Legal Process Outsourcing is Here to Stay

Its a known fact that today, legal service providers can no longer rely on an unwavering acceptance of the old model which according to Cisco General Counsel Mark Chandler describes as “the last vestige of medieval guild system to survive into the 21st century.”  Instead, lawyers and law firms must deliver value and thus, this is one of the primary reasons why legal process outsourcing (LPO) to the Philippines is likely to prosper throughout the incoming years.

Not too long ago, there appeared to be a general conscious that clients would simply bow down and accept the overall “pyramid structure” of large law firms which generally required clients to pay a king’s ransom for massive hourly billing by a large team of junior associates at the bottom who had no idea of what they were doing and as result, purposely bill more hours than what was required.  These junior associates were made up of fresh law graduates but thanks in part to the recession, clients have started to rebel against these steep rates and refuse to be billed by beginner lawyers.

According to industry experts, Western lawyers and law firms need to start operating with the value-based metrics of a business.  Lawyers and law firms need to face reality that law is a business and if they don’t start acting like a business, they risk going out of business.  This stern warning is not only coming from outside the industry but it is also coming from the managing partners of “BigLaw” firms.  Robert Ruyak, a former Managaing Partner of Howrey, once one of the world’s top 100 law firms, that voted for dissolution earlier this year stated “it’s time for firms to start acting like other businesses- it’s a new world and you have to adjust.”  At the same time, Tony Williams, the former Managing Partner of Clifford Chance noted that law firms needed to change their overall habits by creating links with legal process outsourcers (LPO) in the Philippines as such a move is essential to dampen the effects of an unpredictable market.  The business world knows well that what law firms have been learning recently which is maximizing efficiency should be done by enthusiastic, talented personnel in locations that are among the least expensive and the most productive irrespective of national borders.

David B. Wilkins, director of Harvard Law School’s program on the legal profession commented that legal outsourcing is not just a blip but a big historical movement.  “There is an increasing pressure by clients to reduce costs and increase efficiency.  With many companies already familiar with outsourcing information technology to the Philippines, legal services is a natural next step for the outsourcing industry.

Although many law firms have appeared to be less than happy with the changing situation, many other law firms are embracing the future and increasing profits as a result of change.  Some of those firms have been receiving more assignment and client revenue in part from (1) existing clients who send them “elective” legal work that otherwise would never have been performed due to cost but is affordable when Western lawyers are paid to supervise and edit the work of attorneys overseas and (1O new clients who hire those firms because of their reputation for developing a “value” alternative to the old model.

Examples of firms that have embraced the change include partners from three large US/ UK law firms who recently and one inside counsel at a large bank who decided to quit their jobs and form a boutique law firm.  The new firm, Radiant Law, bills for value rather than by the hour and embraces offshore legal outsourcing rather than rejecting it.  One of the founders, former Latham & Watkins partner Alex Hamilton noted “We had all been working at large law firms or in-house at large companies and felt that there was a lack of movement towards change and development in law firms that we were all looking for so we decided to set up our own firm to a view to offering legal services to clients that are better in value using a support network including offshore legal providers.”

As the legal industry continues into the new decade, smart law firms will continue to form new models, adapt to necessary changes, and embrace legal outsourcing to places like the Philippines in order to not only serve the interests of their clients but their own interests as well.  Although there are some in the legal profession who firmly believe that they can hold back the tide and resist entertaining the notion of legal outsourcing, the truth remains that clients are ready for a radical change in the way legal services are delivered and the new way of working requires law firms to move forward with the acceptance that legal outsourcing is here to stay.

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