Outsourcing

In the first of a two-part article, Duncan Finlyson of Legal Futures Lawyers Defence Group investigates the reasons for law firms to outsource certain functions and the regulatory issues that they throw up.

Legal process outsourcing (LPO) will increasingly become a strategic priority for law firms in the coming year and a growth in the number of UK-based LPO providers is likely, it was predicted this week.

The Solicitors Regulation Authority (SRA) is set to launch a “thematic review” of legal process outsourcing next year, Legal Futures can reveal. The review would seek to identify whether there are any particular issues or risks that require changes to the current regulatory requirements or whether certain outsourcing arrangements need particular attention in the supervision process.

City law firm Herbert Smith has eschewed offshore outsourcing to set up a document review operation in Belfast. The first firm to establish a UK base for this kind of work, Herbert Smith said it was seeking to take advantage of the “significantly lower case base” in Northern Ireland and the high-quality pool of legal talent there.

Professor Richard Susskind’s prediction that law firms could find themselves competing with legal publishers moved a step closer to reality today after Thomson Reuters moved into legal process outsourcing by acquiring ambitious provider Pangea3.

The second in a series of extracts from Climate Change, a report on the impact of the Legal Services Act published by accountants Baker Tilly, looks at the growing role of outsourcing both front and back-office work, and how far it could go.

Indian outsourcing company Mangalam Information Technologies has set up an office in Manchester as it explores the opportunities for legal process outsourcing (LPO) in the UK, including “low hanging fruits” such as personal injury (PI) and conveyancing work. It comes as UK-based LPO providers estimated that they could reduce transactional costs in PI by up to 30%.

Indian legal process outsourcers see “a fat, complacent and profitable market place” in England and Wales “and they want a piece of it”, solicitors were warned last week. Mark Jones, former managing partner of Addleshaw Goddard, described legal process outsourcing as “a game changer for all of us” – 25% of Slaughter and May’s work is outsourceable, as is 50% of his own firm’s and maybe 100% for firms outside the top 50.

Legal process outsourcing has taken a further step forward in England and Wales with a trio of announcements – two of which are aimed at the personal injury (PI) market. Both PI initiatives are particularly aimed at helping insurers and brokers handle “low value, low treatment” claims before they progress into a legal process.

Law firms that fail to embrace “legal process management” will quickly lose out to new competitors, such as accounting firms, legal publishers and businesses fuelled by external investment, Professor Richard Susskind has warned. The legal IT and strategy guru has also criticised the approach of many large firms to making cuts during the recession.