What is Legal Process Outsourcing
The process of Outsourcing Legal Work by a Law firm or company to another Law Firm is called Legal Process Outsourcing.
This process is mostly seen in the legal community of the States, wherein legal work is outsourced to legal process outsourcing companies in India.
Legal process outsourcing, or LPOs, encompasses a variety of legal works and services, like litigation, patent services, legal research, legal drafting, and the like.
Legal process Outsourcing in India
As mentioned above, legal organizations in the West, namely, the States (USA), the United Kingdom, and Europe as a whole, branch out their legal work requirements to countries where lawyers can be sought after, in turn for fewer expenses incurred by the seeking firm.
Here, India meets the financial and legal requirements of such firms in these countries.
It provides or extends legal services for cheaper than that in the countries mentioned above, and thus, results in huge savings by the interested organizations or law firms.
The legal process outsourcing sector is growing at an exponential rate in India, thereby attracting a large number of investors.
The main activities carried out as part of the LPO sector include legal drafting, legal research, legal reviews, and so on.
The first legal firm to have conducted legal outsourcing in India, namely, Bickel & Brewer, did so in 1995, with I&A International, its office situated in the city of Hyderabad.
It worked with digitizing legal documents and strived to create easy databases to sift through.
Further, it hired lawyers whose main task was to review legal documents produced in an ongoing lawsuit.
The year 2001 marked the first company, GE, to outsource its legal work to one of the legal process outsourcing companies in India.
Which Legal Provision(s) Govern Legal Process Outsourcing in India?
The Advocates Act of 1961 mainly governs the LPO activities in India. According to the rules set by the Act, it prohibits law firms, etc., from carrying out any process related to legal process outsourcing. These firms are, however, permitted to undertake any other process or activity that complies with the Indian legal code and its relevant provisions.
Apart from this, Indian legal provisions have also restricted the functioning of foreign law firms within its territory.
What are the benefits of legal process outsourcing?
Apart from the few benefits mentioned in the earlier sections, the LPO process has many more advantages as illustrated by the following:
As discussed above, law firms and other organizations operating in developed countries like those in the United Kingdom, United States of America, or Europe, prefer to outsource their legal work to lesser-developed or developing countries, like India, as labor is less expensive here.
Thus, fewer expenses are incurred by the firm to get certain work done compared to the professionals in their domestic country.
This results in up to 30-80% savings in the expenses incurred by the firm and maintenance of a high-profit margin, which leads to the firm's economic growth.
Compared to full-time in-house professionals employed or recruited by law firms, LPO firms can be used as per need.
Further, LPO firms allow a certain law firm to tap into expertise that the latter may lack in-house.
Law firms seeking legal outsourcing are naturally drawn toward highly trained professionals.
This ensures that work is completed by the latter more efficiently, organized, and systematically.
Additionally, the fact that firms engage low-cost LPO firms and get their legal work done also adds to the efficiency factor of both firms.
4. Time zone differences
Since the two firms on opposite ends of an LPO contract are usually situated in two distinct parts of the world, there are time zone differences that go hand in hand with the outsourced work.
These separate time zones for the firms allow one to keep working around the clock, even when it might be difficult for the other to keep working because of the time of the day for it.
Adding to the previous point, legal process outsourcing results in increased productivity as no moment is spent idle.
LPOs use high-end technology and Artificial Intelligence to streamline their work and eliminate chances of errors. This adds to their efficiency and productivity.
7. Challenges and retains in-house lawyers
Legal outsourcing is mostly done concerning work that may otherwise be considered cumbersome and exhausting by the respective firm.
Repeatedly involving in-house lawyers in such tasks, despite having the option of outsourcing, could lead to overloading them and the risk of losing them in the long run as they might begin to find the job extremely draining.
On the other hand, exposing them to fresh tasks regularly could challenge them professionally and lead to their growth, which could benefit the firm as a whole.
Drawbacks of Legal Outsourcing
Just like there are two sides to every coin, nothing in this world is free of any disadvantage to it.
The following are some of the major drawbacks of engaging legal process outsourcing companies:
1. Laws of the land
The two firms involved in the LPO deal belong to different parts of the world, so they are subject to different laws based on their location.
