Legal outsourcing is here to stay

Legal outsourcing is here to stay

Western law firms have been trimming their staff and curtailing hiring plans

As an assistant attorney general for New York State, Christopher Wheeler used to spend most of his time arguing in courtrooms in New York City.

Today, he works in a sprawling, unfinished planned suburb of New Delhi, where office buildings are sprouting from empty lots and dirt roads are fringed with fresh juice stalls and construction rubble. At Pangea 3, a legal outsourcing firm, Wheeler manages a team of 110 Indian lawyers who do the grunt work traditionally assigned to young lawyers in the United States – at a fraction of the cost.

India’s legal outsourcing industry has grown in recent years from an experimental endeavour to a small but mainstream part of the global business of law. Cash-conscious Wall Street banks, mining giants, insurance firms and industrial conglomerates are hiring lawyers in India for document review, due diligence, contract management and more.

Now, to win new clients and take on more sophisticated work, legal outsourcing firms in India are actively recruiting experienced lawyers from the West. And American and British lawyers — who might once have turned up their noses at the idea of moving to India, or harbored an outright hostility to outsourcing legal work in principle — are re-evaluating the sector.

The number of legal outsourcing companies in India has mushroomed to more than 140 at the end of 2009, from 40 in 2005, according to Valuenotes, a consulting firm in Pune. Revenue at India’s legal outsourcing firms is expected to grow to $440 million this year, up 38 per cent from 2008, and should surpass $1 billion by 2014, Valuenotes estimates.

Historical movement

“This is not a blip, this is a big historical movement,” said David B Wilkins, director of Harvard Law School’s programme on the legal profession. “There is an increasing pressure by clients to reduce costs and increase efficiency,” he added, and with companies already familiar with outsourcing tasks like information technology work to India, legal services is a natural next step.

So far, the number of Western lawyers moving to outsourcing companies could be called more of a trickle than a flood. But that may change, as more business flows out of traditional law firms and into India. Compensation for top managers at legal outsourcing firms is competitive with salaries at midsize law firms outside of major metropolitan areas of the United States, executives in the industry say. Living costs are much lower in India, and often, there is the added allure of stock in the outsourcing company.

Right now, Pangea3 is “getting more résumés from United States lawyers than we know what to do with,” said Greg McPolin, managing director of the company’s litigation services group, who divides his time between India and New York.

Outsourcing remains a highly contentious issue in the West, particularly as law firms have been trimming their staffs and curtailing hiring plans. But Western lawyers who have joined outsourcing firms are unapologetic about the shift to India.

Leah Cooper left her job as managing lawyer for the giant mining company Rio Tinto in February to become director of legal outsourcing for CPA Global, a contract legal services company with offices in Europe, the United States and India. Before hiring Cooper, CPA Global added lawyers from Bank of America and Alliance & Leicester, a British bank. The company has more than 1,500 lawyers now, and Cooper said she planned to hire hundreds in India in the next 12 months. At Rio Tinto, Cooper said, she became a champion of the idea of moving work like document review to a legal outsourcing company “because it works really well.”

Many legal outsourcing firms have offices around the world to interact with clients, but keep the majority of their employees in India; some also have a stable of lawyers in the Philippines. Thanks to India’s low wages and costs and a big pool of young, English-speaking lawyers, outsourcing firms charge from one-tenth to one-third what a Western law firm bills an hour. Even global law firms like Clifford Chance, which is based in London, are embracing the concept. “I think the toothpaste is out of the tube,” said Mark Ford, director of the firm’s Knowledge Centre, an office south of New Delhi with 30 Indian law school graduates who serve Clifford Chance’s global offices. Mr. Ford lived in India for six months to set up the Centre, and now manages it from London.

Best litigators

Many corporations agree that outsourcing legal work, in some form or another, is here to stay. “We will continue to go to big firms for the lawyers they have who are experts in subject matter, world-class thought leaders and the best litigators and regulatory lawyers around the world – and we will pay a lot of money for those lawyers,” said Janine Dascenzo, associate general counsel at General Electric.

What G E does not need, though, is the “army of associates around them,” Dascenzo said. “You don’t need a $500-an-hour associate to do things like document review and basic due diligence,” she said. Western lawyers making the leap to legal outsourcing companies come for a variety of reasons, but nearly universally, they say they stay for the opportunities to build a business and manage people.

“In many respects it is more rewarding than jobs I had in the United States,” said Wheeler, who moved to India when his Indian-born wife took a job here in 2006. “If you’re talking about 15 employees in a windowless basement office, I’m not interested in making that my life’s calling,” he recalled thinking when he started talking to Pangea3. “But building a 500-person office, now that is a real challenge.”

Shelly Dalrymple left her job as a partner at a firm in Tulsa, Oklahama, in 2007 and is now based in India as the senior vice president of global litigation services at UnitedLex, a legal outsourcing company with offices in the United States, Britain, Israel and India.
Moving to a legal outsourcing firm, especially in India, is not for everyone. About 5 per cent of Western transplants cannot handle it and move back home, managers estimate.
Some find it hard to adapt to India. Other times, the job itself does not suit them-after spending years working nearly independently as a litigator, for example, it can be hard to transition to managing and inspiring a team of young foreign lawyers. Even lawyers who stay are sometimes wistful about their previous careers. “Of course I miss litigation,” Wheeler said. But, he added, “watching people learn some of the same skills I did is gratifying.”