Since first gaining real traction in 2008, legal process outsourcing (LPO) has changed significantly, influenced by new technologies and market requirements on its way to being a billion-dollar industry. If anything, LPO providers have become more important to their clients, to the point where they are viewed as vital partners whose staff is an extension of their companies.

But this was not always the case.

It took several years for the legal industry to get accustomed to the idea of outsourcing legal tasks to third-party service providers, despite the fact that patent-related sub-contracting of services first appeared in the 1950s. In 2008, the LPO industry received a major boost from the global economic slowdown, as companies and law firms sought out ways to cut costs. One way they did this was by outsourcing routine legal tasks, which could be done in bulk thus borrowing a page from the business process outsourcing (BPO) industry that had been growing for years, particularly in India. From that basis, the industry has been growing steadily and is now a permanent fixture of the corporate landscape.

The reason that LPO is here to stay is that at the end of the day, LPO providers save money for their corporate clients, while also introducing other operational efficiencies into the mix. LPO providers have made lives easier for corporate legal departments in other ways too – by focusing on cost and project management, typically with straightforward fee arrangements, they allow clients to keep closer tabs on budgets.

With more of the world’s biggest corporations and firms choosing LPO providers to deal with what had previously been in-house matters, general counsel are growing increasingly comfortable with outsourcing. By shifting lower-value work to external providers, in-house legal teams are able to address work of higher strategic value. According to a Global Legal Post estimate, almost half of companies outsource an average of between 11 percent to 30 percent of their legal work to LPO providers.

“Clients take it as a given that we can perform the routine, traditional work well and cost-effectively, and are now actively looking to us to expand beyond this,” says Philip Algieri, Associate Vice-President, Legal Services at the LPO provider QuisLex, which has offices in New York, Chicago and Hyderabad.
As the LPO industry has grown, it has fueled the need for more skilled talent to carry out more complex, high-value tasks. It has embraced cutting-edge technology, including using both proprietary software as well as third-party solutions, to offer technology-enabled services to clients particularly for electronic discovery and contract management and review.

Situated at the intersection of law and technology, LPOs provide cost-effective, high-quality services in corporate, litigation, merger and acquisition, corporate restructuring, compliance matters among others. Most large LPO providers have multiple locations globally, especially in regions that had already benefitted from the BPO boom, such as Latin America, India, Canada, the United States, Israel and the Philippines. For such companies, having operations spread around the globe translates into faster turnaround time.

Not long ago, the LPO landscape was terra incognita for much of the global corporate world, with many new entrants and few players with substantial experience. This has changed, and today, there are several industry leaders with proven track records offering a wider range of services, in terms of both scope and scale.

Changing perceptions

The biggest changes have been in the quality and complexity of the services provided by leading LPOs, which were originally seen only as a “low cost” option but have paid their dues since the early days. Along with this has come the growing acceptance and realisation by clients of the value LPOs can deliver.

“In many ways, the industry is well past trying to convince clients that LPO is a viable option for legal services, but has instead moved on to determining how much of the legal services pie can be captured i.e., in what new ways we can deliver value to our clients or what related services we can offer,” Algieri says.

QuisLex clients tend to be either Fortune 500 corporations or Am Law 100 and Magic Circle law firms, but Algieri says the key distinguishing factor for the company’s clients is not size, but mindset.

“Most QuisLex clients tend to be innovative and forward thinking, and engaged us in the first place because they were actively seeking new and different ways to be more efficient, cut costs, and deliver better quality,” he says. “They were willing to think outside the box in terms of how legal services should be delivered, which made them a natural fit.”

At present, the in-demand tasks are in many ways, the same core LPO tasks that the industry leaders have always focused on. This includes services like managed document review, contract management and due diligence.

What has changed significantly in the past few years is the increased complexity and end to end breadth of these services that LPOs can provide, Algieri says. Using more talent, better technology and working more closely with clients, LPOs can provider deeper services with greater value-add.

“While LPO providers initially performed the more basic aspects of services like document review and contract management, they are now frequently providing complete end-to-end support in these areas, while also providing a significant number of related, value-added services,” he says.

