The City slowly discovers legal process outsourcing (LPO)

Following in the footsteps of the banking industry and their counterparts on Wall Street, a number of leading City law firms are beginning to seriously consider outsourcing as a way to further cut costs. However and while adopting some form of business process outsourcing (BPO) has become increasingly the norm, legal process outsourcing (LPO) has yet to significantly catch on.


According to a recent article in Legal Week, eight firms among the top 30 City firms are or were currently looking at introducing some aspects of LPO. These firms included Allen & Overy (A&O), Eversheds, Freshfields Bruckhaus Deringer, Linklaters, Lovells, Pinsent Masons, Wragge & Co and Simmons & Simmons while CMS Cameron McKenna and SJ Berwin are in the process of identifying what areas they would like to outsource. Meanwhile, another eleven of the top 30 firms said they had no plans to begin any type of LPO work and some of these firms had already looked at LPO as an option and had discounted it. Nevertheless, more than half of the firms in the top 30 had told Legal Week that they already outsource at least some of their back office functions.

So why is BPO more popular than LPO among City firms? A recent (November 2009) Legal Week Big Question Survey of partners from City firms in London found that half of those surveyed thought that the general standard of work on offer by LPOs could be better. In fact, no one rated LPO services as excellent while 14% rated such services as good, 27% thought they were ok and 7% rated the services as poor. Meanwhile, 36% of responding partners thought that service levels were “much better” in the UK than the standards abroad and another 38% thought that such services were merely “better” while 19% thought there would be “no difference” in terms of outsourcing location.


Despite some doubts though, a clear majority of City partners thought that the traditional law firm model will need to change or evolve substantially. In fact, 58% of City partners said that law firms will need to re-engineer their business models by considerably improving IT infrastructure and process management over the next 10 years while 24% foresee a “massive need” for such changes. However, there was unanimous agreement that outsourcing legal work as opposed to back office functions was much harder to credibly outsource. Hence, only 13% of City partners saw major prospects for the expansion of LPO into commercial legal services and another 34% predicted “considerable” expansion while 53% expected little to no growth.

However, The Times has recently pointed out that attitudes are likely to change given that a new recruit at a leading City law firm can expect a starting salary of about £60,000 which can rise to more than £90,000 at the best paying firms. The Times pointed out that there are studies that suggest that there are already 10,000 lawyers in India who are working for outsourcers and the total revenue for the LPO sector is expected to double in 2010 to US$1 billion and rise to US$4 billion within five years

In other words, LPO will likely catch on in the near future as the recent Legal Week piece had quoted one City law firm partner as saying that the days of paying for all types of work by the hour and having all of those hours under the same roof no matter what the task was are long gone. In fact, the partner even went on to say that there will only be one “profession” (the world’s oldest!) that will soon be left doing that.

http://outsourceportfolio.com/city-slowly-discovers-legal-process-outsourcing-lpo/