Top Ten Reasons Why Law Firms Should Consider Selective Legal Outsourc…

In the last quarter of 2008 America faces economic challenges never imagined already a few months ago. How will businesses manage and survive the limitations on credit, need and growth? How does the economic downturn impact lawyers and law firms which service the business community?

It is an obvious fact that businesses can only look at modifying two revenue flows, income and expenses, in order to increase profitability. If income is down and not expected to increase markedly in the near term, clients of law firms will take the hatchet to expenses in order to survive. Legal fees will be under extreme scrutiny. Legal outsourcing, while nevertheless a nascent industry, is gaining momentum, being considered in more corporate boardrooms. As the pressures to outsource build, lawyers ponder whether they should embrace outsourcing legal work offshore or resist it. In the confront of global economic challenges coupled with the increasing loss of American jobs why would a U.S. law firm want to already consider legal outsourcing? Are there valid reasons why targeted legal outsourcing should be considered by every U.S. law firm?

Several weeks ago I received an email from a lawyer who was considering outsourcing some of the legal work of his law firm. Facing resistance and challenges from many in his law firm who wanted to continue the position quo, he asked for my advice as to what he should tell his partners. Why should the firm outsource legal work offshore, a practice seen by some as adventuresome and risky, instead of staying the course, doing it “the way we have always done it.” I answered him with the top ten reasons why every law firm should consider selective legal outsourcing:

1. PRUDENT, TARGETED OUTSOURCING WILL consequence IN REDUCED LAW FIRM OVERHEAD

Outsourcing some legal work to qualified providers in India will consequence in considerably lower overhead to the outsourcing law firm. In assessing the comparative costs the law firm will be wise to carefully calculate the real costs of employing one lawyer or paralegal. Those costs include salary and bonus, health insurance, vacation and holiday pay, sick time expense, FICA, office space and equipment for the lawyer, paralegal and secretarial staff stated to that lawyer, pension and profit sharing, auto and parking expense, CLE seminar costs, and other employment benefits such as disability and life insurance. The real annual cost of one lawyer earning a base annual salary of $150,000-$175,000 is more likely in the range of $250,000 to $300,000 per year. NONE of these customary expenses accrue to a law firm employing supplemental offshore legal providers.

2. OUTSOURCING WILL enhance LAW FIRM EFFICIENCIES

Selective outsourcing will enhance the efficiency of your law firm. Because Indian lawyers work while American lawyers sleep, it will be like your law firm has a complete time, fully staffed night shift. Some work can be stated by a partner at 6 p.m. in the evening and the completed task on his desk when he arrives at the office the next morning. Litigation situations will move more rapidly by the court system with less need for extensions of time.

3. OUTSOURCING WILL consequence IN IMPROVED LAWYER MORALE

As a child not many of the sermons I heard from my pastor stuck with me. But one, when I was fourteen years of age nevertheless rings a bell. He said: “Ninety percent of any worthwhile endeavor is pack work, plugging, day in and day out. Only ten percent of our work responsibilities are necessarily fun and enjoyable.” I have always remembered that statement. In more than two decades as a trial lawyer I enjoyed strategizing and trying situations to juries. But I did not necessarily enjoy all of the trial and deposition preparation, research and briefing, document review, and other mundane essentials of the practice of law. A law firm which incorporates outsourcing into its practice will inevitably foster more contented lawyers who devote their time and energies to the more challenging, fun and rewarding parts of the practice of law. Only the “chore” legal work is outsourced with the “chief” work staying onshore. This allows more time for client interaction and development by the firm’s lawyers.

4. OUTSOURCING WILL consequence IN OVERALL SAVINGS IN LEGAL FEES TO CLIENTS

Clients of law firms, particularly business clients, are searching far and wide for ways to cut their legal expenses. Many ask why they should pay, for example, $200 to $300 hourly for document review. Gone are the days when legal bills are simply paid without scrutiny. Likewise, the annual increases in hourly rates will not be well received by clients looking to cut costs. Wise law firms put the interests of their clients above their own. What is good for the client will ultimately be good for the law firm itself.

