New York Firm Takes on India..."Very Nice!"
by Heather Greenwood Davis

If the American lawyers handling the litigation for the film Borat: Cultural Learnings of America for Make Benefit Glorious Nation of Kazakhstan were actually in the movie, people would still be looking for a punch line.

But Canadian law firms–who have been following the legal outsourcing trend of hiring and training legal professionals in India to work for American clients at a fraction of the cost of doing it on-shore–know this is no joke.

SDD Global Solutions Pvt. Ltd., the affiliate arm of New York law firm Smith Dornan Dehn, is currently handling the multi-million dollars worth of Borat-related litigation from their offices in Mysore, India.

Russell Smith, president and chairman of SDD Global, believes it's only the tip of a very lucrative iceberg.

“I would say 90 per cent of the work [being done in North American law firms] can be off shored to India,” says Smith. “If it's not walking into court, holding the client's hand or having a meeting–which by the way most clients don't need anyway–it can be done here.”

Smith's company isn't the only Legal Process Outsourcing (LPO) player in Mysore.

Competitors range from Indian law firms who have abandoned local practice and declared themselves open for low-end outside legal work to Indian lawyers who have allied themselves with American lawyers for training and marketing purposes while they do the routine document work at large Indian firms.

Indian law prohibits foreign firms from practising in India, but SDD Global has managed to stay above the laws by operating as an affiliate.

“We're still the only LPO that's managed by an American law firm,” says Smith. “I'm really quite shocked but also pleased that we have this market pretty much to ourselves for now. I don't think for a second that it's going to stay that way. I have no doubt that other firms will come and I'm sure that will happen with Canadians too.”

While the government hasn't openly welcomed LPO work, they also haven't condemned it, says Rahul Jindal, an LPO blogger based in India (http://legallyours.blogspot.com).

“The sector isn't large enough to warrant substantial government focus at this time, but learning from the past I think the government will be very encouraging,” says Jindal. “You can see that I.T. outsourcing has changed the way so many people live in India. Looking at that success I think the government is excited about delivering offshore low-cost, high-quality services to the world.”

For the US firms, the pros are clear: Cheaper labour costs (an annual salary for an Indian hire starts at about US$6,000), impressive real estate savings (Smith reports paying 43 times less for the same amount of real estate he would need in the States) and the time difference (“People can be doing work while you in Canada are sleeping,” Smith points out) all work in their favour.

And clients don't seem to mind the lower bill: Rates run as low as US$30 per hour.

Smith says his impressive roster of clients ranging from MTV Networks and ABC to Universal Pictures and Sony Pictures Television, recognize that his firm can offer them quality work at a significant cost savings over their onshore competitors.

“Sony pictures had a massive legal issue for us to research in all 50 states. Their usual big firm counsel would've charged them a couple hundred thousand dollars…but because we could do it for US$43,000 the work was done.”

It's just one example of how business is booming.

SDD Global's current staff of about 40 lawyers is, according to Smith, expected to quadruple over the next 12 months. With India graduating about 80,000 lawyers a year, the biggest hurdle has been sifting through the more than 20,000 applications they have already received.

Their onshore firm has benefited as well. The firm is now hiring a number of lawyers in its New York office and three counsel who will split their time between India and the United States.

The firm has also expanded to include Indian clients: Software companies who need immigration visas to the US or who want US counsel and US companies (including Calvin Klein) looking for lawyers who can handle pirating and counterfeiting issues at home and in India.

What clients are concerned about, Smith says, is being able to hold someone accountable.

“I will say that clients in the west they want someone who speaks with their accent I'm sorry to say—it's more so a cultural thing, it's not a racist thing. They want someone who's there when they want them. They don't want to have to wait until the nighttime to call them in India. And to be really crass about it, they want to sue someone if something goes wrong. “

Canadian client's equally conservative nature may be one of the reasons why the industry has yet to take off here.

Simon Chester, a partner who specializes in legal outsourcing at Heenan Blaikie LLP in Toronto, says that while Canadian firms may be taking note of their American colleagues, they aren't yet following suit.

“While the models for outsourcing are clearly there I haven't heard of any Canadian law firm outsourcing back office functions or substantive legal work to the main business process outsourcing centres in India,” says Chester, who blogs extensively on the subject at www.slaw.ca. “It's possible that some clients are doing it but if so they're remarkably discreet about it.”

McCarthy Tétrault LLP partner Wendy Gross suggests that, practically speaking, the savings may be a bit of smoke and mirrors.

“On its face the hourly rates, the unit price, is lower but you have to factor into that the additional costs of managing your service provider and in the context of legal services you can't just take those and flow them through directly to your client,” Gross, who specializes in outsourcing, points out.

“In order to meet your law society obligations there's still a quality control and review exercise that you have to engage in.”

“All in all the cost savings, effectively, may not turn out to be as substantial or even there at all.”

Canadian rules that also govern who is authorized to practice and the issues of conflicts, confidentiality, privilege and privacy are among the hurdles that need to be considered, she cautions.

“There are definitely complications and legal issues that need to be navigated,” she warns.

Smith says the same legal requirements exist for SDD Global but what is different is the mindset of the firm's onshore lawyers: Instead of trying to do as many hours of work for a client as possible, they aim to do the opposite.

“In most law firms, the objective is not to reduce the cost, the objective is to increase the cost as much as possible: Increase the amount of work that's done, increase the hours, increase the fees—wherever they can get away with it,” he says. “My law firm in New York has taken the plunge. We believe that if we actually try to cut the costs we will come out on top because we will get the volume and also our internal expense won't be that great.”

Chester also believes the barriers aren't insurmountable.

“Anytime you engaged a foreign lawyer to help, you needed to cover that off,” he says referring to the various Canadian law society rules, “so I regard the professional obligation hurdles as manageable if the outsourcing contract is properly thought through.”

“Anyone who sees them as a bar is trying to protect a local market,” he adds. “If US and English regulators have thought outsourcing through and approved it with adequate safeguards so should Canadian law societies be able to manage.”

While Canadians have yet to surface in India, there is no question that interests remain high. Jindal says that the number of inquiries he has received from Canadian lawyers have been steadily increasing over the last nine months.

And a plethora of recent Canadian conferences have highlighted the Indian LPO option, often inviting American lawyers and Indian LPO firms to the table to discuss their successes. All suggest that Canada, though wavering now, may find itself part of the game in the future.

“I think its going to be very interesting to watch and see how this market develops over the next five years,” Gross says adding that she would predict that corporations, more than law firms, will begin to use the service.

“The pressure on internal legal departments to find ways to cut their budgets has been increasing by leaps and bounds,” she points out. “More and more Canadian in-house counsel may either start calling on Indian firms directly or directing their Canadian law firm to outsource some of the work.”

And that, she says, isn't necessarily a bad thing.

“There are times when there might be a good business case for it and it makes sense for any organization capable of doing it properly and effectively but it's not the silver bullet or the panacea to cut legal costs,” she warns. “To the extent that it helps clients cut legal costs and get better service, that's what we're all trying to do… It's certainly not going to devastate the legal markets in Canada onshore.”

Heather Greenwood Davis is a freelance writer and lawyer.

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