Welcome legal process outsourcing

Written by Diljeet Titus | Updated: Dec 31 2007, 03:38am hrs
Every law firm in the UK and US is an outsourcing company. Their corporate clients have outsourced legal services to them ever since. Now, these law firms want to offshore their legal work to reduce costs and increase efficiency.

The term legal process outsourcing (LPO), with an echo of BPO, was coined by the media in 2005. Currently, legal work outsourced to India largely includes legal and paralegal services that comprise electronic data management, due diligence, post-merger contract integration, law research, contract drafting and proofreading, document discovery in litigation and intellectual property services and work relating to IPR registrations, enforcements and patent specification drafting. These services do not include tasks performed by the BPO industrytasks such as repetitive data processing activities that can be performed without specialised education and much less professional training. These tasks are basic legal services, even though they do not amount to the direct practice of law.

There are misconceptions related to it. The quality of legal services offshored to India has witnessed a swing from low complexity legal service tasks to highly complex legal services, as clients comfort levels improve. Despite this amazing success, there remain some cynics who believe that low cost equals low quality. As compared to international law firms, offshoring legal work to India costs up to 80% less. The misconception is based on the belief that you get what you pay for. Cynics view cost savings as a compromise on quality and believe that Indian lawyers lack the skills and aptitude to handle the high-end legal work done in the West.

Additionally, in the legal industry where the stakes are huge and risks proportionately high, some general counsel or other inhouse lawyers are still not entirely comfortable with offshoring work to legal service providers here as there are no specific laws in India protecting the confidentiality of proprietary information disclosed to legal units.

Although the Indian legal services sector claims to provide various value additions that its regional rivals do not, the picture as I understand is not as pleasant as it may seem. Several Indian legal service providers lack the depth and breadth of experience that they claim to possess in terms of legal drafting skills and training in applicable foreign laws. Current estimates of the legal service industry range from $1 billion to $3 billion, and this has attracted to this segment existing BPOs that do not have the requisite skills.

In addition, the unavailability of trained legal manpower at the supervisory level is a stumbling block. Also, due to the sudden increase in the offshoring of work to the budding LPO industry in India, the attrition rate of employees is also high. Employees switch jobs even for slight raises.

Still, legal services offshored to India have the potential to grow into a multi-billion dollar industry. Analysts project the total demand at about $18.6 billion by 2009, and expect some 79,000 jobs to be created by 2015. It is also predicted that India will capture more than 70% of the international legal service offshore business by 2010.

Based on these predictions, the Indian government should take initiatives to promote the LPO industry. It could start with providing benefits similar to those offered to ITeS companies, such as tax exemptions during the initial years of operation. The suggestion here is that such tax benefits should not be phased out. Success in the LPO sector will contribute substantially to foreign exchange earnings and generate employment in vast numbers.

Irrespective of misconceptions and growth pangs, I believe that the growth and development of legal services offshoring can bring about a paradigm shift in the way legal services are delivered in the West. The global legal service industry is expected to top $17 billion by 2010, of which Indias share could well be $12 billion. The opportunity must not be lost.

The writer is senior partner, Titus & Co, Advocates and can be contacted at dtitus@titus-india.com