Conducted by business intelligence provider ValueNotes – one of only two quoted sources on legal process outsourcing (LPO) market size – the study indicates that law firms are becoming more familiar with the sector as they work to offset costs.
While US law firm exposure to offshore services remains limited, the report offers a positive outlook for LPO based on a growing awareness of its benefits. IP work is leading the way in demonstrating what the LPO sector can do: driven by document management and patent research, it has proved to be a natural fit for good LPO companies, which are capable of managing and retrieving large amounts of material on schedule and to budget. The report states that 'certain services within intellectual property are currently at a higher level in terms of offshoring as compared to other areas'.
The study polled 102 US and UK law firms of varying sizes. Just as IP emerged as the leading subject area for stimulating LPO, the corporate client base was shown to be the most persuasive institutional factor. 'Corporates are more amenable to offshoring as they have substantial legal work and are already comfortable with the concept of offshoring,' the report said. 'Having understood the benefits of offshoring, corporates are now pushing local law firms to use offshore service providers.'
Much of the law firm activity in the LPO space is still at an exploratory stage, but several international law firms that took part in the poll said that they are building offshore relationships and trying out new business models through 'tie-ups and partnerships' with LPO companies. This process is helping law firms to develop their understanding of the offshore market and build confidence in its services.
On the question of how law firms selected their service providers, management experience and domain expertise were shown to be the most important preferences. Continuity emerged as another crucial factor, with clients seeking end-to-end services that can be honed over the course of lasting relationships. In this context, 'the client is looking at a service provider as an extension of their law firm', the report said. This view also plays a part in another preference, scalability: law firms want reliable service providers capable of reacting to sudden demand 'spikes' in the workflow.
Concerns over data security emerged as a deterrent to LPO use, but the report concluded that this was not a universal source of reluctance. It is well known that many India-based offshoring facilities have developed sophisticated data protection methods. For example, in September 2008 the Delhi offices of leading LPO company CPA Global were awarded International Organisation for Standardisation (ISO) certificates 27001 and 9001, for state-of-the-art data security and quality management procedures. The relatively slow uptake of legal process outsourcing by law firms was instead blamed on a lack of awareness: over 50% of respondents who said they did not offshore 'did not have any specific reasons for not offshoring'.
ValueNotes pinpoints the mid-1990s as the dawn of India's LPO business – a landscape that attracted 'significant attention' within 10 years. While the sector's revenue swelled to an estimated $225 million in 2008, the report says that this figure fulfils less than 5% of the market's overall potential.
With that in mind, the report argues that there is still 'a long road ahead' for the LPO industry to grow and develop. However, it added, 'opportunities are set to grow further as law firms and corporates start reaping the benefits of offshoring'. The more interest the sector generates as a result of these proven benefits, the more competition within it will increase. As such, says the report, 'Offshore service providers are focusing on communicating the data security and confidentiality measures [they undertake]. We believe that, going forward, relatively mature [offshoring services] will see a significant increase in terms of volumes.'