The Non-American Lawyer: Outsourcing Legal Services to India

Call centers and help desks have been shipped overseas for so many years that Americans are used to customer
service with an accent. You dial Delaware and reach Delhi.

Outsourcing started more than 20 ago when companies like IBM started assisting businesses with their IT operations. In the recent trend, called “offshoring”, the helper is overseas. This has been made possible by broadband and is flourishing in countries like India and the Phillipines. The new industry has been dubbed “business process offshoring” (BPO).

Lately, professional — not just customer — services are traveling overseas. With broadband Internet access near-
ly ubiquitous in business settings, it takes the same time to transfer large files (i.e. documents, spreadsheets and
presentations) to the next cubicle or continent. High speed broadband coupled with low-cost telephony facilitates very economical, sometimes free, phone calling, video conferencing and instant messaging around the world. Many of the barriers due to distance are evaporting.

The newest phenomenon is known as “knowledge process offshoring” (KPO), meaning that some “knowledge worker” jobs are performed elsewhere. White-collar, white-hair professions such as market and financial research have been parsed from their corporate workflows and sent overseas where newly-minted MBA’s outnum-
ber their US counterparts.

Paralegal services are among the newest to enter the KPO field. According to Evalueserve, a global market research firm which conducts research in India, there are currently about 1,300 people in India who perform such services. Offshore talent pools are well positioned to increase the supply of such labor dramatically. While popular sentiment might fear or resist the trend, American attorneys are in the position to leverage offshore resources to make themselves more competitive. One could argue that it would be non-American not to outsource legal support services, where possible, to offshore providers.

This Is Not Your Father’s Old Law Firm

The offshoring of legal services is still in its nascent stages yet there are several interesting developments.
Evalueserve calculates that the 1,300 professionals will bill an estimated $56 million collectively for July 2005 – June 2006, or $43,000 per person. These people are per forming tasks such as legal research, prior art  searches, patentability analysis, patent drafting and prosecution, and related services for intellectual property law. This
presents a strong value proposition for many law firms and in-house counsel. Based on our forecasting models,
we conservatively estimate for this cottage industry to reach approximately $1 billion in annual revenues in
about 10 years.

A partner in a law firm does not need to open a branch office in Mumbai. Instead, about 40 paralegal firms are
forming in India, selling their services to US practices and private counselors. The largest such firm has over 100 paralegals, has drafted over 500 patents and performs legal services for over 100 clients. The other approach, adopted only by the largest players, is to create a dedicated operation for a firm’s exclusive use, dubbed a
“captive center”.

Different Models For Offshoring Legal Services

Four models are emerging as the way in which offshore legal services will be delivered, as follows:

1. Captive centers formed by US law firms and their subsidiaries: Indian law does not permit non- Indian law-firms to practice in India. Therefore, some law firms in the US and India are setting up subsidiaries so that they do not practice law in India but provide legal and paralegal services only for export purposes. For example, Schwegman, Lundberg Woessner and Kluth (Minneapolis) has two captive centers. One in Delhi has over 100 professionals involved in prior art searching and patent proof reading, and they will soon provide other IP related services. Other examples of this include Fox & Mandal and ALMT Legal, two Indian based law-firms, and Patent Metrix, an Irvine-California based law firm. Each of these has fewer than 40 professionals providing legal and paralegal services from India.

2. Third Party Vendors Providing Services to Law- Firms and In-house Corporate Attorneys: Evalueserve is a prime example of a third party provider and currently has around 150 professionals providing Intellectual Property and legal support services. Evalueserve hires Indian attorneys and engineers and trains them to become proficient in US law and various USPTO, PCT and WIPO rules and regulations. Integreon is another company that provides Electronic Document Management services for the legal services industry and has more than 100 professionals. Examples of other Indian companies that have 40 or fewer professionals each but that are providing such services include Manthan Services, Lawwave, Lexadigm, Lexworks, Atlas Legal Research, Bickel and Brewer, Quislex, Pangea3 and Mindcrest.

3. Joint Ventures by US-based Firms: Rather than opening their own captive centers, several US-based firms have joint ventures with firms in India. A good example is a well-known legal consulting firm in the US, Hilderbrandt International, recently tied up with an Indian services company, Office- Tiger, to provide such services jointly. However, since statistically most joint ventures fail – especially in India – one needs to be cautious while
treading this path.

4. Captive Centers: General Electric has more than 50 IP and other legal professionals working within its
center in Bangalore India. Although some other large companies are also trying this model, we believe that this model is unlikely to succeed unless the corresponding center can grow to at least 100 professionals. It is our belief that captive centers smaller than 100 will be unable to provide good career paths to its professionals who would therefore turn over quickly, especially because the job market in India is expected to remain “hot” for the next 4-5
years.

As the description of these models suggest, we believe that the first two models will emerge as viable as the
offsshore legal industry evolves. Large and ambitious law firms will create extensions overseas. However, most practices, including some of the largest, are already retaining third parties to provide this work for them. Well run third parties are inherently in a better position to attract and retain talent, and enable the clients — the law firms — not to have to worry about the details, which can be considerable. Third parties are also subject to the
“perform or perish” principle, and this keeps them highly competitive, especially compared to captive centers.

Long Distance Courier: Legal Services Being Off-shored

The services that will be offshored within the broad area of legal and paralegal services include:
1. Electronic Document Management services: These include word processing, creative design, legal transcription, legal coding, data digitization, key word and archiving services. In 2005, 750 Indian professionals are providing these services to US clients, at rates of $11 to $13 per hour.

2. Research services: Consisting of statutory and case law research, much legal research can be done anywhere, using electronic data- bases. Trained lawyers in India can sift through volumes of data and provide focused results to
US attorneys. We estimate that 100 Indian researchers are providing these services today priced at $24 to $26 per hour.

3. Due diligence services: For most mergers and acquisitions, lawyers must examine vast volumes of data to verify the legal and financial status of the target company. Since most of this information is available in electronic form, Indian lawyers and researchers can set up a “virtual data room”. We estimate that 50 Indian researchers are providing these services during 2005 at a price of $24 to $26 per hour.

4. Contract Drafting and Proof Reading of Contracts: US organizations generate a huge number of documents to be drafted. Since many contracts follow templates, Indian lawyers can produce initial drafts, which can be then reviewed and modified by a US attorney. We estimate approximately 50 Indian researchers are providing these services in 2005 at $24 to $26 per hour.

5. Document Discovery in Litigation: In most litigation cases, lawyers and paralegals have to pore over large amounts during a discovery phase. The process is both time-consuming and deadline-sensitive. Legals and paralegals put in extreme hours or hire temporary staff to meet the deadline. Some of this work is now being offshored to India. We estimate approximately 50 Indian researchers provide these services in 2005 priced at $24 to $26 per hour.

6. 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 and more details about the growth of these services can be found in our article “Offshoring of Patent Drafting and Prosecution Services,” (IP Today, May 2005). We estimate approximately 350 Indian researchers provide these services during 2005 at $40 to $50 per hour.

The Verdict

While total headcounts are very low, the Indian legal services industry is poised to grow extremely fast. The field is attracting numerous talented graduates, as it is fundamentally more interesting and lucrative than call centers and helpdesks. India offers an enormous population of highly educated people who are ready to be trained for such positions. Demand is growing silently yet steadily. Most firms will not publicize — and even
keep confidential — their use of offshore resources, yet the trend is becoming prevalent and public.