The Financial Crisis, LPO Conference and Study Tour Update, and Indian Legal Market News

The Financial Crisis and Firm Wide Buy-In for Legal Process Outsourcing

Stories and articles abound within the Indian legal press, on how the financial meltdown on both sides of the Atlantic will propel the still fledgling LPO industry into the stratosphere. Click here to read an article from the Hindu Business Line as a perfect example. Purely to play devils advocate for a moment, while I concur that in a tough economy, where the pressure to keep costs under control is of paramount importance, as much as there are drivers pushing the utilization of LPO services, there are some extra hurdles to overcome.

Achieving firm wide buy-in to a strategy of offshoring legal services functions, at a time of financial uncertainty, may not prove to be the easiest sales proposition, irrespective of how much financial sense it makes. The General Counsel, CEO, or Managing Partner you’ve been dealing with for the last couple of years will find other items rising to the top of the agenda, such as redundancies, department closures, forced mergers and the like. You don’t need to be a rocket scientist to work out that any LPOs or other third party providers for that matter, who were touting Heller Ehrman for business, will very quickly be turning their attention elsewhere. In terms of prioritization, major firms more than ever before, prior to looking overseas for the solution to reducing overhead, may simply cut unprofitable areas of practice and play the “leverage” game with those associates working in the still profitable practice areas.

That said, as I hinted above, I am to a certain extent playing devils advocate. Once the dust has settled I do agree with my peers within the LPO industry. The financial pressures many corporations and law firms are now experiencing, together with the anticipated litigation flowing from these troubled times will only serve as a springboard to the continued growth of the offshore legal process outsourcing industry.


PrinceOMC Legal Study Tour of Leading LPOs

From October 20-24, the independent management consultancy, and authors of the report, Legal Industry Outsourcing Trends 2008, princeOMC, are conducting an executive study tour of some of the world’s leading LPO organizations. LPOs on the tour itinerary include LawScribe, Integreon, Pangea3, and CPA Global. Click here to access the tour’s detailed prospectus.

IQPC Legal Process Outsourcing Conference Reminder

A quick reminder to my readers that I will be chairing IQPC's 1st Legal Outsourcing Conference, in Chicago, from October 20-22.

The conference will provide delegates with first hand insight into real life case studies from major corporations, AM law 200 firms and some of the world’s top 5 LPOs. The conference will gather top LPO experts to share ideas regarding the current changes taking place in the legal industry.

If any readers would like further information on the conference please feel free to contact me directly. Alternatively click here for the full conference web page.

Ongoing Talks on Liberalization of Indian Legal Sector

British Lord Chancellor, Jack Straw has met Indian Law Minister H R Bhardwaj and representatives of the legal profession in Delhi to discuss the liberalization of legal services and cooperation between the U.K. and Indian legal sectors. Click here for the full Ministry of Justice website article.

Jack Straw said that opening of the legal services market would be in the interest of legal systems in both Britain and India.

While I wholeheartedly concur with Mr. Straw's published sentiments, I suspect that the U.K. government is looking for a little more from the Indian legal sector than they in turn will be prepared to offer in terms of reciprocity.

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The Financial Crisis and Legal Process Outsourcing Conflicts

I’ve read several articles over the course of the last couple of weeks referencing the recent turmoil in the financial markets and the potential impact this may have on the LPO industry. I came across this evening an interestingly novel perspective, and well written article on the outsourcing weblog by Gary Zeiss. Gary has previously contributed to this blog and has generously authorized my reproduction of his piece here. Over to you Gary:

The Financial Crisis and Legal Process Outsourcing Conflicts

By: Gary M. Zeiss (click here for Outsourcing Weblog bio)

While I've written about the effect of the financial crisis on general BPO and IT outsourcing services, I haven't yet discussed the potential for legal process outsourcing to move to center stage as a viable offshore alternative.

Given the tectonic shifts in the financial market that have occurred in the past two weeks, there is little doubt that an avalanche of litigation will ensue. In fact, it is possible that the quantity of securities litigation will be so great, and the amount of paper that requires analysis so large, that few companies will have any choice but to look to alternative sources to perform critical discovery tasks.

Where this gets really interesting is in the potential for legal conflicts. While anyone with experience in the LPO business will argue that these companies do not "practice law," the services rendered, particularly for eDiscovery, are knowledge work that can lead to conflict concerns. For example, if an eDiscovery staffer working on the defense-side of a litigation matter learns of a practice undertaken by the defendant, that same LPO staffer could highlight that practice for a plaintiff in subsequent litigation. This could prove to be an extremely complex problem for the large LPOs with institutional clients.

What will this mean for the LPO industry? I foresee (at least in the securities/document review arena) an increase in segmentation between plaintiff-side and defense-side LPO services. This may also lead to segregation by size, with larger LPOs gravitating to institutional clients and large-firm relationships, while smaller LPOs develop targeted expertise for plaintiff firms.

