Legal outsourcing to gain from financial downturn

By Amit Aswal, Clairvolex Knowledge Processes
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The economic meltdown kicked off heated debates in US legal circles on exploring outsourcing options. With the fall of financial giants such as Lehman Brothers, Washington Mutual and Merrill Lynch in the US and the deepening of the banking crisis in Europe and other parts of the world, legal process outsourcing (LPO) firms in India have started gearing up their risk-assessment teams in anticipation of a surge in jobs related to scrutinizing US companies’ existing and prospective clients’ financial transactions and corporate governance standards.

Moreover, the meltdown seems to have taken the focus away from the recent notice by the United States Patent and Trademark Office (USPTO) which prohibits US-based companies from sending IP information overseas regarding patents and inventions, unless government clearance has been obtained.

Amit Aswal Engineer Clairvolex Knowledge Processes
Amit Aswal
Engineer
Clairvolex Knowledge Processes

Cost-competitive options

Companies have been forced to consider severe budgeting as a result of the economic recession in an attempt to reap the benefits of cost arbitrage. Offshore legal services in comparison to onshore legal services still remain financially attractive. Many companies in the US and in Europe are looking for high-quality legal services at lower costs from credible vendors as alternatives to using law firms onshore at exorbitant prices.

The meltdown has emphasized the fact that farming out work to India seems almost unavoidable for big companies with a large amount of repetitive legal work. Outsourcing has become a popular choice, rather than a strategy employed for trial purposes, because it reduces costs associated with the outsourcable functions by up to 80%.

What is being outsourced?

Traditionally, companies have sought outsourcing assistance largely for work associated with litigation and contract management related issues. Litigation involves document reviews and support in investigations, whereas in the field of contracts management, firms are mainly expected to facilitate drafting and support contract procurements.

These continue to be pivotal areas, however, there is an increased need for assistance in internal and regulatory investigations too, as regulators and companies probe further into the reasons for the crisis and determine strategies to avoid them in the future.

There is also a growing demand for services such as legal research, drafting, billing and preparation of invoices, intellectual property research services, paralegal services, secretarial support services, indexing and coding to database maintenance, patent support, contract review and management, litigation support and legal compliance.

In fact, except for the functions that require personal presence (courtroom representations, client meetings and the like); all other activities can easily be outsourced.

Furthermore, the services that can be rendered under the supervision of an attorney in the country where work is being outsourced do not invite any attorney-client privilege conflicts, and according to the American Bar Association, are not unethical, but instead efficient. This implies that there is great potential for legal services in the outsourcing context.

The future in meltdown

According to a survey conducted by law department consultant Rees Morrison and American Lawyer editor Aric Press, US law departments are forecast to spend about US$2 billion on legal outsourcing by end of 2013. A large proportion of this is expected to be sent to Indian outsourcing service providers.

This prediction comes as a result of favourable attitudes towards Indian business process outsourcers, which have been extremely successful. The vast number of outsourcing units delivering support services in the medical, financial and infrastructure sectors are evidently helping to minimize costs while maintaining high standards of efficiency.

Given the current scenario and ability of Indian outsourcing units to deliver quality services at competitive costs in comparison to other countries, the Indian legal services outsourcing industry, which is worth US$240 million, is expected grow to over US$640 million by 2010. In addition, the industry currently employs around 7,500 people and this number is expected to soar to 32,000 by end of 2010. Interestingly, about 70% of LPO vendors have prospered over the last few months of the global crisis.

The conscious reduction of overhead costs is a fundamental goal of the outsourcing industry. With the talent available, LPOs and other outsourcers alike look set to prosper during this period of financial uncertainty.

Amit Aswal is a patent engineer and leads the Patent Licensing and Infringement Unit at Clairvolex Knowledge Processes, a Delhi-based legal outsourcing firm.

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