Disaggregation. If someone wanted to identify a keyword to describe what legal process outsourcers (LPOs) do (and identifying keywords and clauses is part of what they do), this word would have to be top of the list. It’s a buzzword that forms a big part of the dialogue used by proponents of legal process outsourcing, be they industry insiders or the clients themselves, and its meaning applies not only to the work they do, but to the effect that LPOs, and other alternative sources of legal work, could have on the legal sector as a whole.
Disaggregation describes the process by which LPOs cut through the increasingly vast and complex jungle of company data, disassembling it into its component parts to help the client focus on what is truly important. This sort of document review has always been an essential part of the legal process, typically handled in-house or by junior associates and teams of paralegals drafted in by law firms. It once formed a large part of how law firms made their profits. The recent exponential growth in raw data as a result of e-mail, e-documentation, the internet and call centres, coupled with increasing regulatory demands and reduced legal budgets, has, however, necessitated a more specialised, efficient, tech-savvy approach to separating the e-wheat from the digital chaff. That is where the LPOs come in.
‘Anywhere where there is litigation and regulatory pressure, there will be opportunity,’ says Aamir Khan, general counsel (GC) and senior director for UK and Europe at Clutch Group, an LPO. ‘Where you have a lot of data, it isn’t economically viable to have rooms full of paralegals charging at an hourly rate.’
Repetitive, high-volume work that typically went to law firms is now often sent to specialist LPOs and their remit is expanding fast. The belief among many advocates is that as the technology advances, LPOs will be able to work their way up the value chain, the law firm’s traditional monopoly on the market will be dismantled, and ultimately it is the legal sector that will disaggregate. At the top of the chain, more streamlined boutique law firms will provide the bespoke, complex legal advice, while alternative providers, including LPOs, will do the rest. And they’ll do it much more cheaply and effectively.
‘The really interesting story is the breakdown of the old model and the delivery of the new model, and how law firms fit into that,’ says Richard Susskind, academic, consultant and author of Tomorrow’s Lawyers. ‘The old delivery model is under siege and LPOs are very credible alternatives, among a few others, for the delivery of a more cost-effective service.’
To assess whether this optimism lives up to the reality, and in order to fully understand the true impact that LPO is currently having on the market, Legal Business has teamed up with Clutch Group to survey the in-house community and gauge its feelings. On top of the survey, which garnered responses from over 200 senior clients from across the globe, we also spoke to several senior in-house lawyers to look more closely at what LPO means to them and what they believe it offers for the future.
IN-HOUSE PERSPECTIVE: KEITH THOMSON, HEAD OF SUPPLIERS AND SYSTEMS, BT LEGAL
Alternate legal service provider: Axiom
Legal process outsourcers (LPOs) are very much front and centre of Keith Thomson’s mind. As head of suppliers and systems for BT’s legal team, he has directly contract-managed the telecoms giant’s legal process outsourcing (LPO) suppliers for four years. BT has been at the vanguard of early LPO adopters, having previously used providers such as NewGalexy and UnitedLex for commercial and contract support services.
‘They become part of the virtual team,’ says Thomson. ‘They work through front-door routing arrangements and a portion of the work is undertaken by them. It’s usually the higher volume, low-value transactional work.’
These past few months have brought Thomson’s role clearly into focus as the company has just undergone a major panel review for its LPOs, the results of which were announced in early February 2014. This emphasises how BT is increasingly institutionalising its relationship with LPOs in the same way as it does its main law firms: Bird & Bird, CMS Cameron McKenna and Freshfields Bruckhaus Deringer. The outcome will no doubt be a disappointment to incumbent outsourcer UnitedLex, since BT has now decided to give all its work to alternative law firm Axiom. This includes a new multijurisdictional approach, with centres in Belfast and Houston, to handle contract work in the UK and US respectively. For litigation support, BT intends to do more of this in-house or by directly using teams of paralegals. In time, it might also utilise the infrastructure established through its own dedicated legal arm, BT Law, which was granted an alternative business structure (ABS) licence in March 2013. If BT’s approach is a sign of things to come, then law firms had better take note.
‘If you look at it as a pyramid, LPOs provide services across the high-volume, low-value transactional base, while at the apex, the complex work is what we would send out to law firms,’ says Thomson. ‘We are always looking for ways to reduce the apex spend, consequently allowing BT to spend more on the base. This approach allows your own people to up-skill and grow professionally as well.’