Another challenge that may face the industry is a focus on conflict-checking during the hiring process. Given the turnover at outsourcing companies in general and the difficulty in completely verifying records, it is possible that offshore attorneys will ultimately be typecast according to their "side" of the conflict - limiting employment mobility for offshore professionals.

On the other hand, and particularly on the defense side, I predict the development of long-term, institutional relationships between LPO providers and their clients. This increased stability will be good for the market and will help solidify LPO work as a valuable part of the outsourcing suite of services. Plaintiff-side companies will have a larger marketing challenge, no doubt, but also stand to develop reputations in specific types of litigation that could insulate them from market volatility.

Counterbalancing all of this value derived by recognizing that LPO work has some of the characteristics of legal "knowledge work" and needs appropriate ethical boundaries. This cannot help but be good for the LPO industry as it legitimizes what has historically been viewed as a niche practice. With broader acceptance and clear boundaries, LPO work will likely thrive over the next few years.

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Security and Client Confidentiality the Number One Concern

It is increasingly self-evident that the interest level among legal departments and law firms large and small, in offshore legal outsourcing as a viable strategic alternative to the traditional delivery of legal services, has mushroomed beyond my wildest predictions. Only eight months ago I hosted our first MCLE Ethics webinar, entitled, Offshore Legal Outsourcing, the Ethical Implications. Forty-five attorneys, litigation support professionals, patent agents and other interested stakeholders signed up to attend. For Tuesday’s webinar I had a phenomenal one hundred and forty-nine registrants. What began as a whisper in the hallways of the most forward thinking and cost conscious corporate legal departments is now a chorus of approval sweeping law firms and corporations across the country. (My sincere apologies, it’s Friday afternoon and readers will have to indulge me here, but I just couldn’t resist a touch of Presidential nominee plagiarism!). Anyway, for those who couldn’t attend, the audio and slides are available here on my blog home page. If you scroll down the right hand side, you'll find them.

What I found particularly interesting were the results of my poll asking attendees the following question:

What ethical and legal issues concern you the most about offshore legal outsourcing?

Issues relating to Security and Client Confidentiality amassed an impressive 49% of the vote. The other major concern, registering 25%, was potentially failing in the duty to competently represent your client. I was encouraged albeit unsurprised, that despite the plethora of articles covering the recent Newman Hennessey and McIntosh vs Acumen case, only one individual highlighted the now infamous “4th Amendment” issue as their most pressing concern. Let’s all agree that this is now firmly put to bed. What was more surprising, given the number of attendees who professed to be either US IP attorneys, or patent agents, was the relative lack of concern with the Export Administration Regulations in light of the USPTO Notice of July 16. Only four attendees identified this as their number one concern. I don’t view this as evidence of a lackadaisical attitude among attendees towards compliance with the regulations. However, this clearly demonstrates U.S. attorneys’ and Patent agents’ awareness that the outsourcing of patent related support work overseas is set for legitimate growth. Practitioners understand that a careful classification of the technology to be exported with reference to the Commerce Control List, and if necessary, enlisting the assistance of the Bureau of Industry and Security, can ensure one doesn’t fall foul of the regulations.

Perhaps it was naivety on my part, but I actually removed a couple of slides from my webinar presentation dealing specifically with the security and data privacy standards routinely in place at the leading, reputable LPO organizations. I incorrectly assumed that as this is an issue that has been covered so repeatedly in previous conferences and seminars that attendees did not need to hear it all over again. Clearly I was wrong. I’ll be hosting a webinar dealing specifically with the issue of security and preservation of client confidential information before the end of the year and I’ll let readers of my blog know of the dates as soon as it’s in my calendar.

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Register for MCLE Ethics Webinar: Offshore Legal Outsourcing, the Ethical Implications

On Tuesday, September 9th, at 11.00am PST, I am hosting a free webinar entitled Offshore Legal Outsourcing, the Ethical Implications. California and NYC admitted attorneys will be entitled to 1 hour of MCLE Ethics credit. Click here to register for the webinar.

I last hosted the webinar in late January of this year. Over the last 6 months the ethical implications of outsourcing legal work overseas have never been far from the news headlines. Subject to time constraints I'll be looking to cover some of the issues that have cropped up since my last webinar, including:

• NMH vs. Bush and Acumen (June – August 2008)
• USPTO Notice – Scope of Foreign Filing Licenses (July 16, 2008)
• ABA Formal Opinion 08-451 – Lawyer’s Obligations When Outsourcing Legal and Nonlegal Support Services (August 5, 2008)

In addition to the above I'll be re-examining the variety of ethical obligations incumbent on U.S. attorneys contemplating outsourcing legal work overseas:

• Avoiding the Unauthorized Practice of Law
• U.S. Attorney's Supervisory Responsibilities
• Duty to Act Competently
• Client Confidentiality
• Duty to Disclose
• Conflict of Interest Implications and Risks
• Billing Appropriately for Outsourced Legal Support

To register either click on the above link, or feel free to contact me directly. For those of you who are interested, but unable to attend, I will be posting the audio and slides on the blog in due course.

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