This article is written by Shreya Malhotra, from Symbiosis Law School, Hyderabad. The article deals with the emerging outsourcing trends of legal services, factors responsible, precautionary measures along with the pros and cons of legal outsourcing.
Table of Contents
Introduction
Legal outsourcing is becoming increasingly popular as law firms and corporate law offices are seeking to mitigate costs, increase flexibility, and broaden their in-house capabilities.
Trends in outsourcing legal services are forever evolving and will continue to change in the coming years. With the rapid advancement of new technological innovations, the outsourcing sector can only become broader and more competitive in the coming years. The primary focus of firms will be providing top quality services and better client experience rather than focusing simply on lowering the cost of services they provide.Â
Outsourcing firms had originally focused primarily on outsourcing non – core activities to service providers and performing the core services on their own. However, as more and more businesses outsource their core operations to extremely effective and secure service suppliers, this pattern is likely to shift. At present, the outsourcing firms are looking for services that contribute value to the company, instead of those who simply assist them cut their costs.
The term ‘Outsourcing’ is commonly described as sending work typically done for performance within a business or corporation to an external contractor. Outsourcing is by no way a modern concept, but it has become even more common in subsequent years owing to developments in digital technology.
During the early 80s, it was a standard to hire law firms for legal assistance. Considerably larger law firms had good infrastructure and a substantial base of employees; these companies were a one-stop solution for legal service requirements and thus started to enjoy a market monopoly. During the 1990s Bickel & Brewer became the first company to do legal outsourcing in India. It addressed the digitalization of legal documents and the creation of online databases. It subsequently engaged lawyers to examine documents produced in disputes.
The procedure has been much more specialized since then. Intellectuals distinguish ways of legal outsourcing into 3 variables: outsourcing of legal research to companies, contracting international law firms directly, and third-party providers classified as legal process outsourcers (LPOs).
Legal outsourcing, also recognized as legal process outsourcing (LPO), refers to the practice of a law firm or business acquiring legal assistance services from an outside law firm or organization offering legal assistance services (LPO). When the LPO provider is situated in some other country then the practice is called offshoring and entails the practice of outsourcing any operation except those in which personal involvement or contact is needed. Agency job, paper analysis, legal research and writing, the drafting of pleadings and reports, and patent services have been considered as the most widely offered services.Â
The concept of legal outsourcing is based on the division of labour principle, which is common in law firms where numerous time- straining and burdensome processes such as thorough research are assigned to paralegals, document reviewers, or trainees. This allows the organization to answer the different legal problems arising on a day-to-day basis while enabling efficient productivity. The procedure includes a contract between the two companies, with due consideration.
Top outsourcing trends
In order to stay profitable in an unpredictable market environment, most companies turn to cost reduction and concentrating on primary targets. There is no question, why outsourcing is regarded as a first, and in many instances, the only alternative for most businesses to remain competitive and expand their company.
Several practising lawyers, law companies and business sectors are adopting new trends in legal outsourcing. Legal outsourcing to third-party vendors has now become a rising trend as it has significantly assisted individual lawyers and law firms to boost profits and minimize the volume of work. Legal outsourcing involves anything to do with document review, E-discovery, litigation support or legal research. While outsourcing legal services firms find great efficiency gains in several forms among which the most common is cost savings.Â
Here are some top trends in legal outsourcing:
Outsourcing hybrid offshore/onshore will keep growing
Most of the law firms still dread sending any of their legally important and sensitive projects abroad. Outsourcing in a Hybrid form is a blessing for such firms which lets them design the most efficient workflows while maintaining components of both onshore and offshore outsourcing designs.
Hybrid outsourcing projects allow research to take place 24 hours a day, enabling rapid movement between two separate distribution centres and guaranteeing that all necessary data protection safeguards are fulfilled in-house without outsourcing them. In the future, such a trend will definitely see an exponential rise.
