Has Legal Process Outsourcing Forced Lawyers, Vendors, and Service Providers To “Rethink” Alternatives? | Article
Legal process outsourcing (LPO) is here to stay. The reasons? Corporate customer cost consciousness and demand for value. These demands have changed buyer behavior, which in turn has propelled the growth of legal support alternatives. While LPO has not matured to the degree that it is fully accepted in the legal marketplace like other processes such as human resources (HRO), the genie is out of the bottle and there’s no going back.
Lawyers are now just beginning to overcome their initial and ingrained hesitation to outsource and growing to understand the processes, quality control, and metrics service providers like Wipro LPO offer. Once customers recognize that vetted legal professionals can conduct legal support service offerings – intellectual property, contract management, immigration, and document review, among others – at substantially less cost than work performed by white-shoe lawyers in the United States and U.K., all bets are that the old legal paradigms are gone.
Illustrating just how LPO has become a permanent fixture of legal practice in the past three years, LPOs have raised more than $1 billion in private equity in order to service corporate and firm customers. This is a staggering figure that exceeds the value of many of the corporations represented.
Why LPO is the new reality
So LPO is the new reality. But how does the competition perceive the premium service providers that have had the run of the legal marketplace for more than two decades? Have these better-known brands responded to the LPO threat? Have they adjusted their strategies to meet LPO? Or have they continued business as usual with no change in strategy or tactics?
I suggest it’s difficult to teach an old dog new tricks. Established U.S. and UK lawyer staffing, electronic discovery and document management companies, among other legal vendors, have so far failed to define the nature and magnitude of the LPO challenge. They have underestimated LPO because they are so focused on their traditional competitors (the staffing agencies) that they don’t recognize the competition now comes from lower-cost legal alternatives.
What executive isn’t familiar with the case of the low-cost airlines and low-cost telecommunication networks? Complacency and arrogance produce blind spots that delay a response and leave incumbents vulnerable. Consider how Southwest Airlines blindsided the established U.S. marketplace.
LPO, a low-cost alternative to domestic staffing agencies and legal support vendors, has built momentum that more-established, higher-cost players have failed to play close attention to. LPO has even built its presence by competing in underserved segments of the outsourced legal market such as immigration. Likewise, LPO has tapped into the look, feel, and style of traditional domestic vendors. For instance, Wipro LPO has sought to establish operations not only comparable to a legal vendor, but also to a law firm. Nonetheless, the entry of LPO has escaped the notice of many incumbents and will erode their market position.
Another challenge to the existing order is that down-market upstarts may incrementally begin to move up-market. The solutions offered by LPOs will become more sophisticated. Law departments and law firms have grown to demand competition among vendors, and in some cases help low-cost service providers upgrade their offerings by providing information and support. For example, Wipro LPO has benefitted from its relationship with blue-chip customers to expand its offerings in intellectual property.
Finally, law firms are replacing traditional integrated legal support from a single vendor with mixing and unbundling. Certainly there are arguments for law departments and law firms keeping single, long-time vendors just as there are compelling arguments for retaining a single LPO. But that one-size-fits-all mindset is changing. For example, in the past a law department in New York may have hired a single domestic legal staffing agency to maintain the same “team” to review and revise its contracts. But if they perform that review at New York staffing rates, the benefit of an LPO team performing this routine task is stronger. Depending on the type of contract, the law department may mix its contract review between domestically staffed and offshore teams.
The defining moment for LPO will occur when law departments and law firms become accustomed to the concept of unbundling legal solutions. Does this threaten existing “brand name” legal vendors? The answer is “yes” only for those vendors that don’t seriously reexamine their business model. Long-established brands can’t stick their heads in the sand when:
- Corporations will no longer pay retail merely for brand names
- Law departments are more powerful, sophisticated, and tech-driven than ever before
- They will only pay for tangible deliverables
- The new economy is a watershed for legal alternatives
Law departments and law firms can be the epitome of management, overhead, bureaucracy, and administration gone wild. I know because I’ve practiced in them. If that’s the case, why not have them purchase the legal solutions they need when they need them on the open market? That’s why LPO’s moment is now.
Robert Unterberger is Wipro LPO Practice Head and an attorney-at-law with 20 years of outsourcing experience.