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Legal Process Outsourcings Inevitable Effect on the North American Practice of Law
Nav S. Virk

I. Introduction. 1
II. Understanding Legal Process Outsourcing. 3
III. Empirical Analysis.. 5
IV. Political Considerations for Legal and Business Innovation.. 8
V. Sustainable Competitive Advantage: Future Prospects for LPO 11
VI. Risk Mitigation: Factoring Technical Errors in LPO. 13
VII. Risk Mitigation: Factoring Human Errors in LPO. 14
VIII. Passing the Buck or Keeping It: Ethical Considerations 15
IX. Conclusion.. 16

I. I N T R O D U C T I O N

The errand-boy is generally, as was Simonnin, a boy of thirteen to fourteen years old, who in
every law firm is under the dominion of the chief clerk whose odd little jobs and love letters keep
him busy even when he is taking writs to bailiffs and requests for a hearing to the lawcourts. In
his way of life he resembles a streetwise Parisian lad, and in his destiny he belongs to the tribe of
pettifogging lawyers.
Honore de Balzac, Colonel Chabert

The future, if not present, legal errand person for North American law firms
pettifogging or prestigious - will likely be a fully trained common law lawyer operating
from a barren office in a country that no member of the firm has actually had the
opportunity to visit. The city the errand person works from will likely require due care in

pronunciation: it is much harder to say Trivandrum eloquently than Toronto. Global
business process outsourcing, or legal process outsourcing in the specific case of legal
services, is in its initial stages of development. Yet the momentum and results being
experienced in the legal marketplace from the pioneering efforts of legal process
outsourcing are remarkable: it is now possible through virtual satellite offices set-up in
foreign jurisdictions such as India, for North American law firms to operate twenty-four
hours a day, at a high level of efficiency, at an overhead rate from the extra work being
similar to the expenses carried by law firms employing real-life Simonnins at the time of
Balzacs writings. More simply: legal outsourcing will have the inevitable effect of
dramatically changing the North American practice of law.
The question that must be addressed in regards to legal outsourcing is not whether
contemporary law firms will optimize the ability to outsource business processes this is
already occurring, and increasingly gaining momentum as technology and outsourcing
firms become more competent, efficient, and affordable - but when they will be engaging
in outsourcing, and to what extent. The legal guild, zealously protectionist, must confront
business realities: what are the best methods to utilize legal process outsourcing to
enhance the profession? Ethically, should lawyers be reaping the costs-savings benefits of
outsourced services, or should those considerable savings be passed to clients, who may
be oblivious as to where their file was dealt with? Additionally, will competitive
advantage/arbitrage exist in the realm of outsourcing as developing states mature? How
will, or how can countries respond to transcending application of domestic laws,
particularly employment legislation intended to regulate the legal profession? These
issues among others will be discussed within this case study.

Ultimately, the business reality of legal process outsourcing, particularly the
considerable cost-savings that can be achieved by law firms outsourcing their backend
work, guides resolutions to other outstanding issues. The business advantage presented
by well-developed legal process outsourcing models will result in a considerable shift to
the existing legal environment: the efficiency of legal work performed will be greatly
enhanced, as will the quality of services rendered, allowing for greater profit
maximization for private lawyers, while reducing costs for those needing legal services.


Change begets change. Nothing propagates so fast.
Charles Dickens, Martin Chuzzlewit
A business process is any activity undertaken to achieve an objective of business
operations. In the operation of a lemonade stand for example, the squeezing of lemonades
is a business process. For law firms, several business processes are everyday activities:
research, document review, document preparation, accounting, photocopying, et cetera.
Legal process outsourcing involves individuals not in the employ of a law firm or an
organization heavily employing lawyers, such as governments, carrying out the activities
of the firm or organization independently. Outsourcing is primarily done under the belief
that it maximizes the utility of the organization that is outsourcing its processes:
contractors will be able to achieve the process being outsourced more efficiently, thus
saving the organization time, which equates into cost-savings and profit maximization.
Costs are further reduced when a contractor can be paid for their services at a rate
well below that of an ordinary employee. This is now possible through globalization. A