In litigation, for example, this may include areas like deposition prep and surveillance audits, tasks that were once strictly the purview of in-house or specialist counsel. On the contracts side, LPOs’ services now include end-to-end contract negotiation and managing open source software licensing programmes.

Sakthi Vea, managing director of operations at Cobra Legal Solutions, which provides consulting services on how best to use LPO services and has offices in Austin, U.S., and Chennai, India, also considers the LPO industry to be much more mature than what it was in 2008, with any finance, technology or other company with in-house legal counsel likely to benefit from their services.

“The traction has been increasing in the last few years,” Vea says, “It is definitely an accepted industry now – people see value in it.”

Technology has been a big part of recent changes, he says, and the industry has now entered a period in which it needs to learn how to fully use the tools it has at its disposal in order to push things forward.

“The technology is available; now we need to use it more,” says Vea, “The technology has become much more user-friendly, but its application to review work still needs a lot of evolution.”

Technology aside, improving and innovating on their current operations and the services they provide is a major focus for many leading LPOs. Failure to do so could ultimately impact the success and the very survival of established players.

“The LPOs that are able to constantly improve and innovate, whether in terms of quality, talent, processes, service delivery, or any other criteria, will be the ones that are able to keep up with the growing demand for high value, complex legal services,” says QuisLex’s Algieri, “Simply providing the routine LPO services, even where done well, will not be enough to keep pace with market leaders.”

Attracting talent becoming easier

Another important development is the transformation of the LPO industry from a stepping-stone career move to a career destination for young lawyers who are just getting started. Cobra’s Vea says perceptions of the industry among young lawyers have changed for the better in a very short time.
“Suddenly, working in LPO is a very good option, whereas before, it was more of a stopgap option,” said he says, “It’s definitely a good career move now.”

One move that Vea thinks the industry should make is to increase its visibility in the places where tomorrow’s lawyers are being trained today.
“We need to reach the law schools and talk directly to students about the benefits of working in this industry,” he says.

As it is a relatively young industry, things are a bit less entrenched than in other segments of the legal industry, which for young lawyers means enhanced career mobility and an increased likelihood of being assessed primarily in terms of merit rather than other considerations.

QuisLex actively promotes the fact that it can be a challenging place to work in. But for a young lawyer seeking trial by fire in a multicultural and global organisation, cutting one’s teeth in such a demanding industry offers the potential to accumulate valuable skills and experience in a much shorter time than other legal careers. Perhaps lacking the tradition and glamour of other legal traditions, the LPO industry appeals to many exactly because it is young – many see plenty of room for growth in the coming years and the benefits of getting in early.

What next?

Change is the only constant in the knowledge-based, technology-driven world of LPO, and there is little doubt that there is more on the way soon.
“I think there has been, and will continue to be, a stratification among service providers, as we have seen over the last few years, between those who focus on commoditised services and those who are able to perform more complex work that is less price-sensitive and demands greater sophistication, knowledge, use of technology, and expertise,” QuisLex’s Algieri says.

“This has been a steady trend over the last few years, and we do not see any sign of it slowing down. There is now a small, core group of LPO providers that has demonstrated the ability to be successful in this value-added space, and we expect them to continue to lead the way in terms of setting high standards for the industry.“

Cobra Legal Solutions’ Vea says that in the short term, he sees demand continuing to strengthen for LPO tasks, including contract and document review, and IPR as well as patents and copyrights.

However things play out, it does seem certain that LPO providers will have to persist in pioneering technology-based legal solutions while adding new services to their growing stable. There is increasing support for cooperation among industry leaders to work with law firms on compliance and risk issues, and a slow acknowledgment that LPOs have more or less surpassed law firms in terms of adoption and mastery of advanced technology as well as big data.

In the short term, expect to see greater industry cooperation and increased competition for top-end corporate clients, in addition to a push for innovations that can enable LPOs to tap lower-tier clients with smaller legal budgets, who vastly outnumber the blue- chips and top firms.