By H. Ward Classen
The Daily Record Newswire
In response to the constant pressure to reduce legal costs, inside and outside counsel alike are exploring new means of providing greater value to their clients. One of the most intriguing trends is the concept of legal outsourcing.
Legal outsourcing refers to the concept of purchasing legal services in low-cost countries such as India, China and Mauritius, among others. Although the concept of using overseas lawyers to provide legal services in the United States is foreign to many (yes, my bad pun was intended), the concept is gaining acceptance within the legal community.
The American Bar Association’s 2008 opinion approving the overseas outsourcing of legal work has accelerated this trend. A recent New York Times article stated that over 140 Indian firms provide legal outsourcing services and the value of these services will rise from $440 million this year to $1 billion in 2014.
For over 20 years, corporate legal departments and firms have been outsourcing legal services within the United States through the use of contract lawyers to assist with discovery in large lawsuits and due diligence for potential acquisitions. Litigators have outsourced document production to domestic vendors such as Spherion and Iron Mountain.
Overseas outsourcing provides many benefits and efficiencies: Indian legal salaries are a fraction of the salaries for comparable U.S. lawyers; Saturday is a workday in many parts of the developing world, increasing the workweek by 20 percent; English is an official language of India, reducing communications issues; time zone differentials allow Indian lawyers to work overnight and have a project completed when a U.S. lawyer begins work the following morning.
Initially, overseas outsourcing was limited to document production, document review and contract management. Indian lawyers are well suited to these tasks, having been trained in the English common law system. Recently, the breadth of services has expanded to include contract negotiations with U.S.-based lawyers. It remains to be seen, however, whether other sophisticated legal services can be successfully outsourced.
So what is the impact on the U.S. legal industry? It is clear that large firms will be driven by market forces to move low-value tasks overseas in order to remain price-competitive. Some firms, such as Kelley, Drye & Warren and Clifford Chance, have embraced outsourcing and use it as a marketing tool to potential clients. Many associate positions and entry-level in-house positions will be transferred overseas where they can be performed with greater cost efficiency.
The demand for lawyers in the United States will never be eliminated, but it is likely that demand will fall and legal salaries will remain flat or decline in response to the new global market for legal services.
At the same time, a significant dichotomy in legal salaries will likely emerge between the small number of lawyers practicing in large firms in comparison to other practicing lawyers. Only time will tell, however, whether legal outsourcing will actually result in a meaningful reduction of legal costs for corporate America.
H. Ward Classen is Deputy General Counsel of Computer Sciences Corporation. The views expressed herein are those of Classen and not those of Computer Sciences Corporation.