5. THE RULES OF specialized CONDUCT REQUIRE OUTSOURCING CONSIDERATION

The Rules of specialized Conduct of require that: a. “A lawyer should seek to unprotected to the lawful objectives of a client by reasonable permissible method.” (Rule 1.2) b. “A lawyer shall explain a matter to the extent reasonably necessary to permit the client to make informed decisions about the representation.” (Rule 1.4 b) c. “A lawyer shall make reasonable efforts to expedite litigation consistent with the interests of the client.” (Rule 3.2)

A lawyer is required to analyze and discuss with his client all reasonable method of accomplishing the client’s objectives. A lawyer is not permitted to charge an unreasonable or excessive fee. It would seem that a lawyer is arguably required to discuss selective outsourcing as a way of reducing the client’s ultimate fee obligation and furthering the interests of the client.

6. OUTSOURCING “CHORE” LEGAL WORK contributes CLIENT RETENTION AND DEVELOPMENT

Clients have long questioned ever-increasing legal fees for basic, “chore” legal work. However, they felt as if they had no different. They needed the legal representation and wanted good quality work. As there was not a meaningful degree of fee variance from law firm to law firm, clients tended to “stay put.” This trend is beginning to change as clients learn that they have options. Lawyers who outsource selectively are reporting a more contented, loyal client base. Clients who perceive that their lawyers are looking out for the entirety of the their interests, including fee costs, tend to keep committed to their existing law firms and already refer other clients (whose lawyers refuse to outsource).

7. THE COMPETITION IS OUTSOURCING

If your law firm is not outsourcing, be certain that your competition is. On August 21, 2007 Bloomberg. com reported that already long-established AMLAW 100 law firms like Jones Day and Kirkland & Ellis are outsourcing under pressure from clients.

8. OUTSOURCING U.S. LAW FIRMS MAY CHARGE A REASONABLE SUPERVISORY FEE

It is reasonable and permissible for U.S. law firms outsourcing legal work offshore to charge a reasonable supervisory fee in conjunction with outsourced legal work. It is axiomatic that a lawyer who outsources legal work, whether to an associate, contract lawyer or offshore provider, ultimately remains responsible to his client for the quality and timeliness of delivery of the legal product. If a lawyer assigns the research and writing of a fleeting to a junior associate, the assigning lawyer will not customarily submit the final work product to the court without review and supervision. So it is with offshore legal outsourcing. Published ethics opinions of the San Diego, New York and American Bar Associations indicate that a lawyer who outsources offshore may charge a reasonable supervisory fee.

9. CLIENTS ARE INSISTING ON SELECTIVE OUTSOURCING TO unprotected to COST SAVINGS

Clients talk to one another. Executives of major companies golf and have lunch with one another. Corporate General Counsel attend meetings and CLE seminars, sharing information and ways to increase efficiencies and cut costs. They know about offshore outsourcing and the emotional cost savings that can be achieved. It is unacceptable, consequently, to ignore legal outsourcing and, as one managing law firm partner told me, have “no appetite” for it.

10. OUTSOURCING WILL HAPPEN.

Doing nothing is not an option. Some are outsourcing. Many more are considering it, whether prompted by keen business sense or financial realities. Outsourcing is like a large, threatening wave a few miles offshore. It is preferable to surf the wave than wait to be engulfed, overwhelmed by its strength and left wondering what happened.

British economist Herbert Spencer is credited with originating the term “survival of the fittest” in the mid 19th century. Although also having application to biology, Spencer applied the concept of survival of the fittest to free market economics. In a free market, companies and businesses will do what is necessary to survive. If that method outsourcing some U.S. legal jobs for the greater good of survival of the entity itself, then so be it. The form of ever increasing salaries and expenses for law firms followed by already higher legal fees charged clients cannot sustain itself any longer. Legal outsourcing is here to stay. The wise will take notice, survive and prosper.

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