Nine Predictions for the Future of Legal Process Outsourcing
Patrice Gilles, Managing Director, Legal Process Outsourcing Advisory
The legal process outsourcing (LPO) industry is one of the fastest growing segments of the outsourcing market, thanks to companies aggressively cutting their operating costs—even in areas that were once considered sacrosanct, such as the legal department. To help you prepare, here are nine predictions as to what is in store.
1. More corporate organizations will outsource more work to LPO providers.
2. Service providers, which are already good at what they do, will get even better with more experience.
3. Providers will expand their capabilities to move higher up the value chain.
4. Service providers will grow rapidly, some doubling in size in the next year or two.
5. India will remain the primary offshore location, and onshore and nearshore alternatives will grow quickly.
6. Outsourcing to a third-party provider will be the dominant model, as captives are difficult and costly to establish.
7. Because of their historical ties to India, U.K. law firms will continue to pursue more offshore outsourcing than U.S. law firms.
8. Law firms in general, however, will remain conservative in adopting LPO, unless driven to do so by clients.
9. Procurement will drive more purchasing decisions of corporate legal departments.
Now is the time to start. To learn more, read my paper, “Legally Speaking: What You Need to Know About Legal Process Outsourcing and How to Get Started.”
1-3 Aren’t these forgone conclusions that can be concluded for any business?
4 What empirical evidence or trend data exists to support this? Is it because current LPO is so small that any change will culminate in a doubling effect?
5 True statement there again because of present dominance. Many will continue in India despite other possible market locations.
6 This was a realization reached in ITO. The rare LPO exception is where credible high end legal expertise is required. It will probably be, as your trend suggest, more a case of training up than acquiring/developing a captive.
7 True, similiar judiciary framework.
8 You are apt to see this driven by legal clerical economies as long as turn around can be suitably provided. But because legal firms are dealing with a consumer risk, this will require extensive oversight in order to render an option. In some sectors outsourced client confidential issues will preclude LPO a solution.
9 Hard statement to accept. Procurement is service function and takes it’s directives from a consuming sector. The catalyst for LPO procurement will be from within the legal or executive segments of the business and less procurement function driven (unless… they are chartered with opportunity procurement responsibilities).
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Interesting to note that UK law firms shall be more open to the idea of outsourcing in comparison to their US counter parts.
Extremely valid points Patrice. The crisis that the world has witnessed post Lehman has been acute and the GC’s office has had to also participate in contributing to the “cost pruning’ efforts of their respective CFO’s. This has forced the GC’s office to ask their law firms to provide services on a fixed price basis, leverage LPO (Legal Process Outsourcing), cutting down billing rates for junior associates etc. These crisis mode measures have become business as usual and more importantly examples and case studies to follow for rest of the peers who did not do this. Law firms are increasingly seeing requests from their corporate customers towards leveraging LPO and provide better pricing to them. This trend definitely will increase the adoption of LPO.
This apart, growth in emerging economies is another reason that we are witnessing for higher adoption of LPO’s. The emerging economies, particularly China and India are playing a significantly higher role in the growth plans of many global firms. LPO is a direct route to get connected to the legal fraternity in these economies rather than going through expensive global though next door law firms for leveraging this knowledge base.
As regards conservatism amongst the law firms, we agree with you that the adoption of LPO is still in it’s nascent stages. However, the law firms are increasingly getting more receptive to the fact that they need change. Towards that, many law firms are actively working towards re-inventing themselves to meet the challenges going ahead. LPO is one of the many areas where they see outsourcing players helping them apart from traditionally strong areas for outsourcing firms like knowledge management, research, finance & accounting, process re-engineering, systems re-engineering, technology enablement and re-engineering etc. These views have also been outlined on our recent blog http://www.infosysblogs.com/knowledgeservices/2010/06/law_firms_need_transformation.html .