The term, “LPO,” for “legal process outsourcing” (which also stands for the London Philharmonic Orchestra and the Libertarian Party of Ohio), is apparently a media invention, first appearing in 2005. It derives from BPO, or business process outsourcing.  But to the extent that the word, "process," suggests standardized, commoditized, easy-to-replicate tasks that can be performed without a lot of education, much less any professional training, it is a misnomer for the legal services offshoring industry.  Typing a medical transcription, or answering calls based on a script, is a "process."  On the other hand, legal research, legal analysis, or drafting complaints, contracts, patent applications, or legal briefs, is not a BPO-like, commoditized "process."  Those are legal services, even if they do not amount to "practicing law," which can only be done by the supervising, licensed attorney (often in-house corporate counsel) who reviews the services that so-called LPO companies provide.

That is why many in this industry do not refer to themselves as “LPOs.”  One company uses the phrase, a "provider of global legal and patent outsourced services."  Another refers to itself as a "premium legal services company."  Others refer to their "Legal Knowledge Services" or "Offshore Legal Services."  Still another has adopted the label of "legal services organization."

Yet another potential misnomer is “outsourcing.”  There is nothing new or controversial about the outsourcing of legal services.  Every law firm in the U.S. and the U.K. is an outsourcing company.  Their corporate clients have routinely “outsourced” legal services work to outside counsel for hundreds of years.  If there were no outsourcing, there would be no law firms.  What is new is not outsourcing, but offshoring.  What is new is the creation of a worldwide legal landscape, where offices and employees will be located in places determined by the actual needs of clients, rather than the habits those of law firms that do not wish to change.

Last July 28, 36 representatives from 21 legal off-shoring companies held an historic meeting in New Delhi, to form the first trade association for the industry.  In the aftermate of that meeting a new, more accurate term is emerging for what legal outsourcing companies do.  namely “Legal Services Offshoring,” or “LSO.” That is a better and more useful term than “LPO.”

If it does not involve walking into court, holding a client’s hand, final editing of legal documents, signing an opinion letter, or signing a court filing, most likely it can be done in India.  Western legal services available in India include legal research, drafting of commercial contracts and litigation papers, applications for U.S. and U.K. immigration visas, patent applications and analytics, and a whole host of other high-value work.  

Indian lawyers at the legal services offshoring company, Lexadigm, already have drafted a brief filed in the U.S. Supreme Court, involving the application to a tax dispute of the due process clause of the Fifth Amendment to the U.S. Constitution.⁷  For another example, in an article entitled, “Fortune 500 Firms Driving LPO Industry,” one of India’s leading financial newspapers, The Business Standard, reported on one of the accomplishments of SDD Global Solutions (the legal outsourcing company this author helped found), involved one of the top Hollywood film studios⁸. The company needed a legal opinion letter, navigating the legal waters for the filming of a particular project, in order to obtain insurance coverage and otherwise get approval regarding the risks involved. SDD Global’s draft of this 45-page letter, complete with 242 footnotes, each citing pertinent legal authorities, led to the greenlighting of a major motion picture, which might otherwise have not been released.Preparing the letter was a 400-hour job that easily would have cost a dollar amount in the six figures if done in the United States. Instead, the job was done in India for $43,000, much to the satisfaction of the client, who later turned to SDD Global for other assignments.

To cite another example, Atlas Legal Research in Bangalore, together with Atlas’s U.S.-licensed, supervisory attorneys in Dallas, were hired to draft a 50-state legal survey for a U.S. medical services company.  Here is a portion of a “thank you” letter written by the CEO of a grateful client:

For one last example, out of countless others, SDD Global was retained by a Fortune 100 client facing a multi-million-dollar out-of-state lawsuit, brought by a plaintiff who had agreed in writing that any such dispute would be litigated only in New York.  A major U.S. law firm in the state where the claim had been filed had advised our client that a motion to dismiss would not succeed, citing two authorities.  In-house counsel for the client asked SDD Global to prepare a memorandum on the subject.  Overnight, Indian attorneys did the research and provided the memo, which allowed the client to conclude that the local law firm was wrong, and that the lawsuit could be dismissed.  This led to the following unsolicited email from the client’s Senior Vice President for litigation:

