Tuesday, July 20, 2010

Legal Process Outsourcing - Smoke Clearing & Mirrors Cracking?

After two years of hype, press releases, and marketing materials based around the Legal Process Outsourcing (LPO) trends hitting international firms, are we now seeing real cracks in the revolution appear (backing up some of those who doubted the industry's ability to embrace such a change with any real commitment)?

The Lawyer Magazine in London has this week run with three news pieces which indicate that all is not necessarily wonderful in the land of the LPO.

The first is an overview of Integreon's (the leading vendor in this space) projected 26% losses in the UK. The cause of these losses is thought to be a reluctance on the part of law firms to actually send work offshore. Full story
here. According to Margaret Taylor of The Lawyer, Integreon's operation in Bristol keeps the bulk of its work (90%) on-site rather than sending it to lower-cost offices in Asia or Africa. It also currently pays out the bulk of its revenues in salaries.

While Taylor notes that Integreon have refused to discuss financial figures with The Lawyer, a related research article in the same edition of the magazine states that in the five months from January to May this year the 17 members of staff working in the Bristol professional document services team generated revenues of $217,733 (£141,624) and were paid $267,772. Similarly, the 58 staff members working in the business solutions team, which focuses on services such as IT and procurement, generated revenues of $1.2m and received salaries of $1.1m.

The second
piece is a detailed analysis of the current state of the LPO market in the UK with specific coverage of offshore versus onshore. The article states that "according to data from outsourcing consultancy Fronterion, 44 per cent of legal process outsourcing (LPO) vendors were aiming to increase the number of onshore personnel and lawyers they employ, with law firms indicating that they were more comfortable outsourcing locally than internationally. This was despite the fact that cost ­savings from sending work to offshore centres such as India or South Africa are typically twice as great".

third is an overview of the financial pros and cons which is also worth reviewing.

There were always going to be cracks in the LPO model based on the change profile of the legal industry, and there will always be the buzz around the potential cost savings of LPO thanks to the marketing budgets of those in the market. The real impacts will only be known once clients fully understand and adopt, and then subsequently force their firms to behave differently (or the same).


SPurani said...

If there is a crack developing in the LPO world, then perhaps it is a "weeding out" of the weak players who cannot react and adjust to client needs. Perhaps it's a strong indication for LPOs to find a hybrid model of aspects of on & off-shore LPO delivery.

Aathira said...

LPOs which work with law firms and not corporations are seen to be doing better than their counterparts, especially since law firms are more comfortable with off shoring work.

Outsourcing Philippines said...

I think that depends on the company you are working with. That's why as client, you should be careful in choosing which LPO business works for you.

THank you.
Outsourcing Philippines