Legal process outsourcing (LPO) faces a ‘watershed’ year during which it must prove its value to law firms and in-house lawyers, a report has predicted.

Consultants Fronterion said LPO gained the media’s attention during 2009 as several top law firms and in-house teams announced deals, but ‘2010 will be the proving year’.

‘Law firms and corporate legal teams will learn from their peers, resulting in make-or-break peer-to-peer referrals, which will be strong indicators of the success and maturity of [LPO],’ it added.

The forecast said South Africa will emerge as a key competitor for India – where more than 85% of LPO providers are based, it found – because of interest from the UK. ‘The emergence of South Africa as a preferred destination with UK clients will be driven by its concurrent time zone, cultural affinity and a maturing vendor landscape,’ it said.

Fronterion managing principal Matthew Bell told the Gazette that with alternative business structures on the horizon, ‘there is a lot of pressure on the law firm model in the UK’. The report said one of the ‘most compelling strategies to remain competitive is integrating an outside vendor into a firm’s organisational operations’.

The challenge for providers is overcoming negative perceptions of LPO, Bell added, but as many big City firms have run successful pilots, ‘the barriers will hopefully come down’.

The report said major firm consolidation, such as Lovells’ merger with US practice Hogan & Hartson, will also boost LPO: ‘Firms in positions of consolidation will explore how outside vendors can make the legal team more effective in the restructured operations.’

Lovells already outsources work to Exigent in South Africa, as does Pinsent Masons and other UK firms. Hertfordshire-based solicitor Kerry Underwood has also set up an LPO operation in Cape Town for high street-type work.

He said time zones are not South Africa’s only advantage: ‘South Africans speak excellent English and there are very strong links between the countries in terms of holidays and sport, so South Africans are well attuned to England.

‘Also the basic laws are similar, so South African lawyers have little trouble in dealing with English legal matters.’