Talkin’ about a revolution
History dictates the legal industry is a slow mover. It is far from an agent of change and with the post-COVID-19 era ushering in a new way of working, we are getting the sense that the industry jumps only when pushed.
Talkin’ about a revolution
History dictates the legal industry is a slow mover. It is far from an agent of change and with the post-COVID-19 era ushering in a new way of working, we are getting the sense that the industry jumps only when pushed.
The legal industry is no stranger to a revolution. Digital Transformation, The Great Resignation and now, the Outsourcing Revolution. The latest evolution in the outsourcing market, coined Legal Process Outsourcing (“LPO”), is the first time a specific market has been targeted outside the generic Business Process Outsourcing (“BPO”) umbrella.
Long before the crippling crash of the Global Financial Crisis (“GFC”), lawyers and in-house legal counsel were under considerable pressure to do more for less.
The Great Recession exacerbated this pressure and led to a surge in the exploration of innovative legal service delivery models. Almost instantly, LPOs emerged and began to play a crucial role in the reengineering and cost-effective delivery of legal services.
While initially the focus was on the labour arbitrage benefits available from outsourcing certain legal tasks to lower cost locations, such as India, the LPO industry has matured and transformed itself over recent years.
The LPO model is a convenient way to increase capacity, focus on the strengths of traditional law firms, and increase profitability. According to a recent study conducted by Grand View Research, the global LPO market size is anticipated to reach USD 117.89 billion by 2030, exhibiting a CAGR of 30.9% over the forecast period. At its core, LPO heralds a revolution in the way lawyers work and the way their law firms and legal departments deliver services to their clients.
As the roller coaster of alternative legal services, innovation and technological advances continues to pick up pace, not only will LPO providers be along for the ride, we expect them to have front row seats.
This article will present examples demonstrating how LPOs are meeting the demand for innovative solutions in the legal services market.
Document review
Document and contract review can be one of the most expensive and time-consuming parts of e-discovery costs. Lawyers can find themselves overwhelmed with piles of documents that have to be collected, processed, filtered, and produced. With voluminous quantities of records and documents, many traditional law firms with limited staff do not have the means to review it all.
Outsourcing document review makes it possible to review it all without bringing your workflow to a standstill. In turn, traditional law firms save valuable time and it is a far more cost-effective solution than doing it in-house.
According to research conducted by Thomson Reuters and the Georgetown Law Centre for the Study of the Legal Profession, $6.2 billion is spent annually on LPOs, e-discovery and document service providers.
“In an interview with The Times, Karen Jacks at Bird & Bird noted ‘change in law firms can be like rerouting an oil tanker and can be very hard’. ‘If it ain’t broke, don’t fix it’ is a mantra often echoing in the halls of traditional law firms, yet the legal industry is evolving whether traditional firms like it or not.”
“In an interview with The Times, Karen Jacks at Bird & Bird noted ‘change in law firms can be like rerouting an oil tanker and can be very hard’. ‘If it ain’t broke, don’t fix it’ is a mantra often echoing in the halls of traditional law firms, yet the legal industry is evolving whether traditional firms like it or not.”
Benefits of outsourcing
On average, lawyers work more than 50 hours a week. Between juggling incoming calls, advising existing clients, and trying to bring in new clients, an extra set of hands would be welcomed at any practice. The pressure to get it all done can be overwhelming, and traditional law firms benefit greatly from outsourcing their routine, process-driven tasks.
Traditional law firms might not want to hear this statistic - a recent study showed the average lawyer spends less than three hours a day on billable work. So, traditional firms looking to expand their practice and elevate the client experience should be relying on outsourcing to help lighten their load.
Cost-effectiveness is a key reason behind the rise in LPOs. LPOs provide a unique opportunity for law firms to access high-level expertise from external talent whilst staying within budget. The more hands-on deck, the more work that can be taken on, and the more revenue that will be generated.
Although outsourcing requires a fee, the return on investment is well worth it and more cost-effective in the long run. The 2019 Altman Weil Survey Report found that for 62.1% of respondents, shifting work to contract lawyers “resulted in significant improvement in firm performance”. The result is less pressure without the eye-watering price tag attached to a full-time associate.
TradLaw v LPO
So why do traditional law firms view LPOs as an existential threat? Historically, law firms are slow to evolve. Aversion to risk, tradition, culture, conservative attitudes, and billing structures are some of the reasons for inertia.
In an interview with The Times, Karen Jacks, chief technology officer at Bird & Bird noted “change in law firms can be like rerouting an oil tanker and can be very hard”. “If it ain’t broke, don’t fix it” is a mantra often echoing in the halls of traditional law firms, yet the legal industry is evolving whether traditional firms like it or not.
The Outsourcing Revolution is not a spectator sport, and traditional law firms need to go with the momentum otherwise they risk being left behind by the industry and, most critically, by their clients.
In 2023, industry trends indicate clients are expecting law firms to go above and beyond the traditional offering of services and support. They are demanding more transparency and understand and scrutinise their legal spend, seeking more bang for their buck. With LPOs not only understanding but meeting these new demands, the competition between traditional law firms and LPOs only grows fiercer.
The impending collision between LPOs and traditional law firms is also partly due to law firms viewing process-driven tasks as excellent training ground for junior associates. Legal processes can be quite profitable when charged on an hourly rate and conducted by inexpensive legal staff.
As clients become increasingly savvy with their legal budget, traditional law firms must get to grips with this reality and embrace it to keep some control. If they do not, law firms might well find that in a few years, while they could have been part of the game, they are relegated to the spectator stands.
In 2023, the LPO market is poised for growth as LPO players enter the market in increasing numbers, and the existing players expand their capabilities. LPOs are here to stay however, the question remains, is the legal industry ready, willing and able to welcome the revolution with open arms?