E-discovery to stay longer
Today, most solid legal outsourcing vendors implement enormous cybersecurity measures and have skilled professionals that can assist them greatly to improve their current systems of electronic discovery. This process of identifying collecting and eventually producing secretive, electronically processed information is increasingly becoming a practice in lawsuits and investigations. Since this electronic information can be found in the form of emails, records, voice messages, audio and video recordings, etc. legal outsourcing firms not only ensure the security and privacy of these data yet but also ensure that they are prepared for presentation whenever required. During lawsuits and investigations, this process involves identifying, collecting, and finally producing private information stored in an electronic form which is rapidly becoming a standard. Because such electronic material may be found in the form of emails, records, voice messages, audio and video recordings, etc. legal outsourcing firms not only ensure the protection and security of these data but often guarantee they are ready for delivery whenever necessary.
High-quality control of data
The usage of cloud computing technology is an advancement that has greatly aided the outsourcing of legal services. Cloud-based platforms are emerging to revolutionize data storage and processing although not without potential dangers. Companies are obligated to keep consumer information private and must guarantee that the program they prefer ensures adequate protection, and is authorized by global standards.
Digital law assistantsÂ
Nowadays, the upsurge of advanced technologies and web-based computer technology is making virtual law firms and assistants ever more readily available. These very virtual assistants produce complex legal services in a fast and easy way by means of built-in client platforms. Outsourcing of automated law firms or assistants helps to build fresh markets and explore alternative sources of sales, all while increasing workflow efficiencies and minimizing operating costs. Digital law firms can manage both complicated and tedious work with the very same proportion of professionalism people expect from their own staff members.
Quality and affordability are the top priorities
The companies keep sending legal work to Asia, specifically India and the Philippines, but the requirement of high-quality but reasonably priced legal services is kept as a top priority. As purchaser expectations keep on escalating, legal service providers have to reach quality requirements and adjust the offers to fulfil the client’s needs.
How is legal outsourcing done?
Legal outsourcing is a process in which in-house legal departments, private law firms, and companies from different geographical locations outsource their work to minimize the workload. Legal outsourcing work includes preparing such documents on the basis of templates, updating documents, performing client checks, legal research, complying with different laws, rereading documents, etc. With the aid of advanced tools, the job is done electronically.
Individual lawyers and law firms outsource legal projects to service providers providing legal support. Except for legal research services, almost all the projects often include time- straining and repetitive work in nature. Projects that are more time-straining or expensive for doing the same in-house as compared to the prices paid by the service provider are outsourced to third-party providers.
Legal outsourcing is achieved by using service providers providing legal support services or by direct contractual recruitment. Especially in comparison with the expense of in-house production, outsourcing overseas always proves to be beneficial. India is indeed a very widely accepted outsourcing destination due to its progressive English skills and a similar legal structure compared to the US one.
The research is performed by law students/lawyers until outsourced, and an NDA (Non-Disclosure Agreement) is signed until the job is outsourced in order to preserve full secrecy of the information so exchanged by the client. Stringent quality measures are taken to ensure that quality performance is provided to the consumer within the specified time period.
Legal outsourcing works as an efficacious factor for enhancing the performance and efficiency of an enterprise. Individual lawyers, sole professionals, and consulting firms should explore the legal outsourcing business in order to enhance and maximize their productivity and bring down costs. This should also be borne in mind that being in separate time zones tends to be beneficial as legal outsourcing companies based in India due to their 24X7 operating environment ensures that contracts are completed on time.
Factors responsible for the rise in outsourcing legal services
A growing number of firms small and large outsource legal work to worldwide destinations.
- The main factor responsible for growing outsourcing legal services is that it helps in increasing flexibility, widens in-house capabilities and also helps in minimizing costs. Outsourcing legal services helps small law firms and solo professionals to make utilization of high-level expertise they might not be able to afford in-house.
India currently represents the biggest outsourcing location for legal services. Like the United States and the United Kingdom, the legal structure of India is based on British common law. And, unlike China that is evolving as a hub of offshore outsourcing. India also holds one of the world’s biggest pools with English-speaking graduates.
- Reduced labour costs is another major consideration in India’s procurement of jobs. Moreover, India has a large, highly skilled group of workers. Several vendors of legal services require a bachelor’s degree as a minimum level for employment. Staff like data storage personnel have a bachelor’s degree and also most professional employees have a degree in law.
