The legal industry has experienced a global paradigm shift in recent years in the delivery model for legal services. This new model, known as legal process outsourcing or LPO, involves transferring the work of attorneys, paralegals and other legal professionals to external vendors located domestically and overseas. Legal outsourcing is growing in popularity as law firms and corporate legal departments seek to minimize costs, increase flexibility and expand their in-house capabilities. Outsourcing legal work domestically or to overseas providers, known as offshoring, offers several key advantages.
One of the most significant advantages of outsourcing legal functions is cost savings. Organizations can reduce their cost structures through labor arbitrage—the wage differential between in-house legal personnel and outside vendors—to reap tremendous cost benefits. For example, an in-house attorney might cost the firm $150 an hour while a vendor attorney might cost $75 an hour.
Offshoring overseas can sometimes produce even greater cost benefits. Legal employees in overseas markets earn 30 to 70 percent less than comparable employees in the U.S. and the U.K. Infrastructure costs in India and other overseas markets may also be lower.
Access to External Talent
Outsourcing legal work to external vendors allows organizations to access high-level talent and niche expertise that does not exist within the firm. For example, litigation firms lacking litigation support expertise may outsource certain aspects of litigation support such as coding and document review to niche providers. Access to external talent is particularly useful for small boutique firms to fill gaps in internal competencies. Legal offshoring also allows domestic firms to tap into global expertise. Offshore destinations such as India and China boast a large, highly-trained and motivated labor force, ensuring a large pool of qualified workers.
Reduced Turnaround Time
The use of external personnel can expand internal bandwidth to reduce turnaround time for pressing legal projects. The use of a combination of onshore and offshore teams can also allow organizations to complete a project in a shorter time frame. For example, the 12-hour time difference between the U.S. west coast and India permits 24/7 operations. Offshore teams can work through the night to complete a project by morning.
Employing a combination of in-house and external talent allows law firms and organizations to tailor their capabilities in response to workload and client demands. Workflow challenges are particularly prevalent for small and mid-size firms. These firms may find it more difficult to spread variability due to a smaller number of attorneys, support staff, and clients. Outsourcing legal work allows firms to quickly scale up for a case or project, leveling the playing field with larger firms. Flexible staffing also reduces firm overhead. By outsourcing to external vendors, law firms can avoid the fixed costs of salaries and benefits associated with full-time, permanent personnel.
It's Not Just for Big Firms
Outsourcing is technically defined as using resources outside the internal operations of a business to keep things running smoothly. Small firms, in particular, might find themselves slammed with a time-draining major case that will demand all hands on deck for a period of time. But what happens to other clients while the entire in-house staff is focused on that one case? Outsourcing provides flexibility and cost savings over hiring additional staff to keep the firm up and running efficiently.