Why are Indians so good at handling high-end, offshored legal work?  In addition to the fact that India churns out 80,000 English-speaking law graduates per year and shares the same “common law” system with the U.S. and Britain, here is another factor, reported by ABC News:

The Western legal services industry is in trouble.  According to a survey of in-house legal department heads at hundreds of leading companies in the United States, which represents 77% of the global legal services market,¹¹  only 30% of those companies would recommend their primary outside law firm to others.¹² Moreover, fully 53% of them recently fired their primary outside law firm.¹³  According to Business Week magazine, “[f]ew industries seem more ripe for radical restructuring than legal services.” ¹⁴

The reasons are easy to understand. The traditional model propagated by large Western law firms, which Clay Christensen of Harvard Business School refers to as “just about the most profitable businesses in the world,” ¹⁵  increasingly is being perceived by clients as not serving their interests.  The model is based on a pyramid structure, with most of the services provided by hard working, often under-trained young lawyers driven by a billable-hour system. The system rewards inefficiency and in some cases the padding of time sheets, at the expense of clients.  At the same time, the pyramid system causes the young lawyers to quit, almost faster than the law firms can fire them to make way for younger recruits -- yet another pillar of the system.  Indeed, 40% of associates quit even before they finish their third year.¹⁶

In a recent speech, Mark Chandler, the General Counsel of Cisco Systems, tackled these issues in a speech that should serve as a wake-up call for anyone in the legal profession who is interested in its future.  Describing the traditional law firm model as “the last vestige of the medieval guild system,” Chandler mentioned offshoring to India as one of the solutions, and delivered the following shot across the bow, referring both to the young law associates and the large law firm system in general:

These conclusions were echoed even more recently by Mike Dillon, the General Counsel of Sun Microsystems, who compared inefficient Western law firms to dinosaurs:

Some law firms are embracing the change, and reaping rewards from it. One example is my own law firm, New York-based Smith Dornan Dehn, which went so far as to set up its own legal outsourcing company in India. As a result, our law firm is receiving more revenues, not less. This is coming from (a) existing clients who send us “elective” legal work that otherwise would never be performed, due to cost, but which is not a problem when our U.S. lawyers are paid only to supervise and edit the work of attorneys in India, and (b) new clients who come to our law firm only because of our reputation for developing an outsourcing alternative to the old model.

In another example, but different from ours, the mega law firm Jones Day recently admitted publicly that it is now offshoring legal work, in response to client demands.

But of course, many Western law firms, instead of embracing change, are continuing the old ways, some to even greater extremes.  Hourly billing rates have increased over 30 per cent in the last few years.¹⁹  Starting salaries for untrained lawyers, straight out of law school, have climbed to $160,000 per year.²⁰  In London, rates for big firm lawyers have reached the unprecedented level of £1000 (nearly $2000) per hour.²¹ All of this bodes very well for the legal services offshoring industry in India.
Like the U.S. auto industry, which mostly ignored warnings and continued to focus on the manufacture of over-sized, over-priced, fuel-inefficient cars, the Western legal industry, as we know it, may be dragged into either change or extinction by its customers, helped by foreign competition.  However, just as the “Buy American” bumper stickers were too late and too little to stop Toyota from becoming the world’s largest automaker, it is unlikely that anything will stop the legal services offshoring industry in India from stepping into the breach, to ultimately provide a large percentage of the legal work that is urgently needed by the West.

Expert business research analysts have concluded that “law firms and corporates are fast moving toward offshoring more complex tasks to vendors, as their comfort levels improve.” ²² Nevertheless, despite (or maybe because of) the amazing success stories in the field of high-end offshoring, there remain some naysayers.  For example, Gregg Kirchhoefer, a partner at Kirkland & Ellis, one of the biggest and most profitable law firms in the U.S., estimates it could be 50 years before lawyers in India do more than "routine, prosaic" American legal work.²³  The pessimists often rely on one or more of three myths about legal services offshoring, each of them discussed below.

