Legal Process Outsourcing (LPO) , a decade old industry, has been through erratic ups and downs. One thing that remains constant in this rollercoaster ride is that buyers are still skeptical about outsourcing high-end legal work.

Though the $440 million LPO industry has 140 vendors offering legal services, offshoring in high and low end services has only increased by 20 to 25 % over the last two years, as per Valuenotes, a market analysis and research firm. Neeraja Kandala, lead analyst, legal services, Valuenotes says ,” Last year 10 to 15 % of buyers who tried offfshoring, backed out later as they were not happy with the services. This is a matter of serious concern.”

Interestingly, though in 2004-05 the market grew at 40% , it came down to 25 percent in 2007-08, courtesy economic recession. The US and the UK law firms had layoffs and the corporate counsels had shrunk their budgets. The industry was badly hit by recession and did not grow at an expected pace.

Offshoring in Legal services: Unfavorable buyer reaction

Neeraja of Valuenotes terms offshoring as a “knee jerk reaction” for law firms. Lawyers are not very eager and comfortable to offshore pattern driven high end services as they believe that this is specifically the work of lawyers or attorneys. They still believe in offshoring only low end services like contract review, legal transcription, documentation, etc. In 2006, highly reputed US law firms like Clifford Chance encouraged offshoring, but have only stuck to low end services. They established a knowledge center in Delhi to offer low end services to the firm.

The high end work in knowledge based services is pattern driven and not process driven. Thus, we do not see the same intensity in the increase of offshoring like that in BPO services. However, corporates are open to offshore their legal services.

The Current Scenario

LPO vendors are trying to mix onshore and offshore to please the buyers. They are setting up centers in the US and UK to gain the confidence of buyers for offshoring. For example: Clutch Group, an LPO provider has 2 centers in the US and one in Bangalore, India to offer a choice to the customer. Even Integreon, Pangea3 etc are on the same path.” Still high end services like subjective review of contract are not very easily offshored, its only the object contract reviewing that is sent cross borders,” adds Neeraja.

Cross border acquisitions are on a high, but the mantra in the LPO industry is to acquire only technology based companies. No large firm would acquire a small firm because of the manpower of law graduates it has. The more contracts a provider has, the more acquirable it is. Law graduates can be hired and trained by anybody.

According to Valuenotes, in the last six months, UK based law firms have started opening up to offshoring slowly and gradually there is an increased awareness to find out about the different vendors , their services, company offerings and growth in the market.

The research firm analyses the market of service providers in two categories “Pacesetters” and “Aspirants” in its recent study “ Legal Services Outsourcing : What do law firms think?” . The research highlights the importance of the selection process for buyers in the current scenario as they are opening their minds to offshoring of high end services as well.

The basic difference between pacesetters and aspirants is that the pacesetters are 10 to 12 years old in the industry and have service maturity in low and high end. Aspirants are basically the opportunistic vendors who deliver low end process driven services. They might be very old in the legal services segment but need to grow in terms of services offered.

Leaders in High Value LPO Services