newly minted lawyer in Boston for example, may command the year salary of a seasoned
attorney in Beirut for a weeks worth of equivalent work.
Law firms have been outsourcing their business processes since the inception of
the industry. Classic literature and historical legal texts often reference court runners,
transcribers, legal clerks shared among several law offices, and various other uses of
contractors to maximize the profits of the law firm. Contemporary legal practice
periodicals discuss the advantages and disadvantages of using outside human resources
firms to hire staff; specialized technology and consulting firms available to lawyers, and
many other ways a legal practice may flourish through outsourcing some of its practices.
There is little discussion surrounding the reaches of global legal process outsourcing or
the practical limits of what can be outsourced.
Business process outsourcing in the modern, global sense involves the
outsourcing of businesses processes to contractors in another country. Ordinarily this
would be seen as impossible in the legal field, as lawyers are required to be licensed in
the jurisdiction in which they practice. But it is not the physical process of practicing law
that is being outsourced: while a lawyer is still required to be licensed by the province of
Alberta to appear in an Edmonton courtroom, there is nothing theoretically that prevents
an Alberta lawyer from having his pleadings prepared by junior counsel working from a
satellite office in Bogot. The accountant that oversees the daily records of the lawyers
firm may be working comfortably from home in Munich, and much of the document
review involved in the file being contested may have been reviewed by law students
working part-time in their Indian dormitories.

Theory is being put into practice. As early as the late 1990s private lawyers
recognized the considerable opportunity in global outsourcing. With the progression of
time, the complexity, variance and quantity of work being outsourced has been rapidly
increasing. An observance of the empirical growth trend of legal process outsourcing
requires an inference that it is not a novel phenomena; LPO presents a viable way for
private law firms to increase their bottom lines, by reducing costs, and allowing for
greater efficiency in the provision of legal services.


Though there is a lack of empirical information in regards to the depths that legal
process outsourcing could reach, nearly all commentary to date on the subject matter
suggests that legal process outsourcing will greatly effect the way the business law is
conducted. This being said, it must be kept in mind that legal process outsourcing in a
global sense is a relatively new concept. While statistically it is not yet possible to
extensively gauge the impact of legal process outsourcing, the tide of its progress
continues to build at a considerable rate.
Academic literature provides two compelling articles demonstrating the ability of
governments to achieve considerable cost-savings if outsourcing were to become
widespread. Patrick McFadden provides arguments for the United States government to
consider outsourcing legal solutions in the same vane it approached numerous other
public sectors such as the personal staff employed within prisons, wherein privatization
benefited the government not only through cost-savings, but greater efficiency.
Similar to McFaddens arguments, Professor Shapiro provides critical
observations on government regulation and the purchase of legal services occurring with

an economical make-or-buy approach. The government, through due planning and care,
will be able to save considerably if it chooses to buy legal services rather than make
them through the creation of additional public legal departments. Aside from these two
articles, contemporary press and an examination of the software programming and other
industries that have used business process outsourcing for longer periods provide
guidance as to the startling reaches legal process outsourcing will have.
A 2004 study by PricewaterhouseCoopers concluded that offshoring is "about to
dramatically take off" in Canada. This report affirms surveys that assess the willingness
of Canadian organizations and business to consider outsourcing as a viable labour
management solution. Many businesses, such as the legal industry, are following the
trends set by the software programming and telecommunications industries that have
rapidly expanded in using global service-based outsourcing.

Previous Outsourcing Models

It is hard to ignore the fact that many calls to customer service centres of North
American corporations are answered by call centre representatives in countries on other
continents. There is no firm estimate on the number of call centres that have originated
outside of North America, but the boom in telecommunications industry in India and the
Asian region are well documented. Similarly, backend software programming for Silicon
Valley technology companies, including start-ups, is often not occurring in California -
information technology companies now routinely look to outside markets before
considering North American employee hiring for junior programming.
Though the effects of these trends are dramatic thousands of North American
jobs are being vaporized and replaced in foreign markets they are not entirely

unexpected. One of Canadas leading pollsters, Angus Reid, predicted the steady rise of
technology and service-based outsourcing would lead to a dramatic realignment of the
Canadian economy nearly a decade ago. The cost savings of outsourcing, as Reid
theorized, are immense and it is only logical that they would be utilized by businesses
intending to maximize their profit margins.