Many countries, like India, have strict regulations pertaining to the practice of such LPO companies in India.
This results in increased liability of the firm outsourcing its legal works in terms of penalties that it may or may not incur for engaging in such a process.
Thus, it is highly recommended for such firms to thoroughly research the local laws of the firm they are to make an LPO deal with.
2. Dispute settlement
In case of dispute settlement, it becomes pertinent to make related provisions in the contract from the very beginning.
Such provisions would include, most importantly, where the dispute or case has to be filed against both the parties operating under different local laws.
3. Confidentiality & Privacy
One major threat to legal process outsourcing is the risk that firms put their confidential data at.
The buyer’s data is susceptible to leaks and breaches. Even with the attorney-client privilege, the possibility of incurring such risks is not eliminated.
4. Morality & Ethics
Since LPO companies work at a distance, without strict vigilance, employees may be prone to adopting unethical means to accomplish the work assigned to them.
How do we measure outsourcing costs?
Undertaking a thorough evaluation and estimation of outsourcing costs is something that is vital for any firm looking to engage in such a transaction. It can do so by abiding by the following steps:
Estimation of costs
A firm can estimate the total expenses it would incur if it were to outsource its legal work by noting its operations' total percentage of costs.
Such analysis and examination could be undertaken by preparing graphs, charts, and other analysis tools.
This is done to contrast and compare the anticipated outsourcing costs with the rest of the costs of managing the firm.
Calculation of savings
It is pertinent for the firm first to estimate its outsourcing expense, followed by its subsequent savings, before getting involved in any legal process outsourcing deal.
Such a calculation of savings can be done by contrasting the difference between the costs of getting the work done in-house and the same being carried out by outsourcing.
The firm may further decide to outsource some part of the whole task if it seems more viable and feasible.
Such a decision would involve a firm pinpointing which part of the whole task would lead to maximum savings.
Subsequently, if the firm to which the work has been outsourced satisfies the buyer, bigger projects can be further outsourced after making necessary estimations.
Estimation of returns on investment
Such an estimation can only be made after following the previous two steps, but it remains the most important.
Return on investment is the comparison of the profit and savings a business entity makes on some expense it has incurred.
Thus, in terms of legal outsourcing, a firm or organization needs to make sure that the market conditions are suitable for extracting the most profit and savings when it decides to outsource its legal work.
Models of Pricing used by LPOs
1. Pay per unit
As the name suggests, this pricing model involves a pre-decided rate for each part or section of a particular legal outsourcing project.
The total price cannot be predetermined as it would entirely depend on the amount of work done.
2. Fixed price or rate
In such a pricing or cost model, a project is priced as per a fixed rate. However, some flexibility in such prices may be permitted based on the prevailing situation of the market.
3. Variable prices
Under the variable pricing model, the legal process of outsourcing project pricing depends on the prevailing market conditions.
4. Profit & risk sharing
In such a pricing model, the buyer or the firm that is outsourcing its legal work and the firm rendering its services work as partners.
They, thereby, share profits, risks, and losses equally and contribute to the same accordingly.
5. Cost & profit
Under the cost plus profit pricing model, the firm outsourcing its legal work is required to pay additional charges, calculated as a fixed percentage or part of the whole project outsourced.
Thus, such a pricing model does not prove to be very viable in markets where technologies and objectives undergo rapid changes and advancements.
Legal work that can be engaged in LPO
The following works and activities can come under legal outsourcing:
1. Contract analysis and review
This is carried out by qualified legal professionals and the utilization of advanced technology and artificial intelligence.
Such work involves careful and thorough examination of contracts to determine if any errors or faults exist in the contract, which could lead to further complications.
2. Legal research
Conducting legal research does not require any over-the-top surveillance or vigilance.
Such work is also more time-consuming as compared to the others, which is why legal research is one of the most commonly outsourced legal activities.
3. Litigation support
Though local laws or laws of the land may restrict foreign firms from practicing or litigating in a certain country, they may send over case files to be checked for any dispute or complication.
Property-based law firms in certain countries may outsource their work related to checking titles and scanning and reviewing documents to firms from other places.