India’s lumbering justice system may be a dread to its citizens but is on its way to becoming the darling of US and UK-based law firms.
Legal eagles of New York or London are apparently taking comfort from the country’s elaborate, British-modeled legal structure, which they want to exploit for paralegal work and research support.
In the US alone, the potential for such outsourcing orders could be as high as $2 billion annually, most of which could land in India, estimates OfficeTiger LLC. OfficeTiger’s 2004 study shows the top 200 US law firms spend about $20 billion annually on office operations and documentation, a cost they cut via outsourcing for the sake of operational efficiencies.
Legal services are thus beginning to join a swelling list of functions-customer contact, transaction services, debt collection, and payroll processing-the West is looking to migrate to the subcontinent. And, similar to the earliest suite of services sent offshore, legal support may mean attractive deals for local suppliers marketing themselves as the world’s back office.
Harris Miller, President of the Information Technology Association of America, says private law firms that have international operations are the ones most likely to source globally, though much of what they send out will be very routine. “Lawyers must have a very trusted relationship with their clients, and much of what they deal with is highly sensitive information. Unless their clients are comfortable having that information sent abroad, they will be very reluctant to choose global sourcing,” he says. “The kind of legal work most likely to be outsourced globally will be in general non-contentious legal processing, such as real estate transactions.”
The cost savings are there. India’s pool of poorly paid lawyers can offer US and UK-based law firms savings of as much as 40-60 percent in documentation, research, and drafting of case briefs, says Intellevate LLC’s Chief Executive Officer Leon Steinberg. “The savings depend on the type of the service outsourced,” Steinberg says. Randy Altschuler, Co-chief Executive Officer at OfficeTiger, estimates that support services are a substantial cost factor for the top 200 US law firms. For example, Altschuler says these firms typically spend $2.9 million annually on word processing and secretarial jobs alone. The budget for legal recruiting is $350 million and human resources departments can cost $200 million.
The supplier, which last year won a $52 million investment from private-equity firm Francisco Partners Management LLC, is one of the US suppliers tapping into Indian talent for servicing corporate America’s legal services needs.
“Assuming a very conservative outsourcing potential of 10 percent (of the $20 billion spent by US law companies on office operations), the resulting market opportunity is about $2 billion. Of this, India will have the largest share, offering both transactional and high-end services, says the executive from OfficeTiger, whose Indian operations are based in Chennai, where the British colonial government set up a provincial High Court in 1862.
“What is interesting for India is that within the British Commonwealth, there are 54 countries that have similar legal processes,” says Mark Kobayashi-Hillary, director of global research at the Commonwealth Business Council. “This fits into the whole idea of knowledge process outsourcing.”
Early Movers
Much like OfficeTiger, Intellevate offers the “office next door” to legal wings of US companies and law firms. Operating from the outskirts of New Delhi, India’s political capital, the company deals largely in patent and trademark paralegals for its US clients and supports them with research, documenting, and database services. Intellevate runs a night shift in India to provide its clients with an “always on” service.
Steinberg says India’s lower salary base allows the company to have more involved quality control than is affordable in the US. Intellevate’s clients get their work done at $20-$40 an hour, significantly less than the $100-$250 an hour that companies charge for similar services in the US, according to Steinberg. “
The real trend is that many legal departments of major corporations are realizing the value of using offshore resources,” says Steinberg. “They are looking at the full spectrum of services from data entry to sophisticated analysis.”
The size of the patent drafting and support services market potential is $50 million a year. “Most of that will go to India,” says a bullish Steinberg.
The demand is helping the company grow. Steinberg says its 80-member workforce in Noida, on the fringes of New Delhi, and in Bangalore will more than double in a year. Atlas Legal Research says it has been exclusively doing high-end work, such as drafting complex legal briefs that are submitted in US courts. “We have written legal briefs for all kinds of cases-from dog bites and divorces to medical malpractice, trademark, and federal securities,” says Abhay Dhir, the India-born founder of Atlas Legal, which set up operations in India four years ago.
