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Lpo April

WHAT’S HAPPENING?!?!? Remember that famous refrain from Fred “Rerun” Berry in the late 1970’s sitcom What’s Happening?  Rerun got his name because he consistently fell behind in school during the year so he’d have to “rerun” school every summer.

 

By not getting out in front of changes in the global legal space, large law firms are falling into Rerun’s inescapable cycle.  What’s happening? “Clients are demanding more ‘value’ in return for their legal spend….What once was a seller’s market has now clearly become a buyer’s market, and the ramifications of that change are significant.”[1] Whether balancing cybersecurity with mobility, aligning IT solutions to legal needs, or delivering value-added applications for legal processes, legal departments across the globe are increasingly engaging non-traditional service providers to provide cost-cutting solutions.

 

In 2016, the global Legal Process Outsourcing (LPO) industry reached the $2.4B mark, with current projections pegging growth to $13.4B annually by 2022.[2]  The trend toward using Alternative Legal Service Providers (ALSPs) gained traction in the post-2008 recovery, when C-Suite executives turned up the heat on corporate legal departments to justify their value to the company’s bottom line.  Hence, in today’s legal world, instead of corporate clients handing over entire transaction or litigation projects to outside counsel, they are instead segmenting these projects and picking and choosing which parts of the project go to outside counsel, and which parts go to an LPO or ALSP.

 

The rationale is quite simple.  Instead of paying law firm associates to perform routine document review or standard due diligence, it is remarkably cost-effective to hire an LPO. LPOs generally utilize specially designed software that automates and streamlines repetitive tasks, especially tasks involving significant amounts of paperwork and documents. By employing legal-based technology, these alternative legal service providers complete projects more efficiently than in-house counsel and cheaper than outside firms. Moreover, these LPOs can leverage time zone differences to ensure they are working while you are sleeping.

 

And in case you are concerned that engaging an ALSP would run afoul of the stringent ethical guidelines governing attorney conduct, the ABA has supported the LPO industry since at least 2008. According to the ABA’s Standing Committee on Ethics and Professional Responsibility, “[t]he outsourcing trend is a salutary one for our globalized economy.”[3] Because labor costs can vary both nationally and internationally, “[o]utsourcing affords lawyers the ability to reduce their costs and often the cost to the client.”[4] It’s essentially a no-brainer. Corporate legal departments are insisting on cutting down legal spend.  LPOs and ALSPs inevitably accomplish this goal.  What’s happening is clear.  Some law firms are taking the proactive approach of investing in technology and the use of these non-traditional legal services.  On the other hand, some law firms remain in the background, slowly watching their market share erode.

 

Rerun never figured out “What’s happening.”  Will you?

 

[1] Georgetown Law, Center for the Study of the Legal Profession, Report on the State of the Legal Market at 2 (2016).

[2] Grand View Research, Legal Process Outsourcing Marketshare, LPO Industry Report, 2024.(2016)

[3] American Bar Association, Formal Opinion 08-451, Lawyers Obligation When Outsourcing Legal and Non-Legal Support Services, Aug. 5, 2008.

[4] Id.

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