Monday, November 05, 2007

Document Review Being Outsourced

Finding the document review market a little slow? While you were busy busting your hump and clicking away on the "Anita" project, Kirkland was coming up with a way to outsource your jobs:

Jones Day, Kirkland Send Work to India to Cut Costs (Update1)

Aug. 21 (Bloomberg) -- Bruce Masterson, chief operating officer of Socrates Media LLC, asked his outside counsel to customize a residential lease for all 50 U.S. states in 2003. The firm's estimate: about $400,000. He rejected that price tag and hired QuisLex, in Hyderabad, India, which did it for $45,000.

"It was good quality," said Masterson, whose Chicago-based company publishes legal forms on the Internet. "We've been working together ever since."

Clients are pushing law firms like Jones Day and Kirkland & Ellis to send basic legal tasks to India, where lawyers tag documents and investigate takeover targets for as little as $20 an hour. The firms are reacting to a trend that will move about 50,000 U.S. legal jobs overseas by 2015, according to Boston- based Forrester Research Inc.

"The objective is to have only the most valuable people in London or New York, and the others in India, China or Columbus, Ohio," said Robert Profusek, co-head of the mergers and acquisitions practice at Jones Day in New York, who sends low-end work to the cheapest locations and plans to open a document center in India. "Lawyers are service providers. We are not gods."

Companies with in-house legal departments in India include Wilmington, Delaware-based DuPont Co., San Jose, California-based Cisco Systems Inc., and New York-based Morgan Stanley, according to ValueNotes Database Pvt. The Indian legal services industry will more than quadruple to $640 million by 2010 from $146 million in 2006, Maharashtra, India-based ValueNotes said.

General Electric

General Electric Co. sends about $3 million a year in routine legal work to its Indian affiliate, said Janine Dascenzo, the Fairfield, Connecticut-based company's managing counsel for legal operations.

"India has very talented lawyers," she said. "But it's a misconception that you can just send work there and it gets done. You need proper supervision and security."

Kirkland & Ellis, the seventh-largest U.S. law firm, works with offshore attorneys at the client's request, said Gregg Kirchhoefer, a senior partner in the firm's outsourcing and technology transaction practice.

"I'm not an advocate of offshoring legal services, but having worked in this area for so long, I understand the value of the model," he said. Typically, clients hire a provider and Chicago-based Kirkland helps manage the attorneys, Kirchhoefer said.

Markup Disclosure

U.S. law firms are required under ethics rules to disclose markups on what they pay foreign attorneys who aren't licensed to practice law in the U.S. Such rules don't apply to legal work performed by lawyers admitted to practice in U.S. jurisdictions.

Traditionally, law firms pay U.S. contract attorneys $50 to $65 per hour and bill clients up to three times the fee. For work performed by associates at the law firm, firms typically bill clients about $250 to $400 an hour.

Armed with the knowledge of how little law firms might pay for offshore work, corporations can use the threat of cutting them out and sending legal tasks overseas on their own to force law firms to reduce fees.

"Law firms can earn more by using labor they can mark up without disclosure," said Stephen Gillers, professor of legal ethics at New York University School of Law. "But clients are knowledgeable about costs, and they want to negotiate the markup on these charges."

Trend

Not every law firm has accepted the trend.

"Some firms are spreading fear, uncertainty and doubt," says David Perla, co-chief executive of Pangea3 LLC, an offshore legal services company based in New York and Mumbai. "They see any competition as bad and they'll raise any issues as to why you shouldn't go offshore."

Of the 10 highest-grossing U.S. law firms, seven declined to comment on outsourcing. Only one, Chicago-based Mayer, Brown, Rowe & Maw, said it doesn't use the practice.

"I don't think law firms are ashamed of offshoring," Perla said. "The firms that are having success with it aren't talking, because they view it as a competitive advantage."

Of about 100 third-party legal services providers in India, clients give top marks to Pangea3 and New York-based Integreon Managed Solutions Inc., according to The Black Book of Outsourcing, a survey published in July by Clearwater, Florida- based Brown-Wilson Group Inc.

About 80 percent of Pangea3's clients are corporations and 20 percent are law firms, Perla said.

In-House

"Some firms are coming to us because in-house clients suggested it or pressured them," Perla said. ``Others want to come to the client first and offer a solution.''

Integreon, which provides legal services in India, the Philippines and Fargo, North Dakota, has long-term contracts with about 45 companies and 15 law firms, said CEO Liam Brown.

Law firms contribute 45 percent to offshore revenue, while corporate law departments contribute 36 percent, ValueNotes said.

Integreon recruits lawyers from second-tier law schools in India and managers from the litigation practices of firms such as New York-based Skadden, Arps, Slate, Meagher & Flom, Brown said. After training in India, managers relocate to New York or Los Angeles.

In India, legal education is based on common law, conducted in English, and requires two or three years of classes. The country produces about 80,000 law school graduates a year, according to ValueNotes, compared with about 44,000 in the U.S.

Offshore companies charge $10 to $25 an hour on low-end work and $25 to $90 an hour on advanced jobs. Junior Indian lawyers might earn as much as $8,160 a year, according to ValueNotes, compared with the $160,000 average salary for associates in major U.S. cities.

Janice D'souza, 26, a lawyer in Pangea3's litigation and research department in Mumbai, says she makes three times as much as she would at an Indian law firm.

``At an Indian law firm, generally your potential is not recognized at an early stage,'' D'souza said. ``Here it's talent- based. In the near future, I think I will be a department manager.'

26 comments:

Anonymous said...

I guess I should go open a 7-11...

Anonymous said...