“The one thing I knew well coming out of law school was how to research a case and write a legal brief,” says Dhir, whose first assignment after law school was a clerkship with a federal district judge in Texas. “A lot of lawyers in the US don’t have the time or the aptitude to do that.”
Dhir has been operating out of offices in Dallas and Bangalore with a clutch of less than 10 lawyers. They serve about 100 clients.
Even Small UK Firms Are Interested in India
Kobayashi-Hillary, who was in India in early March to help UK-based companies scout for offshore suppliers, says India could be the happy hunting ground for UK companies seeking legal services support. He says the list includes even small, regional firms.
Sniffing the opportunity, Reading-based Xansa, an IT outsourcing company in England, is extending the scope of its operations to include legal services support. The company has initiated project-based support to a big law firm it is reluctantto identify. Success of this venture, what Xansa calls a “pilot project,” could drive its entry into a new vertical.
“We have started pilot work on some paralegal services,” says Padmaja Krishnan, Director, Marketing and Business Development at Xansa’s India unit, which is planning a four-fold rise in its manpower here to 10,000 people by 2007.
She says that the scope of work initially would include time-bound activity, such as processing large volumes of legal documents, and the nature of work “will essentially be supporting attorneys on the ground.”
Hiring Indian Lawyers
In countless courts spread across India, hundreds of cases come up each day for hearing, with vast armies of lawyers probing the progress of their long-to-concludearguments. The vast majority of these lawyers don’t make it to the top of the professional pyramid and are scouting for meaningful employment. That means very few of the 298,000 law school graduates joining the pool annually can aspire to participate in high-profile civil or criminal cases.
The cavernous stone corridors of Indian law courts could emerge as the recruiting campuses for outsourcing companies looking to hire legal professionals.
“We could have a team from the legal profession and some crossing over from other industries,” says Krishnan. “We have a wide choice of lawyers, as our legal service is in sync with the rest of the developed world. We have the resource base to tackle the complexities that this service may throw up.”
Therefore, companies such as Xansa or Intellevate won’t need to look far to sign up talented law graduates. However, for many recruits a job on the back-up desk may be a short-term career option.
Take for example Ali Naqvi, a 25-year-old New Delhi-based advocate. Naqvi says working in outsourcing firms could be a great idea for “legal executives”–law graduates who choose to work for companies as a legal liaison and those who can’t take the long gestation period.
“I would treat it as some place where I can make some quick money,” says the upcoming lawyer, who practices at the New Delhi-based Supreme Court and who works at Juris Consultus, a medium-sized law firm.
Some Worries
The opportunities are immense, but India needs to move cautiously, weeding out practices that may raise concerns over data security and service quality in buyers’ markets according to industry members. Although India now has joined the elite league of nations with a WTO-compliant patents system, intellectual property and data may not always be tamper-proof within Indian territory.
Miller says lawyers also have other issues such as rationalizing any conflict of interests. “Lawyers cannot represent two businesses on opposing sides of a legal dispute unless both sides waive the conflict of interest prohibition,” he says. “That could impact their ability to outsource.”
For the time being, suppliers and buyers will have to be content with paralegal work being performed in India in a win-win situation for all.
| TABLE | |
| Approximate total spending by the top 200 US law firms: | |
| 1. Office operations | $6.2 billion |
| 2. Word processing and secretarial | $2.9 billion |
| 3. Information systems | $2.5 billion |
| 4. Marketing | $850 million |
| 5. Finance and accounting | $500 million |
| 6. Library | $500 million |
| 7. Legal recruiting | $350 million |
| 8. Human resources | $200 million |
| 9. Legal research | $620 million |
| 10. Litigation support | $4.9 billion |
| 11. Patent & trademark prosecution | $400 million |
| Total: | $19.92 billion |
| Source: Hildebrandt International, OfficeTiger, 2004 | |