Results of Existing Legal Outsourcing Projects

Existing press coverage of legal process outsourcing rarely provides economic
data on the effects of the LPO process. A recent news article by CNN Money estimated
that nearly $(US)15 Billion of legal work would be outsourced from the United States by
2015. Although the article did not provide the financial calculations CNN used to project
this amount, it is fair to conclude that the LPO market is quite large. This is evident from
other media reports and press releases circulating on business wires.
Nearly everyday a news story emerges indicating the success of a legal
outsourcing venture. Several companies have issued press releases on their rapid
successes in the LPO market, but often these reports must be viewed with a critical eye as
it is in the best interests of individuals involved in the LPO market to emphasize the
growing trend of their practice. But it is difficult to ignore the rise of LPO movement
when the worlds sixth largest corporation engages in the practice and intends to expand
its outsourced staff.
General Electric hired thirty Indian lawyers in 2004 to assist its legal practice
group deal with American legal issues. The team of Indian counsel is being supervised by
American attorneys on-site. GE has further indicated that based on early results of their

outsourced staff, there will be further expansion in the near future. Although GE has been
public about its outsourcing moves, it is quite probable that other corporations have also
engaged in globalized legal process outsourcing, but have not as forthcoming as GE due
to the current negative connotation that outsourcing derives in the public eye.


As the 2004 U.S. election demonstrated, outsourcing is a hot topic of political
debate. The threat of losing ones livelihood to foreigners is a scary proposition for
ordinary citizens. Analytically, bodies of evidence suggest that outsourcing actually
improves the vitality of state economies and eventually the quality of life for all residents.
This seems contradictory: the loss of jobs should decrease the vibrancy of a state, as there
are less people employed and therefore less disposable income available for material
goods. Yet continually, this is not what is found to occur. Rather more innovative
occupations emerge in an evolving economy wherein knowledge is expanded and
inefficiency is eliminated; individuals with more incentive and expertise to complete a
task do so, at a lower cost in another country.
Several scholars argue that the sooner American and Canadian politicians
embrace the fact that global outsourcing is not a passing fad, the more responsible the
actions governments can take to position each state to economically thrive in a
increasingly globalized world. As the results of global outsourcing become more evident,
it is interesting to note that earlier economic criticisms of the outsourcing process that
developing countries would not reap the economic benefit of corporations from the
developed world using labor at more attractive rates have gradually dissipated with the
rise of middle classes in states such as China and India. As poignantly noted by some

critics, while developing countries have become more focused on business innovation,
traditionally innovative North Americans seems to be slipping: they'll sell us semi-
conductors and we'll sell them poetry". The criticism of the outsourcing process has
increasingly become cultural, but it is an absolute certainty that politics of various
degrees impacts the future evolution and success of legal process outsourcing.
Politics effects legal process outsourcing in numerous ways. Most prominently,
American and Canadian lawyers try to safeguard their existing practicing ability with
zealous force. It is state or provincial legislation that directs the requirements for lawyers
to practice within a jurisdiction. Competency testing is administrated by self-governing
legal organizations, typically bar associations or provincial legal societies, to affirm the
public trust that a lawyer practicing within a state or province is capable of being a legal
professional. This political action is the first and most powerful of many to safeguard the
entry of outsiders into the legal business. It should also be the most assuring for current
Outsourced bogeymen in foreign jurisdictions cannot take away American and
Canadian legal positions except those that are currently inefficient for the bottom lines
of sophisticated and modern practices. Contractors however can, greatly supplement the
efficiency of most legal practices therefore bettering the profit margin of private practice.
As a basic example of this, an individual operating a boutique practice may currently rely
on part-time law students to provide legal research and document review for her files. It
is in the best financial interests of the lawyer to have a competent legal student complete
tasks for her at the lowest possible price. Globalized legal process outsourcing is thus
favorable for her because it increases the pool of contractors she may pick from she

does not have to hire a local student when one in a jurisdiction several thousand
kilometers away can complete the work as favorably as the local student, except at a
much reduced rate. Her overhead has decreased, while her profit margins have increased.


Legal process outsourcing is most advantageous when the cost-savings for those
engaging in the process are the greatest. Continuing with the example of the lawyer with
a boutique practice from above, the lawyer has no incentive to outsource her backend
work to a part-time student in another jurisdiction if that student is costing as much or
more than the local student. Currently, emerging common law legal markets can provide
competent individuals capable of completing legal work at tremendous cost-savings for
North American employers. As states such as India mature, will this simple application of
arbitrage continue?
The simple answer is yes. However as demonstrated by the outsourced
telecommunications industry in India, often work will have to shift from region to region
to allow the greatest advantage for North American employers. Call centres in India were
traditionally concentrated in New Delhi, but as the industry boomed and experienced
workers commanded higher rates, several other regions began to compete with the city to
attract foreign investment. Over the long term, the supply of competent workers in
developing states including India, China, Malaysia, Singapore and Pakistan far exceeds
the qualified demands of American and Canadian companies looking to outsource.