Attacks on the competence of Indian lawyers and law graduates are about as valid as saying that Indian software engineers are incapable of handling sophisticated IT work.  To the contrary, the Indian IT industry is a world leader, and the same will be the case with offshored legal services.

Legal education in both India and the English-speaking West serves essentially the same purpose – to train its graduates to “think like lawyers” and to teach them how to conduct research in the British-based, common law system.  Western law schools, however, do not train students to practice law.²⁴  A recent study conducted by Harvard Law School and LexisNexis reveals that 75% of U.S. law graduates admit they do not have the necessary skills to practice law.²⁵   Interestingly, when young lawyers were asked what is the one thing that they wish they had learned, the most frequent answer was “how to draft a motion.” ²⁶  Yet, motion practice is at the heart of litigation services provided to clients by law firms.

Since Western law schools are mostly litigation-oriented, their failure to train students in the most basic of litigation skills is especially disappointing.  However, clients who pay high hourly fees for corporate and transactional work by recent U.S. law graduates often are short-changed even further.  It is typical for Western law students to graduate from law school without ever having learned how to draft a contract.

So you might expect that these deficiencies would be met by rigorous training programs undertaken by Western law firms.  Guess again!   The Harvard / LexisNexis study reveals that 64% of young lawyers receive no organized,  on-the-job training.²⁷   They learn as they go along, most by trial and error, with their firms’ corporate clients footing the bill. 

By contrast, reputable legal services offshoring companies in India provide rigorous training for their lawyers, and the hours spent on training do not appear on invoices to clients.  At SDD Global Solutions, for example, all of our Indian attorneys are trained by veteran Western practitioners who are at the top of their fields.  Our training program accomplishes what Western law schools and many law firms have failed to achieve, namely, the systematic preparation of young lawyers to provide quality legal services.

George Bernard Shaw, and later, Winston Churchill, famously referred to Britain and the United States as two countries “separated by a common language.”  Because Indian legal education is conducted in English, and because India generates 80,000 English-speaking law graduates per year,²⁷ similar statements have been made about the difference between English communication skills in India and the West. What these accusations miss is the fact that, at least in the U.S., many law graduates are incapable of writing effectively in plain English. That is why some large U.S. law firms now assign a writing coach to each incoming associate, to help eradicate the stilted, circuitous, jargon-filled style that often plagues Indian legal writing as well.²⁸ However, most lawyers in the West never receive this kind of training.  By contrast, reputable legal services offshoring companies in India provide training in English writing for all of their attorneys.

In India there are no bar exams.  Instead, Indian law students, unlike U.S. law students, must pass a comprehensive final or “leaving” exam in order to graduate.  But in part because India has no bar exam, some commentators have suggested that Indian lawyers working for legal offshoring companies should be required to pass a certification test, to demonstrate their ability to provide Western legal services.  This is an admirable effort.  But who will develop a certification system for Western lawyers, many of whom lack skills needed to properly practice law?  Regarding bar exams in the U.S., they sometimes seem to serve mostly as a public relations device for the legal profession. New York University Law Professor Harold I. Subin goes so far as to say that they test “nothing relevant to the practice of law”:

The tremendous cost savings available from legal services offshoring are sometimes met with disbelief. Some partners at large law firms in particular are prone to making comments such as “you get what you pay for.” First, let’s examine what a client pays for when it hires the typical large Western law firms (although there are exceptions):

(a)  staggering real estate costs, due to the location of office space in some of the most expensive locations in the world, most of which are at least 43 times more expensive per square foot than SDD Global’s office building in Mysore, India; ³⁰

