Outsourcing is rapidly moving beyond back-office support and into areas like volume legal work and litigation support. Margaret Lang looks at how best to combine offshore, near-shore and onshore services


The press has recently covered the surge in companies being established to provide legal outsourcing services to international law firms, in-house legal departments, legal publishers, and legal research businesses in the UK and US.



What it signifies may herald a revolution, and I use the word advisedly, in the way lawyers work and the way their law firms and legal departments deliver services to their clients.



The reason is that business process outsourcing (BPO) - currently viewed by many as mainly of interest to large law firms and corporate legal departments to offer cost savings on functions such as IT, human resources and some litigation support - is now being clearly targeted at the UK legal profession.



The major outsource providers are developing strategies to offer a multi-level service to law firms of all sizes, designed to meet the requirements and concerns that many partners have when examining the possibility of outsourcing parts of their knowledge and professional practices.



This new evolution in the outsourcing market has been termed legal process outsourcing (LPO) and, as an indication of its perceived value to the suppliers, it is the first time a specific market has been targeted outside the generic BPO umbrella.



The rationale is simple. The latest Forrester Research report indicates the current value of legal outsourcing is $80 million (£40 million) and this is set to rise to $4 billion by 2015.



Firms will spend almost five times as much on outsourced services in the next eight years - and this will not only be on the traditional outsourced 'below-the-line' services. LPO will now encompass volume legal processes such as debt collection, mortgage and insurance claims processing; knowledge services such as document support and management for major litigation, case law research, precedent checking and updating; and professional support such as drafting standard documents, sale and purchase agreements, reviewing contracts and filing patent applications.



This is work that in many firms is currently undertaken by high-cost fee-earners in high-cost locations who may be trainees, newly qualified solicitors, paralegals or others whose time is charged in some form of hourly rate.



It is unlikely that a law firm's first foray into outsourcing will be straight to an offshore provider with limited UK presence, and possibly little or no understanding of the UK legal market and the challenges it faces. What will be far more effective in meeting the requirements of UK firms will be a partnership with a service provider which understands their space intimately and might offer a hybrid delivery model.



This could, for example, comprise an offshore facility in India, the Philippines or South Africa, which could be easily scaled taking advantage of shared resources; the alternative of a near-shore capability in Canada or Brazil (for the US market) or Poland or the Czech Republic (for the UK market); an onshore service in the UK but typically remote from the client service location; and an on-site service at the firm's own premises.



This hybrid development of the traditional offshore delivery model is seen as the key to approaching the legal sector with its complex requirements and frequently non-standard approach to its business and legal service delivery processes.



Many of the outsourced suppliers in the sector are currently based offshore, but just how well considered is their approach and how well do they know the nuances of the UK legal market?



In India alone, the statistics are extraordinary - Accenture currently employs 25,000 staff in India and expects this to rise by 48% to 37,000 by the end of 2007, making it the company's largest country by headcount. In addition, 50% of India's population is under 25 and it is estimated that over the next ten years, the country will have a surplus population of 45 million, while the developed world has a labour shortage.



To ensure that this 'people resource' is effectively utilised, the Indian government has invested heavily in education. In addition, many domestic and international businesses operating in India have established their own 'universities'.



While the cost of labour is one of the driving forces in the growth of offshore outsourcing, the Indian government has been a significant supporter, and for more than 25 years has provided a low or no-tax environment for businesses in this sector.



For the legal market, the dynamics make equally interesting and compelling reading. Service providers expect to offer cost savings of 30-70% with constant process improvements to further drive efficiency at all levels. India has more than 80,000 law graduates every year, of whom a tiny percentage enter private practice, leaving large numbers looking for an alternative career in a market where English is the main business language and the Indian legal system is based on English law.



The multi-faceted delivery model is being developed to meet a number of requirements that have been identified as key to the legal sector. Specifically, these are the acceptability of the process, the need to interact with the firm's end-client, the practicalities of remote processing and technical, risk or liability constraints imposed by the firm.



However, while the principal benefits of any form of outsourcing remain increased levels of service, freeing up management time, access to expertise and cost reductions, the multi-shoring concept now proposed appears to offer further advantages for firms in terms of continuous process efficiencies, shared resources, increased access and control of services, improved management and freeing space in high-cost locations for client-facing activities.



The offshore market is here to stay. But is the UK legal market ready to accept it and is the average offshore provider ready to understand and address its needs?



Margaret Lang is chief executive of Intelligent Office UK