Legal Services Outsourcing and Second Tier City Lawyers

 

 

 

 

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Legal services outsourcing (LS0) had a misdirected start up in North America and is just now finding its feet. First exposure for many in the legal profession were the 2004/2005 “Legal Tech New York” expositions featuring a company with the unusual name of “Pangea3” promoting itself as the premiere provider of “offshore” legal support services in routine document production through referrals to its network of lawyers in India. My consulting work for top tier international law schools in the UK had familiarized me with a broad swath of Indian and other south Asian law students from commonwealth countries and I was aware of their competencies in delivering common law legal services. Corporate legal departments in the big New York financial institutions were among the first to take advantage of the opportunity to off shore document production. The catapulting to success of Pangea3 with its absorption into the Thompson/Reuters conglomerate within three years of its “coming out” solidified  both the veracity and credibility of the highly specialized support service of “offshore” document production.

 

The American Bar Association (ABA) can take considerable credit for fully articulating what was being misidentified and type cast as “off shoring”  into the mainstream of “Outsourcing” with its publication of Formal Opinion 08-451 “Lawyer’s Obligations When Outsourcing Legal and Nonlegal Support Services”.[1] The provocative comment in the opening paragraphs that “The outsourcing trend is a salutary one for our globalized economy”  set off a firestorm of retorts that was proactively responded to by establishing the ABA Ethics 20/20 Commission[2] that’s set the stage for a constructive dialogue on the globalization of legal services.

 

The recently published text, The Rise of Legal Services Outsourcing Risk and Opportunity[3] provides an excellent overview of the present legal services outsourcing (LSO) market. It’s gravitated upscale with cost effectiveness replacing low cost as the dominant driver in the LSO decision-making process. A combination of savvy in-house counsel leading the referral brigade and specialized LSO providers who now provide a variety of services have emerged as the principal players.

 

The ABA 2O/20 Commission is in the process of resolving the traditional ethics issues around outsourcing, a number of which pre-date the e-business era. Within 3-5 years there is  reasonable assumption that outsourcing will be fully integrated into both the practice of law and the broader legal services. The UK legal services market provides and excellent illustration of how outsourcing will become mainstream in North America.

 

Manufacturers, who were initially enamored with off shoring and led the way in referring low end work to factories in less developed countries have become aware of the limitations with the model. “In shoring”, bringing back upscale/knowledge management jobs to either the home country or a developed country with labor market and location advantages, is now the new thing. Expect it to become the norm.

 

In many instances the preferred location is what is now being  referred to as a “second tier city”. These aren’t to be confused with suburbs. Second Tier Cities are stand-alone medium sized cities that are in proximity to urban centers with many of the attributes favored by the “creative class”; good schools, proximity to a college or university, strong local arts, culture and recreation, family oriented neighborhoods with affordable housing, green environment, no gridlock on local streets, accessible public transit, etc.

 

It’s  now acknowledged that the next generation of lawyers is going to have to be entrepreneurial. Forget the sending out of the standard 100 e-mails in final year to law firms that say the same thing as all the other e-mails they’re receiving from classmates. The auto response is “at this time we’re not interested’. They’re going to have to learn early on while in law school how develop a stand-alone competency and  brand themselves as providers of a specialty or niche service that’s of value to a client base .

 

Branding oneself as an LSO specialist in a “second tier city”  with the competencies to be a cost effective provider of what is essentially an application of project management for legal services is  the future for many budding lawyers. Goodbye gridlock and hello to the good life. The office is virtual, perhaps even home based, because the work – flow back and forth is electronic.

 

That’s the opportunity. Now what are the obstacles? The first is the legal profession itself. The ABA 20/20 Commission is in the process of breaking down that barrier in the U.S. Canada is presently a laggard but can be expected to follow the U.S. lead. The second is the legal education system. LSO has yet to enter the discussion stage let alone proceed to curriculum development. Law professors remain enamored with academic jurisprudence. Even if they did decide to embrace LSO, it would require opening up the law school program to professionals with LSO expertise. Law school faculty have, to date, been an insular lot. However, the good news for law students and even junior associates realizing they’re stuck in a tread mill in a medium to large sized firm is that there is a best in class Project Management Institute[4] that does provide a number of professional development/certification programs that can bring a budding legal services entrepreneur up to speed.

 

Two additional obstacles deserve special mention. Established law firms are desperate to cling to whatever revenue streams they can in what is now a permanent stagnant market for “billable hours”. They’ll be less than favorably inclined to outsource quality work. In fact, in an effort to retain clients and maintain “billable hour” targets,  a few enterprising firms have sent senior associates/partners on 2-3 day professional development project management excursions and then laid claim to having LSO expertise in-house.

 

The natural leaders in defining the parameters for high end LSO and the corresponding referral to LSO providers are corporate counsel. Unfortunately, there is no legal education model in place for corporate counsel, although “JD Advantage” proposal put forward by the ABA Task Force on the Future of Legal Education[5] does open a window for its development. Coupled with the standard form legal education the initial training ground for the great majority of corporate counsel has been law firms. They been conditioned to believe in the veracity of the established law firm model. Moreover, the rationale for the creation of many corporate legal departments has been risk management with the general counsel closely linked with the Chief Financial Officer (CFO). The least risky avenue to deal with a corporate legal problem or need has been a referral to an established law firm. The good news, as the LSO book referred to above demonstrates by using case studies of corporate legal departments, is that a nascent cohort of best in class general counsel have gravitated beyond basic risk management and are utilizing LSO providers as strategic management partners. The Corporate Council Association (CCA) and affiliated Canadian Corporate Counsel Association (CCCA) need to embrace LSO in its fullest context and take a leadership role in making the LSO part and parcel of “Future Law” for future lawyers.

 

 



[1] www.americanbar.org › … › Ethics Opinions

[2] www.americanbar.org/…/aba_commission_on

[3] Mary Lacity, Leslie Willcocks and Andrew Burguess, The Rise of Legal Services Outsourcing –Risk and Opportunity London, Bloomsbury UK (2014).

[4] www.pmi.org/

[5] www.americanbar.org/…/taskforceonthefuturel