When Clifford Chance, the world’s largest law firm chose to offshore three years back, law firms across the world took notice. Over the last two years, several law firms have given offshoring a serious thought and several others are considering the offshore option.

Currently, LPO providers earn a large share of their revenues from the US market. The US based buyers make up for a significant portion of the total contracts. According to ValueNotes’ recent publication on “ Legal Process Outsourcing: Crisis creates opportunities for LPOs ”,  about three-fourths of the current Indian offshore business is generated from clients based in the US while one-fifth of the business comes from UK and the remainder from the rest of the world (including Asia Pacific and Middle East).

While the US remains the dominant market for the service providers, several others are exploring newer geographies. Interestingly, over the last coupe of months, several large contracts have been announced by UK based law firms.

Significant traction from the UK market

The UK market is gradually opening up with law firms such as Eversheds, Osborne Clarke, among others exploring the offshore option. Some of the recent deals in the UK are provided in the exhibit below.

Some of the UK deals in 2009                              

Source: ValueNotes’ report on Legal Process Outsourcing: Crisis creates new opportunities

While most of these firms have primarily outsourced their IT and F&A functions, few of the recent deals include the legal services component along with support services.

The growing interest among the buyer community was also evident at a recent conference on “ Legal Process Outsourcing and Offshoring ”  organized by the Lawyer magazine in London. (To download the presentation, please follow the link) Some law firms are still hesitant about offshoring because they view it as a drastic change in their way of working. However, corporates such as RioTinto had positive feedback to share with the attendees. Leah Cooper, Managing Attorney, Rio Tinto questioned the perceptions of law firms about offshoring and discussed the offshoring initiative taken by Rio Tinto where they outsourced certain services to CPA Global (which helped them save $8 m till date!).  While offshoring does entail some changes to existing workflow processes, these changes are mostly one-time effects.

There were discussions around the benefits of offshoring, the considerations and requirements before deciding on offshoring. Mark Ford, Director Knowledge Centre, Clifford Chance talked about their shared services center in India that offers support and legal services to the law firm. Some firms and corporates are adopting the captive model as they consider it a better (and safer) alternative; however there are differing opinions on this.

Cutting costs (especially in these challenging times) and better utilization of in-house lawyers by outsourcing low value tasks is a compelling reason for law firms to consider outsourcing/offshoring in their strategy. Further, offshoring and its cost-economics will lead to a situation where in-house lawyers will be able to focus on high value and wider range of legal services. While most leading law firms are concerned about the data privacy and confidentiality, once the firms that are offshoring reap the competitive advantages of lower costs/higher capacity, the segment will see increased interest.

Indian revenues from legal services offshoring were 320 m for 2008 and are expected to reach $440 m by 2010. We believe that the situation will change considerably once the acceptance of offshoring gathers momentum amongst the law firms.