Financial Post – Legal Process Outsourcing Grows by Leaps and Bounds

The following article was published by the Financial Post on April 17, 2013. The article is authored by Matthew Wocks:One of the ways firms can save money is legal process outsourcing (LPO).

True, farming out work to lower cost providers is nothing new. Yet improved technology that allows for document review over the internet could help the LPO industry grow by leaps and bounds.

Which leads to an interesting possibility. While it may be getting tougher for recent law graduates to find work at traditional law firms in Canada, perhaps a solution is emerging through the expansion of opportunity in the LPO sector.

“LPO is where we take some of the work we would do in house and send it out of house,” said Andrew Fleming, managing partner of the Toronto office of Norton Rose Canada LLP. “The best example is electronic discovery in litigation or due diligence in mergers and acquisitions.”

Indeed, LPO is growing in importance, notes Mitch Kowalski, an adjunct professor with the University of Ottawa and author of the book on change in the legal profession,Avoiding Extinction: Reimagining Legal Services for the 21st Century.

The best example is electronic discovery in litigation or due diligence in mergers and acquisitions

“(LPO’s) are starting to move up the food chain,” Mr. Kowalski said. “They are becoming more geared up with technology and also becoming well versed with lean six sigma principles.”

“The law firm of the future is going to be more of a corporate structure without partnerships and it’s going to be focussed on efficiency and cost effectiveness.”

Law firms are losing the monopoly they used to enjoy in the legal industry. Competition is increasing. Firms need to follow examples set in the corporate world, Mr. Kowalski said.“Corporations around the world are in a mode where they have to do more for less.”

Similar to outsourcing in other industries, the number one concern among firms, aside from confidentiality, is the level of quality.

“There are a wide variety of LPO’s in the market and with that comes a wide variety of quality,” said Matthew Peters a partner with McCarthy Tétrault LLP. “It is understanding what you are buying.”

Mr. Fleming said choosing an LPO is the same as choosing any other supplier. “You do your due diligence and make sure you are comfortable working with the LPO as well as giving them access to your clients sensitive information.”

It’s no easy business. Law firms tolerate a low margin of error. “It will have a very negative effect on our reputation as litigators if the outsourcer doesn’t produce at a quality level we expect,” Mr. Fleming said.

LPO providers traditionally set-up shop in countries where wages are substantially lower. One of the more popular countries is India, where the market is crowded with LPOs of differing quality levels.

Pangea3 was one of the first LPO’s to setup shop in India and is currently the largest private employer of lawyers in the country. Umair Muhajir , a vice president with Pangea3, is aware of the quality concerns. To ensure it hires the best and brightest, Pangea 3 recruits from the country’s top law schools. “The primary way in which we ensure quality is by being selective in whom we hire.”

Pangea3 opened  in 2004 and currently has offices in Mumbai and Noida, located in suburban Delhi. Thomson Reuters acquired Pangea3 in 2010. Mr. Muhajir sees this as the moment when the rest of the industry took notice and the LPO moved up the value chain.

“It’s not just the fact that we got acquired, it’s who acquired us,” Mr. Muhajir said. “Six or seven years ago we were getting breach of contract litigation or mass tort product liability, but now we are getting asked to do work beyond document review.”

Back home in Canada, the rise of outsourcing could mean the very real possibility that future law school graduates could face shortages in finding work, but Mr. Peters thinks the industry should balance out.

“Maybe the number of positions will decrease, but we could see positions opening up in LPOs with onshore capabilities.”

Mr. Fleming said he detects a waning in the market excitement for sending work to India. He thinks there is room for a similar LPO model in Canada. His firm already has a domestic model for outsourcing.

“In-house outsourced means that something is done in the Ottawa office because it has a lower cost attached to it because of rent and salaries,” Mr. Fleming says.

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