work with.
· Handling Disputes
The settlement of disputes is also one of the major problems while outsourcing. If a buyer from one country wants to file a case against his service provider from different country then the legal issue will be where the case should be filed. Legally the case has to be fought in the country where the case is filed. So, it is important to make an agreement with the provider in the beginning to ensure that you mention the system of dispute settlement. Clearly defining the legal aspects in outsourcing and dealing with the problem of dispute settlement can avoid future problems.
One of the major concerns with outsourcing is the potential for breaches of client confidentiality. In legal process outsourcing the issue of client confidentiality assumes utmost importance. The attorney–client privilege is a doctrine that says anything conveyed between an attorney and his client shall be treated with utmost confidentiality and is exempted from disclosure even in a court of law. However, when either party discloses confidential information to a third party or the opposite party, the privilege is deemed to be waived. However, confidentiality becomes increasingly complicated when the internet and potentially unsecured networks are used to transmit information back and forth between an LPO and their law firm or corporate legal department clients.
· Unethical Standards
Another criticism is that people performing legal work may not be bound to necessary ethical standards. The legal profession is governed by strict rules with regards to who is authorized to practice law plus lawyers are required to adequately supervise and monitor any lawyers or non-lawyers whom they manage in order to ensure that they abide by the legal profession’s professional conduct rules. However, the use of an LPO firm, especially one who performs their work from overseas where there are time zone differences can significantly complicate matters.
· Law firms to go in for a cylindrical makeover
Major law firms in the US, UK and Canada have a pyramidal set-up. The top echelons are occupied by the partners who are supported by an army of supporting staff constituted by associates, counsel and non-equity partners placed at the bottom. The cylindrical structure will not only further enhance the productivity and quality of large law firms but it will also make the clients reap the benefits of smart work culture at leading offshore based providers of quality legal support services. Such offshore companies employ talented lawyers who are only too keen on working for and being associated with marquee law firms from the developed world.
· Competition for Talent
With more number to LPO’s increasing in the country day by day, it is becoming difficult to recruit the most efficient talent. The supply of efficient attorneys is short of the demand. The cost cutting advantage may also soon be complicated by the software advances. Clients are demanding greater transparency of charges, pushing law firms to change their old ways and move to fixed fees and off shoring. In the future, the success of your firm will depend on how you embrace new technology and how you approach offshore legal services, shared knowledge and fixed fee charging.
· LPO’s to add punch to the India
LPOs to add more punch to India action. As of now only around 30% of the top ten Indian BPO players have evinced interest in entering this segment. But, according to industry experts, big players like Infosys, Wipro and others are studying this model and could look at entering this business in the near future. It makes sense for the BPOs to enter this segment because the profit margins in LPOs are higher. And legal-process outsourcing is part of high-end knowledge process outsourcing, which many of these BPOs are already into. However, this buoyant sector could present many challenges to the BPO sector; the biggest among them is finding the requisite talent.
LPO as an industry is quite different from other knowledge-based industries. The work done is high on intellectual level and is also expertise-centred. As it is in the growing stage, one can expect a lot of innovations happening. With the newly enacted LLP Act, it is expected that international law firms will also be making foray into the Indian legal market. Sec 59 of the LLP Act allows law firms to set up their business within Indian boundaries. Such firms will act both as consumers and producers of trained force suitable for addressing the legal support needs of global corporations. In that respect, the LPO industry and the international law firms will converge and are expected to fuel the growth of each other. It is also expected that some international law firms may also setup their own ‘captives’ that will address the offshore legal support needs of their clients. Outsourcing and off-shoring are concepts not new to India. After the hugely popular business process outsourcing (BPO), the country is currently witnessing a boom in legal process outsourcing (LPO) with legal firms from around the world turning to India to outsource their legal services. According to LPO watchers, the industry is here to stay.
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