Liberal democracies are obsessed with fairness and justice. As societies evolve, the challenge to ensure justice becomes more and more complex. In a few countries, that challenge is tackled by newer legislations, and implemented by the judiciary, making the judicial system less flexible but simple. But in many others, judiciary evolves independently, drawing on opinion and historical precedents, and is only supported by legislature. While that makes the system respond to the changing needs of the society more effectively, the delivery of justice becomes far more complicated. This system, popularly called the English Common Law System, owing to its origin, is followed by many larger democracies such as the U.S.A., India and U.K.
In countries such as India, that complexity has resulted in delays in judicial processes. In fast-moving nations like the U.S.A, where delay is not an option, it has led to steep rise in cost of legal services. In 2005, of the total $250 billion spent on legal services globally, the U.S.A. alone accounted for $170 billion, according to Forrester Research.
The $170 billion U.S. legal-services industry employed 1.5 million people in 2004, according to calculations based on information available from the U.S. Bureau of Labor Statistics (BLS). Two-thirds of these jobs were in the private sector.
Getting the Numbers Right
Since almost all global-delivery initiatives are driven primarily by labor arbitrage, at least initially, and since many of these services are priced on a time-and-materials basis, quite a few legal job functions are eligible.
Of course, not all jobs can be executed offshore. The category of jobs (See Table 1) that can theoretically be offshored directly include law clerks, paralegal and legal assistants and part of the legal secretaries. Components of some other jobs — including that of researchers and lawyers — can also be done offshore, but that requires careful separation of activities.
According to Forrester, the “offshoreable” legal-services market is about 65% of the total market in revenue terms. According to the firm, the market potential for globally-delivered legal services is $111 billion, out of the total of $170 billion.
That is a theoretical number, however. In practice, a small fraction of that number has actually gone offshore. According to a recent report by ValueNotes, an India-based research firm, the current market size of legal offshoring to India — which, together with the Philippines, accounts for a major chunk of offshored legal services — is $61 million. And the total number of employees engaged in delivering the services is not more than 1,000. NASSCOM — the India’s software and services association — is even more conservative and puts the number at 600–700 workers.
A study of 20 legal services providers by Global Services suggests that the previous estimates are low — there are approximately 2,000 legal-services delivery workers.
And Getting the Definitions Right
Legal Process Outsourcing (LPO) is a vague phrase. Coined primarily by the supplier community, it includes everything from highly specialized legal work such as draft patent filings to highly repetitive, mechanical work like coding of legal documents for electronic storage.
While most larger service providers do include legal-applications coding as part of legal BPO, a significant part of that work performed by smaller companies based largely in the southern Indian cities of Chennai and Coimbatore (that combine it with other similar work in healthcare and insurance domain) never get captured in market studies due to them being at the two extremes of the offshore BPO price band. While the coding type of work fetches an average of $7–$8 and can go down to even four U.S. dollar per hour, a high-end patent research and drafting may be billed at anywhere between $80–$120 per hour, or for full-time employee-based pricing anywhere between $30,000–$90,000.