Men are only as good as their technical development allows them to be.


George Orwell, Charles Dickens

To date, there have been no reported technical errors in legal work that has been
outsourced. This likely a result of coverage of the development of legal process
outsourcing being sparse, rather than the perfection of the technical processes involved in
transferring large bodies of information instantly over transatlantic oceans. Using the
examples of other industries that have been in the global outsourcing pool for a greater
period of time, it is worth considering potential problems that will emerge in legal
outsourcing, and possible strategies to mitigate these risks.

Communications, Power, and Data Failure

In an increasingly evolving world, it is difficult to imagine life without the ability
to instantly communicate through phones, faxes, e-mails, and instant messaging devices.
In legal process outsourcing, these tools are essential for even the most basic project. It
should come as no surprise that in states that are still developing, some of these facilities
may not function with the efficiency of their North American counterparts. Almost as
startling however, is the rapid rate at which outsourcing hubs match or exceed the
capabilities of American or Canadian complements.
For example, broadband internet access is more affordable in parts of Southern
India than nearly all regions of North America. Dedicated networks were established
during the technology boom of the 1990s. While the chances of communication failure in
such developed regions are nearly equivalent to those expected in North American
business environments, any well-developed legal or business process outsourcing model
will require a plan for the possibility of communications failure. A risk mitigation

strategy may include the automation of data transfer processes so that vital information is
more frequently available between satellite offices.
Like communications, because much of the outsourcing process involves a
reliance on technology, there is an inherent risk presented by power and/or data failure.
The good news for the future vitality of the LPO process is that state governments have
implemented measures to protect specially designated zones intended to draw
outsourcing companies. It is quite common for example, for outsourcing campuses to
have electrical generators operating at the same time as conventional power sources, to
limit the chances of a power failure interrupting business.

Protection of Intellectual Property

India and China are both signatories to the Paris Convention for the Protection of
Industrial Property, and India has recently implemented legislation intended to further
enhance the protection of intellectual property specifically to further its role as one of
the worlds foremost destinations for business process outsourcing. Like the conventional
protection of IP, private lawyers must pay special attention to how they protect their
assets along with those of their clients, regardless of where they practice.


Malicious or Incompetent Errors in Judgment

It is quite probable that the largest legal settlement in United States history would
not have been possible, if not for the deliberate breach of error committed by an out-of-
firm paralegal that was hired by a law firm representing tobacco manufacturer Brown and
Williamson in the late 1990s. The contracted paralegal, Merrell Williams, was hired to

perform backroom sorting duties on behalf of the firm for B&W at the rate of $9/hour.
Williams stole thousands of pages of B&W documentation containing sensitive
information that provided evidence that cigarettes were essentially nicotine delivery
devices. This was information B&W never anticipated to end up in the public sphere,
and certainly not in the hands of several state attorney generals and powerful courtroom
litigators who would use the leaked and illegally attained internal documents to force the
tobacco industry to settle billions of dollars in state-by-state and class-action litigation.
Merrell Williams actions are a striking example of potential pitfalls in legal
process outsourcing: the possibility of human errors, deliberate or otherwise, resulting in
irreparable damage to lawyers and more grievously their clients. The law firm
representing Brown and Williamson required Williams to sign an extensive confidentially
agreement, which was of little consideration in the eyes of the court as the stolen
documents would be accepted as evidence in trial after trial. The Williams example
though spectacular for the amount of damage an errant contractor caused to an entire
industry, should not be dismissed as being isolated. Human error is a factor in business-
to-business interactions. There are several strategies that can be used by lawyers
interested in outsourcing their work to mitigate against the risk of human error resulting
in damage to their clients businesses.
Chief among any strategy is responsibly delegating any outsourced processes. In
the Williams example, the law firm representing Brown and Williamson would have been
well served to have had internal staff sort through sensitive information while outsourced
clerks processed information that would cause only minimal damage if it were to fall
within the hands of a third-party. Of course the circumstances of a project could be

directed by time restraints, and numerous other factors, which may make it prudent to
implement a system of checks and balances.
A simple strategy to circumvent human errors in legal process outsourcing is a
regimented system to detect errors early in the process so they may be corrected before
they cause harm. This may be as simple as appointing staff that serve in a supervisory
capacity and review all processes that have been outsourced by the firm/organization.

