"The 'Nuts and Bolts' of Legal Process Outsourcing"
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| The "Nuts And Bolts" of Legal Process Outsourcing | |
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Mark W. Heaphy and Sarvesh D. Mahajan presented a paper with the above title on the essential features and working of the offshore legal outsourcing industry to the International Law Section of American Bar Association. The authors address the ethical implications and economic impact of legal process outsourcing and its necessity in the legal market: Outsourcing is no longer a choice for American and European lawyers. The question is not whether we should outsource, but rather how best to do it. Most discussions on LPO up to now have focused on the if and why of LPO. This article focuses on the how of LPO-models for outsourcing legal work, criteria for selecting an LPO provider, and strategies for managing an LPO relationship.
Heaphy and Mahajan state that contrary to popular notions, the responsibility of the attorney cannot be delegated to a legal outsourcing unit: Removing the layer of in-person supervision, however, does not change the fundamental nature of the relationship between the lawyer and the service provider (i.e., the temp attorney). Whereas the temp attorney previously sat somewhere down the hall, she now sits in a service center in Gurgaon. Contrary to popular perception, legal outsourcing, whether to a temp attorney or a "lawyer" in India, does not mean a lawyer can outsource her professional responsibility to her client. The lawyer is ultimately responsible for the delivery of legal services. A lawyer may have an LPO provider draft a contract on behalf of her client. But she must determine whether the contractual terms integrate the agreement of the parties and are consistent with the applicable law. She must face the risk of malpractice if the contractual terms do not. As one observer succinctly remarked, "judgment cannot be outsourced."
The paper says that although most legal outsourcing units handle the repetitive and time taking aspects of a case, but there is no fixed category of job which can be attributed to these units: LPO providers currently handle the more mundane, time-intensive tasks associated with legal practice, currently the province of junior associates. Thus far, LPO providers have been successfully handling contract drafting, review, and management; compliance assistance (e.g., regulatory filings); electronic discovery, records management, and other litigation support services; and patent support (e.g., drafting applications and conducting prior art searches). LPO providers are, however, quickly moving up the "value-chain" of legal services, with one provider recently even drafting a brief submitted to the U.S. Supreme Court.
Heaphy and Mahajan specify three standard models for outsourced legal work. They use the example of SDD Global Solutions in describing the third category of outsourcing: 1) Direct Contract - The most straight-forward method of outsourcing legal work is to contract directly with a LPO provider. 2) Managed Outsourcing - In a managed legal outsourcing model, a client contracts with an LPO provider and also retains a law firm to manage projects assigned to the LPO provider. This approach has the benefit for clients of ensuring that an LPO provider's work is reviewed by reliable and responsible counsel. 3) Required Outsourcing - a client might require its law firm to outsource to an LPO provider of the law firm's choosing. Law firms have taken different approaches in dealing with LPO. Some firms contract with an offshore provider, and then mark-up the fees charged by overseas lawyers. SmithDehn, a New York firm, which represents a number of media companies and entertainers, set up the well-publicized SDD Global to serve its clients as well as others firms.
The article also deals with "Multi-Sourcing" for reducing risk and using strength of each other, by two LPO providers: "Multi-sourcing" involves working with two or more LPO providers in order to reduce risk and take advantage of each provider's strengths. Multiple providers are particularly helpful when dealing with jurisdiction-based expertise. Having more than one provider "on deck" also allows a service recipient to obtain more favorable pricing. On the other hand, multi-sourcing can be more complicated than some other approaches. Successfully managing multiple, competing providers always requires strong and effective governance procedures.
While dealing with criteria for selecting a provider, the article deals with mainly three issues, which are people, place and things. On the issue of "people", the article lists out the requirements which a client must look for in a legal outsourcing unit before hiring them: 1) It is particularly critical to ensure that the entire LPO staff is trained about the confidentiality of client matters. The LPO provider should also have sophisticated protocols on the storage, transmission, and use of information, in electronic and physical form. 2) The LPO provider should ideally conduct background checks. India does not have the same information infrastructure as the United States in terms of criminal history, work history. Further requiring a police clearance certificate may pose cultural concerns. Instead, requiring the LPO provider to verify work history and educational background is often used in conjunction with other legal, administratively feasible procedures like requiring a recent passport. 3) Customers should also inquire into the LPO provider's hiring process and retention The outsourcing industry is plagued with high attrition. This may be nothing new to law firms, where associates and partners move from firm to firm. But in selecting a provider, high attrition leads to problems of management and consistency in quality. Finally, customers should consider the provider's "bench" strength. When client has a new document review project, how quickly can the provider ramp up to meet the need? Conversely, when the project is finished, does the provider expect payment for "lawyers" no longer needed? A provider with a large "bench" will have the ability to ramp up and ramp down the team assigned to projects quickly.
On the issue of "place", the article mainly deals with the facilities of a legal outsourcing provider: A site visit is a must in evaluating an LPO provider. A site visit will provide a first-hand view of how the LPO provider conducts business on a daily basis and what kind of facilities the provider has (e.g., dedicated space, physical infrastructure, and so on). In addition to facilities, customers need to consider the provider's hardware, connectivity, as well as specialized legal applications. One should consider bringing a technology expert for due diligence. Importantly, the provider should explain what kind of disaster recovery options it offers and how it can insure business continuity for the law firm and its clients. An important area in analyzing an LPO provider's technology and infrastructure is its administrative, physical and technical security procedures. What security precautions do you or your clients need and what will it cost? What internal controls does the LPO provider have in place? On the whole, one will typically find that the information security technology and procedures at established LPO providers are far more rigorous than the laissez-faire approach taken at law firms in the United States, where often security is assumed if not actually achieved.
On the issue of "things," the authors discuss the technical skills and resources of a legal outsourcing provider: As part of the evaluation process, a number of "things" can make the difference between equally-positioned LPO providers. Finding the right "fit" is as important as a provider's technical skills and resources. Trust is critical. It is crucial to communicate priorities to the provider. Does the LPO provider understand how you want your work done? Do not provide a wish list; but rather make clear what your requirements really are. "Any thing, any way you want" is not a good answer. The provider should be able to describe how it gets things done. And the customer needs to know what the intrinsic culture of the provider is. Referrals, in particular, can provide insights on intangible aspects of the relationship, such as a provider's responsiveness to customer concerns. A provider's financial stability is also worth considering in the burgeoning LPO industry. Some providers have received significant venture backing, whereas others maybe "fly-by-night" operations.
Lastly, the article deals with management of a LPO relationship and lists the measures that should be taken by a provider, for maintaining such relationship: 1) One has to define measurable processes to prove success. Finding suitable metrics to measure quality in work based so much on judgment is not a trivial task. A lot of preparation is required, including an analysis of current lawyer productivity. Most lawyers do not have a measure of quality. But without such measures, it is not possible to comparatively evaluate LPO. 2) Organizations considering LPO also need to manage change internally. Outsourcing affects people in very personal ways. Your team must understand the new goals and impact on them. 3) Communicate clearly the rationale and expectations. For example, is it about cost or doing a bigger volume of work. Before embarking on a LPO strategy, understand clearly the cost of managing the outsourced relationship. 4) Finally, avoid the vendor-customer mindset. Think of the relationship as a "partnership," even a marriage, in which you and your LPO provider "partner" to deliver the best quality and cost services to your clients. "... [O]utsourcing arrangements are comprised of a series of complex human transactions ... where the nuance around and tenor of any interaction are as or more important than meeting a service-level agreement. ... In the lexicon of outsourcing transactions, partnerships mean partying together."
To read full, original article, see http://www.abanet.org/dch/committee.cfm?com=IC100123 |
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