(b)  having most of the work done by newly minted (and sometimes even unlicensed) associates who admittedly lack many of the skills needed to practice law, but yet are paid a starting salary of $160,000 per year, and who are learning as they go along, at the expense of clients, who in turn are charged as much as $360 or more per hour for the privilege; ³¹

(c)  unnecessary stretching out of work assignments or sometimes padding of time sheets structurally encouraged by an hourly billing system that rewards heavy hours and inefficiency, as young associates struggle to meet ever-increasing demands to increase their billable time, with yearly quotas that have risen from 1600 hours in the 1960’s, to 2100-2500 hours at many large firms today; ³² and

(d)  generally a high-quality level of service, due to editing and supervision by talented senior lawyers, but at a cost that clients are no longer willing to tolerate, especially when offshore providers offer flat rates and hourly rates that average from $25 to $90 per hour for high-end work, and $10-25 per hour for lower-end work, as compared to $300-2000 per hour for Western lawyers.³³

An issue sometimes has arisen as to whether the high-end legal research and drafting services provided to Western clients from India amounts to an unauthorized practice of law.  This rapidly is becoming a non-issue.  Ethics panels in New York, Los Angeles, San Diego, and Florida all have concluded that that the offshoring of legal work to unlicensed attorneys is permissible, so long as the work is supervised by a licensed attorney.³⁴   The New York Times has quoted Stephen Gillers, a professor at NYU School of Law and legal ethics expert, as stating that “‘[t]here is no problem with off-shoring…because even though the lawyer in India is not authorized by an American state to practice law, the review by American lawyers sanitizes the process.’ ” ³⁵

In fact, virtually all major law firms in the U.S. routinely use non-licensed attorneys to perform legal work, and they bill their clients for it.  The hours of summer associates, who have neither graduated from law school nor passed a bar exam, are billed out to clients at rates as high as $260 per hour or more.³⁶   Moreover, the work of first-year associates, who start work at law firms before their bar exam results are in (and who often fail on their first attempt), is billed out to clients for as much as $360 per hour or more.³⁷   This is all permissible, because the work is supervised by licensed attorneys.

The same is permitted in the case of legal offshoring firms in India.  At SDD Global Solutions, for example, we are an India offshoring company managed by a U.S. law firm, such that all of the work by Indian attorneys is supervised, reviewed, and edited (if needed) by licensed U.S. attorneys.  Several other high-end legal offshoring companies also have licensed U.S. attorneys on their payroll, or at least affiliated with the offshoring unit.  Even where the offshoring companies themselves do not employ licensed attorneys, the work can be supervised by in-house counsel for corporate clients, or by Western law firms who act as intermediaries, hiring the offshore unit on behalf of their clients.

On the subject of confidentiality, this is a legitimate concern of clients, regardless of whether the legal service provider is a Western law firm or an offshoring company in India.  Based on my experience both with U.S. law firms and the provision of legal services in India, I believe that quality offshore providers generally are doing a better job than U.S. law firms in addressing this issue. 

For example, at SDD Global, we use secure, hack-proof IBM servers, and the latest Cisco ASA firewall to protect data and systems from internet vulnerabilities.  Even more protection is provided by a Linux environment throughout our offices.  Electronic access control is provided for all areas of the building, such that no one is able to enter any floor or project area without being specifically authorized to do so, and without using a custom-made electronic access card.  Our offices are virtually paperless, and passwords are required for all data access.  Most importantly, we take great care in selecting employees.  We hire only one out of every 900 applicants, and only after a lengthy battery of evaluations and tests, as well as a thorough background check.  SDD Global is not alone in this attention to security.  As research analysts have reported regarding our industry, “vendors have invested significantly in systems and processes to ensure data security – often to a greater degree than their overseas clients.” ³⁸

Compare this with many U.S. law firms, where Microsoft-based networks are vulnerable to hacking, where paper trails abound, where employees are able to roam the offices at will, and where in one famous case, a person posing as an attorney was entrusted with the management of important client files, even though this felon had never attended law school or passed the bar exam.³⁹