The survey, conducted by a leading market intelligence firm, reveals that the total value of legal outsourcing to India is set to grow to $640 million by 2010. In 2006, that value stood at $146 million.
Corporates have effectively broadened the marketplace, developing outsourcing relationships out of necessity. While only part of their activities revolve around legal issues, those issues are often complex and time-consuming. By offshoring that work, corporates buy themselves more leeway for focusing on strategy. Law firms, by contrast, are entrenched in traditions of procedure and intricacy that are arguably more sensitive. However, positive developments in corporate LPO have given law firms more confidence to enter the market.
A substantial amount of corporate LPO work involves document review, which accounts for 58% to 90% of litigation costs, depending on the client. In areas such as this, corporates are able to save on charges of $300 to $400 per hour that would be levied in the US or UK. Corporates have been inspired to take advantage of labour arbitrage, and other outsourcing benefits, by continued strong performances in the IT and BPO sectors.
Western law firms have begun to perceive their own range of practical benefits: in early 2007, the Los Angeles Daily Journal reported that pay scales for first-year attorneys had hit a daunting $160,000 annual starting salary. With expenses thrown in, firms can expect to pay up to $250,000 per year for a junior staff member, and traditionally, it is juniors who have taken on the kind of work – from drafting to litigation support – that is now being passed on to LPO groups. This will potentially allow law firms to develop the talents of new lawyers in less paperwork-intensive directions. While US and UK law firms are currently reluctant to discuss what kind of work they are outsourcing, or to whom, this concern over PR is likely to ease as LPO relationships develop and the industry itself matures.
Industry analyst, Neeraja Kandala, says: 'Early adopters among US and UK law firms are gaining comfort with the idea of offshoring. There are several law firms that are inhibited by various concerns [but] those who have held back are now seeing the success stories of some of their competitors, leading to more optimism now.'