Legal Process Outsourcing (LPO) shot to prominence during the global recession in 2008. The primary reason that led to this rapid growth was the continuing pressure on organizations to cut legal costs. Since its emergence, LPO was able to exceed most people's growth expectations and now has over a 100+, providers servicing clients across four continents. Addressing data security and quality of work issues convinced General Counsel (GC's) of the value of LPO, assuring its viability in the space. However, despite LPOs having proved their capability, law firms continued to harbor disillusions about their competence and the quality of work delivered. A key reason for their cynicism was the loss of low value work, previously outsourced to law firms, and now being off-shored to LPO service providers. Additionally, LPOs were able to demonstrate that work typically performed by domestic lawyers could instead be done by associates off-shore for a far lower billing rate without quality or timelines suffering. This is leading to organizations encouraging law firms to either offer a LPO advisory practice or have a list of preferred LPO service providers that work could be outsourced to.
With law firms being reluctant to partner with or approach LPOs to outsource work, GC's were forced to foster relationships with LPO providers directly. Law firms maintained that while LPO billing rates were lower than their own, due to the poor quality of work and lack of adherence to timelines, it made little sense for work to be outsourced to them. Data security was another issue that law firms used as an attempt to further question the credibility of LPOs. For the law firms that were willing to outsource their low-value client work, they were unable to recommend any suitable LPOs to their clients due to the lack of any prior relationships. Yet another reason why GC's felt the need to bypass their law firms and seek out an appropriate LPO based on their requirement, an activity that took time and resources.
Recent trends indicate that law firms have begun to accept, albeit grudgingly, the value of LPO to their clients. They have begun to introduce advisory divisions aimed at providing unique solutions to clients regarding outsourcing their legal services. Law firms have realized that instead of their clients independently developing a LPO strategy and managing the LPO engagement, it would make sense for the law firm to do it themselves. This would help strengthen their client relationships and also allow them to bill clients for offering such a "unique" service. Clients would only be too happy to pay for such a service given that the need for them searching for and managing a LPO provider is eliminated altogether. Besides being relied on for delivering high-value work, law firms offering a LPO management & advisory practice will be looked at as a one-stop shop a strong value proposition to clients, current and prospective.
Going forward, law firms will play a delicate role, one that ensures its clients are happy and the other that makes certain its LPO partners are as well. An ironic position that I am positive law firms had no idea they would find themselves in a couple of years ago.