Offshoring of Legal Processes to India and Philippines

1. Introduction

Although the offshoring of IT services, call centers and other low-end business processes to India and
other lower-wage countries has been now going on for the last 15 years, the offshoring of legal
services is still in its nascent stages. In fact, our market research shows that as of September 30, 2006
only 1,750 professionals were providing legal services from India and this number is expected to
grow to only 7,000 by 2010 and to 22,000 by 2015. Furthermore, our forecasts show that the Indian
companies providing such services will generate approximately $72 million in revenue in 2006, $300
million in 2010, and $960 million in 2015. On the other hand, the revenue generated by this industry
worldwide is likely to grow from $285 billion in 2006 to $360 billion by 2010 and to $480 billion by
2015. So despite the seemingly large growth in offshoring of legal services from India, in reality,
only 1.2% of the legal and paralegal jobs would be offshored to India by 2015 and these would
constitute only 0.2% of total revenue!

Interestingly, the other low-cost country that seems to be coming up the value-chain quite rapidly and
starting to provide high-end legal research services is Philippines and our research shows that
approximately 750 professionals in Philippines are already providing such services to various
organizations in the US. Given that Philippines is a relatively small country as compared to India, the
following are the two main reasons why Philippines is coming up this value chain so rapidly:
Philippines was an American colony during 1898 and 1946 and hence the lawyers there understand
the American legal system much better (than those in India) and Philippines has one of the largest
English speaking population in the world that has fewer accent and slang issues as compared to
Indians. Consequently, not only has Philippines grabbed a significant portion of the current legal
process offshoring market, our forecasts show that Philippines will continue to provide rather intense
competition to India at least for the next 8-10 years. Given below is a synopsis of services that are
likely to be offshored to India versus those that may be offshored to Philippines:

2. Offshored Legal Services: India vs. Philippines

Electronic Document Management services: These include word processing, creative design, legal
transcription, legal coding, data digitization, key word and XML tagging, and archiving services.
These services are equally likely to be offshored to India and Philippines but because of its size, India
may have a small advantage over Philippines.

Research services: These include statutory and case law research. Since much legal research can be
done using electronic databases, trained lawyers in India and Philippines can sift through volumes of
data and provide focused results to US attorneys. However, since the legal system in Philippines is
much closed to that of the US, it could get a bigger share of this market that India.

Due diligence services: For most mergers and acquisitions, lawyers must examine large amounts of
data to verify the legal and financial status of the company that is being acquired. Since most of this
information is now available in electronic form, lawyers and researchers in India and Philippines can
set up a “virtual data room” and do the preliminary due-diligence for their US clients. This research
can involve, for example, confirming thousands of supplier agreements as to whether they will remain
valid after a “change of control” or whether each might lapse after a certain period of time. Due
diligence may also include checking of company books, board resolutions and shareholder resolutions
and to ensure that there are no surprises for the acquiring company. Since these services require substantial analysis that is related to financial information, India may have a slight edge over Philippines in this area.

Contract Drafting and Proof Reading of Contracts: US organizations require a large number of
contracts and agreements to be drafted, which include employee contracts, Non-Disclosure
Agreements, licensing agreements, supplier agreements, lease agreements, vendor agreements, and
distributor agreements. Since each agreement typically follows a standard template, Indian lawyers
can produce the initial drafts of such an agreements, which can be then reviewed and modified by an
attorney in the US. Furthermore, lawyers in India and Philippine can be used for proofreading or
“red-lining” documents and ensuring these documents follow the guidelines provided by their client.
Since the legal system in Philippines is much closer to that of the US, it could get a bigger share of
this market than India.

Document Discovery in Litigation: In most litigation cases, lawyers and paralegals have to pore over
large amounts of data as a part of “document discovery”. This process is often time consuming and
usually has a critical deadline. Hence, often the involved lawyers and paralegals have to put in
extreme hours or hire temporary staff to meet the deadline. Since this work is “rule based” and often
is electronic data (i.e. email, electronic documents and scanned pages), some of this work is now
being offshored to India. Both countries seem to be poised almost equally to capture this market.

Intellectual Property Services: These services include patent application drafting, prior art searching,
patent proof reading, docketing, patent landscaping and patent valuation services. Within the last
three years, these services have grown quite rapidly in India but not so much in the Philippines.
Furthermore, over 150 multinational companies have started conducting research and development in
India, which gives India a much bigger advantage over Philippines in this area.

3. Conclusion

In summary, since many of these services are very “qualitative” in nature wherein every word and
every punctuation mark counts and where the culture and trends can be very important, Philippines is
certainly a country to watch out for, especially when it comes to providing legal process services to
various organizations in the US! On the other hand, India may have similar advantages while
providing such services to the UK, Canada and Australia.