Outsourcing legal services also proves to be cost-effective as it helps organizations to cut costs by hiring an in-house resource and outsourcing it to an off-shore vendor owing to the difference in wages. For instance, Indian-based legal practitioners have significantly lower pay levels relative to the US and the UK. Similarly, the cost of infrastructure is relatively low in India when compared to that of the UK and US.
- The other major factor responsible for the rise in the popularity of outsourcing of legal services is a reduced turnover period. Using offshore vendors lets companies execute a job in a limited period of time due to the twelve-hour gap between US and India time zones. The 24/7 work cycle of Indian vendors offers an additional benefit for finishing the job in a shorter period of time.
Precautionary measures to be taken while outsourcing
Before outsourcing one must keep a lot of factors in his mind and weigh a lot of other things, one has to do proper homework while picking up the best offshore company that can fulfil the requirement of the business.
- The parent company must make sure that the firm which is chosen for outsourcing is secure and takes the privacy of the client very sincerely. The company should also need to ensure that it finds the right experts who are capable of handling complex jobs. Â
- The parent company must do a comprehensive background check of previous reports of companies whether the firm to which it will outsource the job can safeguard the parent company’s confidential information.
- The parent company should always investigate properly the competence of any potential law firm based abroad. It is also very important to know the overview of the firm and its operations. The parent company should also clarify before making any deals the methods of the company for avoiding the conflicts which might arise in the future. Â
- The parent company must discover all the other available options and then select the best deal. It must also go through the feedback from past firms, keep in contact with the firm, and make sure to put everything on a contract to avoid future conflicts.
- ​Another thing must be taken care of is to pay close attention to privacy issues while a lot of litigation documentation usually deals with public information records, a few issues are not really the same, like immigration, insolvency and tax legislation, etc.
- Other preventive measures that must be obtained during outsourcing are data security, legislation and standards on the level of the organization and the quality of standards, the procedure for settling disputes between the parties, and the paperwork when exiting.
All of these are precautionary measures that should be taken to avoid major issues that might occur in the future.
Advantages of legal outsourcing
Massive savings on costs
Outsourcing legal work saves a lot of money that can be used to improve other areas of business or to hire employees in other divisions that need employees. Outsourcing gives the best quality work at the least cost. This is probably the biggest advantage of outsourcing legal services. Through outsourcing legal services, organizations can minimize their cost structure by labour arbitrage (the disparity in salaries between outside contractors and in-house legal staff) and benefit from low-cost advantages.
Access to outer expertise
Outsourcing legal work to global vendors enables companies to leverage high-level talents and specialized skills which are not available in the firm. The availability of external talent is especially helpful in filling gaps in internal competencies for small boutique businesses. Legal offshoring also allows domestic firms to draw on global talent. Outsourcing of legal services opens up the opportunity for companies to gain access to high-level legal expertise that would otherwise not exist within the company.
Flexible
Hiring a mixture of in-house and out-of-home talent enables law firms to customize their capabilities to fulfil workload and client requirements. Small and medium-sized firms may find it difficult to spread variability because of a limited number of practitioners, support personnel, and customers. Legal outsourcing enables companies to quickly ramp up for a case. Flexible staffing also reduces overhead for firms.
24/7 support
You will be able to get legal services at any time of the day by outsourcing LPO services, you will always have attorneys who are open to assist you or provide you with what you need considering the time zone where you’re based. By using the difference in time zones you can have your tasks functioned on 24 hours a day.
Reduction in turnaround time
You can broaden your internal team by using the services of external staff and lessen the turnaround time for important legal project activities. By having an onshore and an offshore team, companies would be able to finish a project in a relatively short time period. As described above, despite the time zone variations between countries, proposals can be worked on for 24 hours a day, which will support in getting things done in almost half the time.
Disadvantages of legal outsourcing
Local laws
Local laws are among the most common obstacles that are usually experienced by the countries that outsource. Since many countries have stringent privacy laws and data protection laws, the service provider and the purchaser are bound by law to share equal legal obligations. This tends to increase the purchaser’s liability for saving his business from the civil penalties of that particular country. Therefore, the buyer is recommended to analyze the country and its local laws so that if they would create any obstacle in the near future, then change the service provider.
