20 May 09 Law firms and offshoring

Although offshoring has garnered a lot of media attention, there still is a sizeable proportion of the legal community that has not considered offshoring.

According to a survey conducted by ValueNotes, a large number of firms, irrespective of their size, were hesitant about sending work to another country. In the first part of the survey (random sampling, online survey), it was found that less than 3% of the respondents had any past experience of offshoring legal services. However, in the second part of the survey, we actively sought out lawyers who had offshored; to solicit their views. Overall, the exposure of US law firms to legal services outsourcing (the LPO industry) is extremely limited.

While this does result from lawyers not being convinced about the benefits of offshoring, they also indicate several concerns. More than half of the respondents who do not offshore did not have any specific reasons for not offshoring.

Why don’t you offshore legal services?

Source: ValueNotes’ report on Legal Services Outsourcing: What do law firms think?

There was another large group of law firms that dismissed the idea of offshoring saying that it is “Not required” and strongly expressed that they do not feel the need to send their legal work to another country. Interestingly, 10% of the respondents had past experience of offshoring legal services, however they were not satisfied with the quality of work delivered. There were also respondents who indicated that they will consider offshoring in the future. However, number of such responses was less than 5%.

Cost pressures: The primary driver!
As in case of most of the businesses, cost reduction is the primary driver for offshoring legal services. Other significant drivers include client pressure (to cut costs by offshoring), increasing workload, time difference and competitors’ decision to offshore.

Cost saving is the primary driver
Source: ValueNotes’ report on Legal Services Outsourcing: What do law firms think?

There seems to be some awareness about the benefits from offshoring, especially amongst those who offshore. However, for the majority, the drivers do not seem to be strong enough. Obviously, the benefits do not appear to be substantial to help over-ride their concerns.
Future Outlook
While there is still a long road ahead for the legal services outsourcing industry, opportunities are set to grow further as law firms and corporates start reaping the benefits of offshoring. On the other hand, with increasing competition in this segment, offshore service providers are focusing on communicating the data security and confidentiality measures taken by them to their clients. We believe that, going forward, relatively mature services (in offshoring) will see significant increase in terms of volumes.

The above article is based on the recently released report by ValueNotes, “Legal Services Outsourcing: What do Law Firms Think? ”.

ValueNotes Research
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