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Strong Winds Offshore

By Amy Jo Ehman

More from CBA PracticeLink and National For more articles and tips on outsourcing for law firms, check out the CBA PracticeLink supplement produced in coordination with the April/May 2008 issue of National. cba.org/practicelink/outsourcing

Legal service providers in foreign countries are a force to be reckoned with.

It’s 8:00 am, you’re in the middle of a major document review, and you’re speaking with the lawyer who has been working on it all night. Sounds like a typical big-firm deal, right? Except the junior lawyer is ten time zones away in Mumbai, India, where she worked a day shift while you were sleeping. Offshoring legal work, the newest trend in cost savings, is picking up steam.

“The time zones can really make a difference. You can effectively double your capacity to review documents without trying to staff a night shift,” says Ron Friedmann, a senior vice-president at Integreon, one of the world’s largest legal and financial outsourcing firms with operations in India, the Philippines and North Dakota.

“Not only is the labour cheaper in the locations in which we operate, but we are relieving our customers of the management and supervisory headaches of taking care of that kind of work,” says Friedmann. “Depending on the level of service and the location, the labour savings alone can be up to 50%.”

With a burgeoning cadre of well-trained English-speaking lawyers, India is fast becoming the leading provider of offshore legal services such as document review, electronic discovery, patent searches, contract drafting, due diligence, witness statement summaries, legal briefs, and more.

Lawyers in India typically earn one-quarter the salary of junior associates in Western firms. But saving money isn’t the only reason law firms and in-house legal departments are sending work their way.

“Cost saving is a strong motivation, but I think it’s only a minor one. You should be putting the same amount of money in and getting a better service out of it,” says Friedrich Blase, a Toronto-based legal consultant with Kerma Partners, which provides strategic counsel to professional services firms. “Law firms are not in the business of making money by cutting costs. They’re in the business of increasing their profits by increasing their effectiveness at bringing in more revenue.”

Large outsourcing firms such as Integreon and Evalueserve — with more than 2,000 employees worldwide — say they can do a better job because they focus on specialized tasks, developing the human processes, technology and quality control that many law firms cannot achieve. Depending on the job, outsourcing firms can pull together a team of professionals that might also include engineers, accountants, chemists and medical doctors.

Despite these advantages, law firms in Canada are not flocking to legal service providers in India and around the world.

“By nature, lawyers are risk averse,” says Alok Aggarwal, co-founder of Evalueserve, a world leader in legal services for patent and trademark searches, commercial leases, intellectual property and document translation with operations in India, China, Chile and soon, Romania.

Among his clients are 4-5 law firms and several large companies in Canada, significantly fewer in proportion to his US client base which includes prominent law firms and Fortune 2000 companies. However, he believes legal outsourcing is not only for big global firms.

“Smaller law firms have a feast or famine issue. They may have only four lawyers in the house and suddenly they have work for 20 people that must be done in a month or two. They have to find attorneys on a temporary contract or they can outsource it.”           

Red flags are raised concerning the skill level of India-trained lawyers and the possibility of breaching confidentiality, but offshoring insiders say these fears have been proven largely unwarranted in the last 7-10 years.

“The security in place in our Mumbai offices is tighter than what I have seen in North America for the most part,” says Integreon’s Friedmann, whose company employs numeric keypads and biometric thumbprint readers and restricts cameras and USB drives.

Aggarwal believes these concerns are only natural and will fade with time, converting many lawyers to the advantages of outsourcing legal work.

“This area is just developing and so this is not even the tip of the iceberg. It will not happen overnight. It will be easily five years at minimum before it develops in any measurable sense,” he says.

Expect to hear more about offshoring in the legal news. Recently, the American law firm Howrey broke new ground by setting up its own facility in India to handle basic legal services for its 620 attorneys around the world.