State Corruption

As Elizabeth Economy discusses, using contemporary China as her model,
Western businesses must confront the reality that state corruption still exists at
heightened levels relative to North American environments in certain foreign regions.
The corruption Economy refers to is not deliberate sabotaging of an outsourcing project,
but rather the inherent cost of doing business that must be built into an well-planned
outsourcing model.


There are considerable cost-savings in legal process outsourcing. Paying for legal
services is often done on an hourly basis, with attorneys billing clients per hour for
services performed. Attorney rates are usually set by the complexity of the matter being
addressed, the expertise and experience of the lawyer, and often the competitive rate
charged by other lawyers within the jurisdiction for similar work. Often backend work
will be performed by newly graduated lawyers or articling students, if not paralegals and
legal assistants. It is common practice to provide clients with a legal bill that allocates the

breakdown of services rendered by the firm according to the hours devoted by each
While a newly called Canadian lawyer will generally bill at a rate exceeding
$(Cdn)110/hour, more seasoned Indian lawyers working with outsourcing firms will
typically charge $(Cdn)10-25/hour for equivalent work. The cost-savings for using a
contracted lawyer for back-end work become readily evident. The question that lawyers
must confront is whether the cost-savings achieved by employing a contracted lawyer
should be kept by the firm or passed through to the client.
The Law Society of Alberta provides no guidance to this question. Several
publications intended in to clarify value guidelines for counsel make note of provisioning
legal services at reasonable rates. There is no direction given on how an Alberta law
firm should be billing the work performed by it by a contracted lawyer.
An easy solution to this dilemma would be to bill a client at the mid-point of what
a contracted lawyer commanded in wages and what a client would have likely have paid
to a junior associate for equivalent work. This solution may seem like the most ethical
way to address the billing concern, but it is not in the best interest of any law firm or the
legal industry in general to proceed in this manner.
As the software industry, which eagerly adopts business process outsourcing
solutions, has demonstrated countless times: decreasing prices for customers occurs only
after profit maximization has been optimally achieved. For lawyers in private practice,
the eventual goal should be to gradually decrease the billing rates for ordinary individuals
using legal services, but this should only occur after the highest level of profit
maximization has been derived from using the powerful tool of legal process outsourcing.

A client should be made aware that his/her file is being handled by outside contractors,
but the cost of that contractor to the firm does not need to be revealed to the client and the
difference in quality of work delivered should make the client satisfied, regardless of
whether it was a veteran Pakistani lawyer that prepared the legal research or a newly
minted law graduate from Pennsylvania or Ponoka, Alberta.


The business reality of legal process outsourcing, particularly the considerable
cost-savings that can be achieved by law firms outsourcing their backend work, makes its
evolution and adoption in the North American practice of law inevitable. The business
advantage presented by well-developed legal process outsourcing models that consider
proper risk mitigation techniques will result in a considerable shift to the existing legal
environment: the efficiency of legal work performed will be greatly enhanced, as will the
quality of services rendered, allowing for greater profit maximization for law firms and a
reduction of costs for governments and private individuals using legal services.


Comprehensive Bibliography of Works Cited and Consulted

[Sources that have no corresponding date on which they were retrieved were copied into
a Microsoft Word document that inaccurately recorded the date stamp (as September
2004 rather than correct dates in May/June 2005). Material/document available if

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Additional Online Material Examined BUT NOT USED AS REFERENCE



Representative List of Online Legal Process Outsourcing Firms and Organizations (includes law
firms with a practice that assists other organizations and law firms implement outsourcing

Organization Internet Address (http://) Originating Country
E-Lance United States
Legal Research Network United States
Kirkland & Ellis LLP United States
Atlas Legal United States
Bickel & Brewer United States
Taran Virtual Associates Canada
Litem Legal Canada
IndianLegal India
Jatin Popat Company India
Legal and Paralegal
Services India
Law Wave Litigation
Support India
Rajinder Narain & Co. India
The Shared Services and
Business Process
Outsourcing Association Belgium