Behind the Scenes of Legal Outsourcing

7 May ’05

Via The E-LawLibrary Weblog, Legal Affairs has an interesting article that goes behind the scenes on legal outsourcing. Some quotes that caught my eye in particular:

With the work being done in India becoming more sophisticated, some American attorneys are skeptical of American firms that use outsourced legal services. “I think a lawyer has a responsibility over his work and he just can’t delegate it,” said former ABA president Jerome Shestack, now the head of litigation at the Philadelphia firm of Wolf, Block, Schorr and Solis-Cohen. “The problem with outsourcing is, how do you keep control over it? How do you see how it’s being done?”

My first reaction to this was simply disbelief. The basic business model of Biglaw is built on outsourcing – to junior lawyers – trainees, essentially. And at least among lawyers, it’s a pretty notorious fact that in the big firms the work performed by juniors is (too) often completely unsupervised and not adequately reviewed for quality. The firms treat it as ‘sink-or-swim’ training, and for that purpose it’s ultimately quite effective. But as to quality control, it’s often effectively outsourced blindly. My suspicion is that work outsourced to India is, at least in that regard, often of superior quality. And I see no difference between outsourcing to a junior, for review by the lead lawyer, and outsourcing to India, for the same review.

Given this reluctance to discuss outsourcing, convincing a potential client to accept even a free sample can take months of lobbying. Intellevate offers to prepare at no fee a mock patent application for firms it courts, but this offer is often declined. Steinberg has been forced to resort to more aggressive tactics. Eighteen months after applications are filed with the U.S. Patent and Trademark Office, they become public record. Steinberg recently had Intellevate’s Indian staff comb through a company’s latest USPTO applications for errors. When they found some, one of them serious, Steinberg contacted the large D.C. law firm that had filed the application. He flashed a devious smile recounting a partner’s response to his unsolicited help: “This is outrageous.” If the mistake doesn’t convince the D.C. firm to work with Intellevate, Steinberg said, “there’s nothing stopping us from sending it to the corporation.”

I think many clients think that what they are paying for in Biglaw is quality. In many cases that’s certainly correct – some of the best legal work I’ve seen has come out of the big firms. But some of the worst work I’ve seen has also come from the big firms – any everyone who’s been involved has their own share of the same stories. And so, often the client is not so much paying (probably without knowing it) for quality – it’s paying for immediate access to an army of young, bright minds who can swarm a complicated deal and work all night to get it done quickly, using largely preprinted forms that require some, but not much, judgement and creativity. And get it pretty close to, but not exactly, right. Because the lawyers are inexperienced and their work not adequately supervised. Because people are working quickly and without enough rest. And so on. The large firms are able to reduce this risk through effective knowledge management – giving these young lawyers ‘tried and true’ precedents to work with, but mistakes are still often made. This is not necessarily a problem – clients might well be comfortable with buying a Volkswagen and not a Cadillac, as long as they understand the risk and believe the price appropriate. The point here is just that to some extent, perfect quality is a myth. And Biglaw has built its business model on that myth, and the idea that it is very expensive to provide that level of service.

But the Indian outsourcing model allows, theoretically at least, for greater quality control – more people reviewing the work, at lower cost, using (eventually, at any rate) the same precedents. It makes the myth more affordable …

So far, large law firms have protected themselves from quality comparisons by fostering a genteel and gentlemanly culture over comparative marketing (hence the bland and effectively meaningless sloganeering we see from Biglaw) and through Bar Association rules that prevent advertising that compares these qualities (ostensibly to maintain respect for the profession, but I’ve never bought that line). I think we are about to see those rules start breaking down …

Finally, if an Indian outsourcer can assemble a team to prepare patent applications, why not a draft of a prospectus? Why not a share purchase or merger agreement or syndicated lending agreement? Why not manage the deal using a deal leader from the domestic law firm, with Indian attorneys at all meetings via conference call to take the drafting comments and manage the documents? Why not an extranet, for use with your client and your legal outsourcer, that manages document flow and all shared information on the deal, and gives the outsourcer access to all the firm’s precedents that might be used on the deal?

Seen from this perspective, knowledge management is both a competitive weapon for the individual firms that deploy it well, and a ticking time bomb for the industry generally – if much of the knowledge about these kinds of legal matters can be reduced to forms, they can be given to Indian attorneys who can then be supervised to work with them, at all much lower cost than is presently the case. Certainly, much of the knowledge can’t be reduced to forms, but it’s certainly the case that a lot can – enough to profoundly affect the cost of performing the work. And if Indian attorneys are to get involved to that extent, what work will be left for the young untrained attorneys in North America that Biglaw trains using that kind of exposure? And after a generation of working like this, won’t Indian attorneys be trained well enough to perform the mandates themselves? What would prevent an Indian outsourcer from then opening an office in New York, hiring a few attorneys called to the New York bar, and then outsourcing 90% of the work to their offices in India?

The model reminds me of the work I did in Budapest, for a Canadian law firm, shortly after the Berlin Wall came down. The privatization market was brisk, and I was given an opportunity to work on a few deals in Budapest. We worked with Hungarian attorneys who, at least in the beginning, were unfamilar with these types of transactions or with how to manage them. But they learned very quickly. And I suspect that it was not long after we left that they were quite able to serve the local demand for sophisticated legal work on their own, thank you very much. In the end, after a brief spurt of business activity that Western law firms were able to share in, legal know-how was transferred through the simple day-to-day of working together …

I think that eventually, the Indian legal outsourcing model will take us to the same place ….

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