Why Scottish firms must not miss outsourcing boat

Published on Monday 16 July 2007 01:19

EARLIER this year one of India's largest conglomerates joined a UK business services group and a leading Indian law firm to provide specialist legal outsourcing services to major law firms, in-house legal departments, legal publishers and legal research businesses in the UK and US. Two weeks ago BT announced two legal services outsourcing centres in Brazil and Argentina to add to their existing legal centres in India.

These announcements provoked little comment, but they signified an acceptance of a revolution in the way lawyers work and the way law firms and corporate legal departments deliver services to their clients.

To date, the reaction to specialist legal services outsourcing has been cautious in Scotland and England. However, this will increasingly be an untenable approach as domestic legal talent becomes more expensive and difficult to retain, consolidation and merger continues apace and major corporations, such as BT, demand better value for money and effective cost control. In Scotland, one lawyer has already launched a specialist legal offshoring company and a major Scottish firm recently seconded one of its lawyers to India for six months to work with a major offshore legal services provider.

The business rationale is simple. The latest Forrester Research report indicates the current value of legal outsourcing is $80 million (39.5 million, about 3 per cent of the outsourcing market), with more than $60m (29.5m) in India alone, and estimates the total legal outsourcing market will be worth up to $4 billion (1.9bn) by 2015. The major outsource providers now have a strategy to offer a multi-level service to law firms and legal departments of all sizes that meets the requirements and concerns many lawyers have when analysing the possibility of outsourcing parts of their knowledge and professional practice. This has been termed Legal Process Outsourcing (LPO).

Service providers expect to offer cost savings of 30-70 per cent with constant process improvements to further drive efficiency at all levels. India alone has more than 80,000 law graduates every year, of whom around 1,500 graduate into the best firms, with a further 2,000 obtaining jobs elsewhere, leaving large numbers of well-educated individuals looking for an alternative career in a market where English is the main business language and the Indian legal system is based on English law.

The new multi-shoring LPO model is designed to capture higher value work, and consists of a geographic and skills hybrid. It will provide, for example, an offshore facility in say India, the Philippines or South Africa, which might offer to manage all the volume or mass transaction work, a near-shore capability in say Canada or Brazil (for the US market) or Poland or the Czech Republic (for the UK market), which will undertake work where there are cultural, control or time-zone sensitivities.

The principal benefits to the legal sector of any form of outsourcing remain increased levels of service, freeing management time, access to expertise and cost reductions. However, the multi-shoring concept appears to offer further advantages for firms and in-house legal departments in continuous process efficiencies, shared resources, improved management and freeing space in high-cost locations for client-facing activities. One of the most significant benefits must also be the impact on recruitment and retention created when basic and mundane legal tasks are taken away from junior fee earners.

The question is whether Scottish firms are yet ready to take advantage of the opportunity, or will it take a downturn in the economic cycle to move LPO up the value chain and the senior management agenda. At that point the cry will be "too little, too late" and those who moved first will already be reaping the benefits.

• Margaret Lang is chief executive of Intelligent Office UK, the UK's leading provider of managed offices services.