An uncertain economic climate coupled with structural changes in the global marketplace — these are challenging times for most businesses. And law firms are no exception. Several law firms such as Clifford Chance, Cadwalader Wickersham & Taft announced layoffs while some like Thelen Reid Brown Raysman & Steiner have shut shop. U.K. conveyancers as well as U.S. attorneys are facing an extremely difficult time with the collapse of the US housing market.

The Changing Marketplace
While many believe that the financial crisis will result in increased litigation, this may not be enough to offset the lower business from other customers. We believe that there will be a considerable drop in billing rates, which is already starting to show up, as understandably, corporates will look for ways and means to reduce their costs across the board. The pressure on billing rates for law firms could result in greater outsource/offshore possibilities.

Cutting costs and better utilization of in-house lawyers (especially in the current economic conditions) is a compelling reason for corporates to consider outsourcing/offshoring in their strategy. While corporates have been pushing law firms to offshore, going forward this pressure will only increase, and the offshore component will become more significant.

Impact on Offshoring
At this juncture, the pertinent question is, how will the global financial downturn affect the Legal-process Outsourcing (LPO) industry?

Even as the world weathers the most significant global financial crisis, the legal-services outsourcing industry remains competitive because of the very nature of the business. On the other hand, law firms are likely to have problems responding to the changing market because of their costs and overhead structures. Hence, partnership with a local or offshore service provider will be of paramount importance at this time. We expect an increasing number of alliances between law firms and service providers to address the needs of the corporates. According to Arihant Patni, CEO, Bodhi Global Services, “While there will be a slowdown in terms of decision-making, services such as litigation support in general will see a spike in demand.

However, the specific areas within litigation need to be identified. There is likely to be a slowdown in services such as legal research and contract review.”

Action Items for Service Providers
While corporates and law firms need to work on strategies to compete in the new environment, challenges and uncertainties have unlocked opportunities for offshore service providers. Now is the time for service providers to re-evaluate their strategies.

While it is always a good strategy to provide higher-value services to existing customers and keep moving up the value chain, now is a good time to develop/garner a wider-customer base. Providing services that are scalable and pose the least offshoring risk to customers is the best bet for providers.