The Hindu Business Line : Only 3% of law firms in UK, US offshore back-office work to India

“If the ‘low perceived benefit’ of outsourcing legal services amongst law firms is not addressed, it could stunt the growth of the Indian LPO industry.”

Adith Charlie

Mumbai, May 19 Despite mounting cost pressures, only three per cent of law firms in the UK and the US have ‘offshored’ their back-office functions to Indian LPO (legal process outsourcing) vendors.

And this is largely due to lack of conviction about the benefits of offshoring and concerns surrounding data security and quality of work, according to a report from research firm Valuenotes.

The report is based on a survey of more than 200 law firms in the UK and the US.

Indian LPO firms generally derive around 90 per cent of their revenues through dealings with the legal departments of companies themselves. However, greater opportunity lies in working with law firms.

Untapped opportunity

“Working with just a few law firms (having 2,500-3,000 lawyers) can be enormous for the sheer volumes that would come your way. It is a significant opportunity which I agree is largely untapped,” said Mr Sanjay Kamlani, Co-CEO of LPO firm Pangea3.

Given the sensitive nature of the work, a large number of law firms, irrespective of their size, are apprehensive about sending their legal work to another country. One reason is that the precautions taken by LPOs to prevent data theft are not being communicated to the law firms in a more convincing manner.

“Indian players need to market their services more aggressively. If the ‘low perceived benefit’ of outsourcing legal services amongst law firms is not addressed, this could result in stunting the growth of the Indian LPO industry,” says Ms Neeraja Kandala, lead analyst, Valuenotes.

However, industry pundits are optimistic of garnering more customers as outsourcing enables law firms save about 70 per cent in costs vis-À-vis law firms in America.

Corporate spending

According to BTI Consulting, corporate legal spending at large companies will grow nearly five per cent over the next six months. However, analysts are of the view that pressure on billing rates will continue given the recessionary environment.

“The corporate customers of law firms are looking for significant cuts in billing rates. And this can be achieved only by offshoring to Indian players,” said Dr Navtej Saluja, Vice-President — Intellectual Property & Legal Services of KPO firm Evalueserve. “While a legal assistant or paralegal is paid $150 per hour in the US, the same job is done out of India for $8,000 per year,” he said.

According to some estimates, the market for legal process outsourcing is expected to reach anything between $640 million and $1.5 billion.

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