It's going to be interesting to see what happens when swarms of people start defaulting on their student loans because they can no longer get the temp work that paid the bills. (It was the only legal work available...)

Anonymous said...

my only problem with this is that the work can get sent somewhere else, but I can't pick up and move as a lawyer. i have to take a bar exam, fill out a billion pages of info and in some states pay a thousand dollars or more just to take the bar exam. Almost any other industry allows you to move to where the work is, legal is one of the few where you can't do that

Anonymous said...

That's because you've been scammed, 9:28.

Let's all open 7-11s. If the damn Indians can take our jobs, we can take theirs, too! That'll show them!

We can charge only 50 cents for a Big Gulp. See how many Big Gulps they sell at $1 then, those bastards.

Then they'll all have to go to Indian law school and do doc review.

Anonymous said...

Which begs the question why the vast majority of legal temp ads ask for "admitted only" candidates in the first place? What a slap in the face to unadmitted JD's who have a hard enough time finding work only to realize that an unlicensed Indian lawyer with zero training in US law is doing this type of work on the cheap.

Outsourcing customer service is one thing, but legal work is quite a different matter. They don't even get how to do basic customer service over there. I have a feeling that this type of outsourcing is going to go bad in a spectacular way.

Anonymous said...

I'm hoping the current situation in Pakistan might make firms skittish.

Anonymous said...

You know what is REALLY annoying? This article talks about the "average" salary for US large city associates being $160k. That is utter bullshit and perpetuates the public belief that law school graduates make a lot of money.

Most people are making 40-50k. Only a select few will make six figures.

Anonymous said...

^Not to mention the prelaw and pre-OCI belief that you, too will make $160k.

Anonymous said...

Anita does not give a damn about anybody. She has no soul.

Anonymous said...

Good outsource the work to India. Let these big firms kill off the legal profession because that is what is going to happen. Between the law schools admitting tons of people and the big firms outsourcing all the work, the end of the lawyer is near. Hopefully, the student loan industry will crash and burn, too.

I am sick and tired of all this outsourcing! What the hell is that matter with these companies/law firms? Who will be able to buy anything if no one has a job, even a temp job?

The end is near...

Anonymous said...

Hudson sucks the dilsnik.

Anonymous said...

No one will be able to pay their student loans. Default on a massive scale. The winners end up being the toilet law schools who laughed all the way to the bank when you signed over your student loan checks to the bursar way back when.

Anonymous said...

Where the fuck is Lou Dobbs when we need him? Our government, and corporate assholes are blasting the american workforce away. Gone are the middle class my friends.

Anonymous said...

Ah, the racism and entitlement of temps. Do you guys actually wonder why nobody has any sympathy for you?

Anonymous said...

Its a ridiculous notion to think outsourcing to India will produce anything other than poor work product. If you are resorting to outsourcing legal work to India, you have already lost the case. Anyone who has actually dealt with an outsourcing project will know this.

Anonymous said...

If one country can rise up after years and years of being dominated by so-called superpowers, and with the potential to kill international markets with skilled man power, then so be it!
A note to those ignorant few of you who compare high-end outsourcing to that of customer service. Just like any other country, chances are the ones who land a 'customer service' job at a call center/bpo can't get a job else where. But professional Indians like lawyers are not only equally capable in their own country but hold respectable positions in leading firms around the globe.

All I can say is... buckle your shoes and either catch up or get left behind!

Anonymous said...

Zero training in US law?? You need to make sure you have the whole picture before you make such statements. Quite a few Indian lawyers have more than just zero training. Infact, they've not only received LLM degrees from US colleges but have also practiced in the States. Those with little knowledge of US law are trained extensively, taking reputed online courses, before they're placed on projects.

I agree with 6:21AM. Buckle your shoes and catch up or get left behind.

Anonymous said...

Excellent Article. I will link to this article from our site. Take some time and check out ICanFreelance.com for any offshore outsourcing or freelance jobs.

Anonymous said...

We are killing our own economy. Everything gets outsourcing to somewhere esle, what jobs are left for Americans living in America. Those coroporations which are pushing outsourcing idea are too short-sighted. You may save a few bucks for outsourcing jobs to foreign country, it will end up people here get jobless and no money to spend. When corporations have no customers, it will go out of business sooner or later.

Anonymous said...

if it makes you feel any better, we hate doing your legal work. I work for an lpo called Pangea3 and for being a so called 'industry leader' the working conditions are crap, their HR polices are practically non existant, no one feels any loyalty to the company, and working on stuff that paralegals do in the US is the last thing we want to do. Ironic how this article is under 'the sweatshop edition.' try and get your jobs back! please! you'll be doing us a favour!

Ashish Kumar said...

Does legal process outsourcing threaten the existence of U.S. law firms? No, unless you want to define American law firms as inherently dinosaur-like, and incapable of changing to avoid extinction. No, the threat is not to law firms themselves, but to an outmoded model of law practice that clients increasingly will not tolerate. We are witnessing the start of a positive, paradigm shift in the way legal services will be delivered in the West.

Several law firms are embracing the change, and reaping rewards from it. Those firms are receiving more assignments and more client revenue, not less. This is coming in part from (a) existing clients who send the firms “elective” legal work that otherwise would never be performed, due to cost, but which is not a problem when the U.S. lawyers are paid to supervise and edit the work of attorneys in India, and (b) new clients who come to these law firms only because of their reputation for developing an alternative to the old model.

So there is no need to start making funeral arrangements for the U.S. legal industry. Forward-thinking law firms will adapt, embrace off-shore legal outsourcing, and learn how to make it serve not only the interests of their clients, but their own.

Ashish Kumar
high-end legal outsourcing

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