Global Sourcing 2010: AmLaw 50
Jul 07, 2010 – A new study by consulting firm Fronterion has found that while many United States law firms are using legal outsourcing providers for the first time, few are willing to admit it in public, leading to a culture of secrecy around an increasingly important development within the legal services industry.
In a Fronterion survey of 30 top US firms in the Am Law 50, some 83 percent declined to comment on whether they had used legal process outsourcing (LPO) providers, despite the fact that responses were confidential.
Just one firm confirmed that it has carried out LPO while, to date, no firms in the AM Law 50 have made public announcements about the issue. Thirteen percent of firms contacted said they were not outsourcing.
However, using its own primary source market research, Fronterion conservatively estimates that between 65 and 75 percent† of top 50 firms have used or are currently using LPO providers, either on an ad-hoc basis at the request of clients or through official agreements.
Many law firms cited the sensitivity of the issue as a reason for not participating in the survey.
Fronterion managing principal Michael Bell argues that transparency benefits both the law firm and its clients. With this in mind, Fronterion has launched a new website, the LPO Ethics Resource Center, focusing on legal outsourcing ethics. The website features breaking news, online resources and current positions in jurisdictions in both the US and the United Kingdom (www.lpoethics.com).
“Much of the reticence we are seeing by law firms to acknowledge their use of legal outsourcing vendors stems from ambiguity over ethical issues,” Bell said. “Working with outside vendors, if handled correctly, can be a clear selling point for a firm eager to stand out from the crowd.
“The basis for our LPO Ethics website is completely market-driven. Legal professionals have an inordinate number of questions on basic ethical issues such as oversight, pricing mark-ups and client disclosure, and they didn’t have a reliable, informative online resource to turn to. Now they do”
In recent months, a number of large UK firms have made public announcements about deals with LPO providers and the potential cost savings they can offer their clients.
The growing popularity of legal outsourcing has also attracted the attention of regulators and bar associations. The UK’s Law Society has begun a consultation into the impact of outsourcing on the profession, trade magazine The Lawyer reports.
Further, the Solicitors Regulation Authority has issued its first public statement on the topic of legal outsourcing this week. The SRA release states, “Where law firms are outsourcing some of their legal or administrative work to other law firms or non law firms, the SRA’s guidance is that this is allowed on the basis that all relevant rules are complied with (Solicitors’ Code of Conduct 2007) and that the arrangement is made transparent and is agreed with the client.” The complete statement by the SRA is available on the LPO Ethics website (www.LPOethics.com)
Meanwhile, the American Bar Association is holding a public forum in San Francisco in August to explore the ethical issues surrounding outsourcing as part of its Commission on Ethics 20/20.
Along with transparency, ethical considerations in legal outsourcing include: how to manage staff when positions are moved offshore or to low-cost onshore service centers, how to supervise and maintain the quality of work carried out by external organizations, and how to set the pricing structure when law firms bill clients for work carried out in conjunction with an LPO provider.
“There are certainly a number of important issues to address when implementing a successful legal outsourcing engagement,” said Bell. “One of the most important indicators of success that we have seen is when firms take a firm-wide or enterprise approach to ensure that all legal and ethical issues are appropriately addressed, and that employees feel included in the process.”
† The basis for the Fronterion estimate on LPO penetration of AM Law 50 firms – ranging from 65%-75% – is a composite scoring of LPO vendor reporting, legal outsourcing initiatives implemented by general counsel that involve their outside counsel, the number of declines by AM Law 50 firms from the current study and Fronterion’s experience working with similar peer firms.
For the purposes of the study, Fronterion defined legal outsourcing as working with outside vendor(s) on either an ad hoc or through established relationship for the delivery of legal and legal support services. Such services may include, but are not limited to document review, contract management, intellectual property support and litigation support. Traditional legal staffing, back office services such as IT and accounting/finance, and low-level legal support such as transcription and typing services where not included in this study.