Global recovery to herald LPO boom

A boom in legal process outsourcing (LPO) activity is imminent as law firms look to life after the recession. According to a new report by leading outsourcing research group ValueNotes, the industry will 'pick up pace' post 2010 as the global economy recovers'. 

The report predicts 'consolidation in the industry with larger players acquiring capacity and capability, as well as international law firms looking for control over India capacity'. In the medium term, ValueNotes said, 'numerous smaller businesses will continue to mushroom, which will, in turn, create a large pool of acquisition targets as well as potential joint venture partners'.

The report – Legal Services Outsourcing: Crisis Creates New Opportunities for LPOs – focuses on the performance of the offshoring sector in India. While its figures suggest that offshoring of legal services to India hit a temporary slowdown in the past two years as clients faced recessionary conditions at home, the sector still produced a 16% growth rate in 2008-09. With the expected recovery, Indian LPO revenues are forecast to reach $440 million by the end of 2010.

Helping to drive that growth are law firms, which are following the lead of corporate law departments and starting to embrace LPO, according to Paul McGolpin – director of legal services outsourcing at CPA Global. Commenting in the report, McGolpin said: 'Many of the UK's biggest law firms are now being increasingly linked with outsourcing, either as part of a three-way relationship between the corporate client, their external counsel and the legal outsourcing provider, or directly with outsourcing providers.'

Jack Diggle, legal specialist at leading outsourcing consultancy OMC Partners, shares this view. Speaking to IP Review Online, he said: 'Overall, volumes of legal work are down across the world, and there's a knock-on effect on LPO. But, having said that, I can't think of a single law firm that hasn't thought of LPO as a means of tackling costs and logistics. I think we are at the beginning of a big LPO surge – there has been a substantive shift in law firms towards LPO this year, and we [at OMC Partners] don't see that reversing.

'Once you've moved work offshore,' he added, 'there's no imperative to bring it back onshore. The work is only going in one direction, and law firms are increasing the scope and scale of the outsourcing arrangements they are entering into. We are seeing a big shift from a situation where some law firms were piloting projects to one where many more are piloting, but an even larger number are looking at structural transformation.'

McGolpin told IP Review Online that for law firms and corporate clients, the flexibility of a multishore approach is increasingly important, especially with the growing scope of LPO partnerships. 'Outsourcing does not always have to mean offshoring,' he said. 'When CPA Global first started developing its thinking on legal services outsourcing, we looked at it as an India offshore model. India is an important component and we have developed a first class delivery capability there. But not all outsourcing roads lead to India. 

'Our corporate and law firm clients feel most comfortable when they have options. Some are happier to outsource locally, then branch into offshoring when they've grown more confident in the concept. For others, strong onshore relationship management plus high quality and cost efficient offshore delivery capability is a great combination. Either way, multishore is the preferred model.'

Diggle thinks that IP-related legal work 'is one of the areas that lends itself most naturally to outsourcing, because of its commoditised nature. I would expect it to be one of the most prominent areas that we will see growth in during 2010.' However, McGolpin is keen to stress that the top LPO providers are capable of handling work that is more demanding and bespoke. 'If you talk to some of our clients,' he said, 'they will tell you that the work they are giving us is complex. It's not work that can be delivered to a standard set of metrics. Yes, we do the volume, process-driven work, but, at the same time, we're also taking on more sophisticated and strategic tasks.

'If you've got the engagement level right and the quality of lawyers right, you will be capable of delivering more complex services. In our Washington office, for example, we have lawyers of a quality that could be found in any major law firm. There's a real place for law firms and LPOs to work together. We are talking with law firms in a very collaborative way about serving their clients' interests.'

In the long term, planning and persistence will be the most vital ingredients for successful LPO relationships. 'If the global economy picks up,' said Diggle, 'that will lead to an increase in M&A activity, which the legal services industry will play a part in. As the resulting change programmes could take up to 18 months to implement, it is likely that a measured, consistent increase in LPO will be seen from the end of 2010 onwards. There is no overnight switch – it takes time to build a successful model.'

McGolpin agrees. 'CPA Global takes a very consultative approach,' he said. 'It is the openness of the dialogue with the client and our responsiveness that counts. We are continuously improving, learning and re-implementing our expertise, and it's all about maintaining consistency. You need to have trust to bed the relationship in; and you need to demonstrate quality, commitment and reliability to develop it further.'