Tackling disputes
Dispute resolution is one of the main concerns during outsourcing. When a customer from one country decides to file a lawsuit against his service provider from some other country, the legal question will be where the complaint should be brought. Legally the case will have to be fought in the country where it was filed. Therefore, it’s necessary to make an initial arrangement with the company and make sure to mention the dispute resolution method. This would avoid the problems which might occur in the near future.
Privacy and security Â
The chance for breach of confidentiality is one of the main concerns with outsourcing. Outsourcing the problem of customer confidentiality in the legal process takes on great priority. The attorney-client privilege is a doctrine that says anything communicated between a lawyer and his client is to be treated with strict confidentiality and is excluded even in a court from disclosing. Nevertheless, the right shall be considered to be lost where either side discloses sensitive details to a third party or the opposite party.
Unethical rules
A further concern is that people doing legal research may not be bound by the ethical principles that are needed. The legal profession is subjected to strict rules concerning who is authorized to practice law plus attorneys are needed to supervise and monitor adequately any lawyers or non-lawyers whom they handle to make sure that they comply with the rules of professional behaviour under legal profession. Even then, the use of an LPO company, particularly one that conducts its work from overseas where the time zone varies, will make matters considerably more complicated.
Talent rivalryÂ
Due to an increasing number of LPO, recruiting the most efficient talent has become difficult. The efficient attorney supply has now become short of request. Similarly, technological advancements could soon affect the cost-saving advantages. The clients have started demanding increased transparency of costs, trying to push law firms to modify their traditional ways and start moving to specific costs and off-shoring. After all, the company’s future success will depend on how you endorse modern technology and how you approach legal services offshore, shared knowledge, and a set fee charge.
Conclusion
Legal outsourcing is a blessing for busy lawyers and law firms to tackle difficult and time straining projects on a reasonable budget. Solo professionals and small businesses now manage situations that may otherwise be too large to tackle. Legal Outsourcing can help lawyers and law firms make their expenses more feasible by paying for a discounted price of outsourced legal services. Companies using legal outsourcing have discovered outsourcing to be advantageous, as it prevents them from hiring full-time staff.
The trends in outsourcing are continuously evolving and the transition is also projected to grow in the coming years. With emerging technologies constantly making progress, the outsourcing industry will only get wider and much more effective in the coming years. Companies will concentrate mainly on delivering top-quality services and excellent customer support, instead of simply marginalizing the expense of the services they provide.
References
- https://www.completelegaloutsourcing.com/benefits-legal-outsourcing/#:~:text=The%20chief%20factor%20responsible%20for,helps%20in%20minimizing%20the%20cost.&text=Low%20labor%20cost%20is%20another%20major%20factor%20in%20sourcing%20work%20to%20India.
- https://www.indialawjournal.org/archives/volume3/issue_4/article_by_megha_vipula.html
- https://books.google.co.in/books?id=5SeaAgAAQBAJ&pg=PA91&lpg=PA91&dq =fa c t o rs+responsible+for+the+rise+in+Outsourcing+of+legal+services&source=bl&ots=nhVJpEnYPC&sig=ACfU3U2i9izPaYr3RaCi-rL6CSnoASYo-Q&hl=en&sa=X&ved=2ahUKE wiW vY Gw8aDqAhV9yTgGHcgMBLEQ6AEwCnoECAoQAQ#v=onepage&q=factors%20responsible%20for%20the%20rise%20in%20Outsourcing%20of%20legal%20services&f=false
- https://www.outsource2india.com/why_outsource/articles/benefit_outsourcing.asp
- https://www.forbes.com/sites/deeppatel/2017/07/17/the-pros-and-cons-of-outsourcing-and-the-effect-on-company-culture/#135f4fca562d
- https://www.thebalancecareers.com/top-advantages-of-outsourcing-2164339
- https://www.outsourcinginsight.com/outsource-legal-services/
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