May 2009: The recent survey of US and UK based law firms conducted by ValueNotes reveals that less than 3% of the respondents had any past experience of offshoring legal services. Although legal services outsourcing has garnered a lot of media attention, there still is a sizeable proportion of the legal community that has not considered outsourcing legal services to lower cost destinations.
Offshoring of legal services to India began way back in 1995 when law firm Bickel & Brewer opened a captive facility in India. The legal services outsourcing industry started to attract significant attention only around 2005. In a matter of just a few years, the industry has grown to reach $225 million in revenues in 2008. However, this is only a very small portion (<5%) of the addressable market. According to the recent survey results, there is a low perceived benefit of outsourcing legal services amongst law firms and (if not addressed) this is likely to stunt the growth of the LPO industry.
Most of the law firms are relatively new in terms of their offshoring initiatives and have not integrated offshoring in their overall strategy. A large number of law firms, irrespective of their size, are apprehensive about sending their legal work to another country. While this does result from lawyers not being convinced about the benefits of offshoring, they also indicate concerns such as data security, client confidentiality and quality of work delivered.
Cost reduction was rated as the primary driver for offshoring legal services. Other significant drivers include client pressure to cut costs by offshoring, increasing workload, time differences and competitors’ decisions to offshore. According to Neeraja Kandala, lead analyst – Legal Services, “There seems to be some awareness about the benefits of 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.”
Data security and quality of work delivered emerged as the key concerns for law firms. Given the confidential nature of legal documents, it is understandable that law firms have apprehensions on the security aspect. While several leading and experienced offshore legal service providers take adequate precautions to ensure that there is no data theft, this needs to be communicated to the law firms in a more convincing manner. Further, service providers need to gain the confidence of buyers that a satisfactory end product will be delivered.
According to Arun Jethmalani, CEO, ValueNotes, “This is the challenge for the provider community as a whole, but inconsistency in quality between the good and not-so-good providers will remain a problem until sufficient maturity is achieved – both by buyers and sellers.”
The ValueNotes report – Legal Services Outsourcing: What do Law Firms Think? – provides an understanding of the offshoring awareness, drivers and concerns of US and UK based law firms. The survey throws light on the perceptions towards the associated risks and rewards of outsourcing legal services to low cost destinations.
ValueNotes is a leading provider of business intelligence and research, with expertise across selected domains and types of customer needs. Working with clients across the globe, we have significant understanding of international markets. www.valuenotes.biz
The ValueNotes Sourcing Practice is one of the largest information providers on the outsourcing industry. The Practice uses a comprehensive, analytical framework providing fresh insights into the fast emerging and yet, complex outsourcing space. We extensively track the space through regular analysis of news and events, continuous primary research and contact with the industry.