Thomson uses the example of BT Sport’s recent £900m broadcast deal with UEFA, which grants it exclusive rights to broadcast Champions League football matches for three years. All of the legal negotiations were carried out in-house. Thomson is keen to extend these legal cost-savings to the LPO side as well, by giving them the opportunity to do more of the advisory work.
‘We’re looking for LPOs to do advisory as well,’ says Thomson. ‘We’ve said we don’t just want them to always undertake high-volume, low-value transactions. We want them to move up the value chain into managing more complex work. We’re looking for them to grow their space in the pyramid.’
BACK TO THE FUTURE
To understand the future of legal process outsourcing (LPO), you need to look at the past. And in the case of the LPO industry there really isn’t much of a past to speak of. The concept of outsourcing actual legal work, as opposed to the back-office tasks, is barely a decade old.
The big tobacco litigation of the early 2000s, where Integreon was instructed by British American Tobacco to work alongside Hogan Lovells, was one of the first high-profile examples of how an LPO could assist in e-disclosure for major disputes. Given the rising cost and scale of such cases, the demand for a more cost-effective discovery solution had been building for years.
‘The salaries for associates at major law firms were going through the roof,’ says Mark Ross, vice president of LPO at Integreon. ‘The standard MO for a law firm in increasing profit per equity partner was simply to leverage these junior associates out at over-inflated hourly rates and these law firms were making an absurd amount of money on these e-discovery cases. The corporate clientele were receiving multimillion-dollar bills for associates sitting in a basement clicking “relevant” or “non-relevant”. They soon said, “sorry, no more”. That was the birth of the LPO industry.’
Since then, the credit crunch and the ensuing global financial crisis have accelerated things further. The growth of regulatory compliance and risk management has proved a major boon for LPOs, and the Libor price-fixing scandal and the PPI mis-selling claims in particular, have given providers an entirely new platform to show what they are capable of.
In the case of Clutch Group, growth has been rapid. Founded in 2005, it now has 500 employees worldwide and claims 100% year-on-year revenue growth for the past two years. Pangea3, another major provider, grew from 330 employees five years ago to around 1,000 today. Integreon took its first foray into LPO in 2006. Since then, LPO has become the fastest-growing component of Integreon’s wider business, which includes business process outsourcing to law firms. From a standing start, Integreon now has 750 employees doing LPO out of 2,300 in total.
While further consolidation in the market is almost guaranteed (Pangea3 was acquired by Thomson Reuters in 2010), to make more specific predictions about the future is difficult as the young industry has already been through many changes. Two years ago, Clutch completely altered its strategy from focusing on law firms as clients, to focusing on corporate legal teams. Within a year, a client base that was geared 80% towards law firms and 20% towards in-house teams did a complete about turn.
‘We changed the engines in the airplane while we were in the air,’ says Varun Mehta, vice president of legal and compliance solutions. ‘Where four years ago we were probably talking to a paralegal at a law firm and that was our end client, now I’m talking to a general counsel at an international bank or the chief operating officer of an investment banking business.’ A number of other LPO providers have also tilted their business towards the general counsel audience.
The evolution of Integreon has been equally rapid. Prior to 2005, one of its biggest clients was McKinsey, for which it did document support services. Then Clifford Chance came knocking on the door, which led to Integreon striking a deal to build, operate and transfer the law firm’s multiservice offshore centre in India.
‘The importance of the deal was that it very much opened up the legal market to Integreon,’ says Ross. ‘Then we provided back-office support services to a slew of law firms. This was initially support services. We then became truly immersed in the legal sector. Our focus very much switched to legal at that point. The law firm clients started asking for document review and litigation support, and in turn their clients became more comfortable approaching us. LPO is now our fastest-growing business unit without a shadow of a doubt.’
How much further LPO develops will ultimately depend on the client and the technology. Mehta is effusive about the potential for technological innovation. One of the key areas for this will be in risk management, not just in helping clients react to problems like PPI, but also helping them prevent it from happening in the first place.
‘Banks need to find PPI concerns and nip them before they happen,’ says Mehta. ‘That foresight and preventative aspect is something that everyone is focusing on. We’re doing testing right now on two different products, one that would monitor surveillance on voice, which would help banks and insurance companies doing phone-based sales to find where mis-selling is occurring and deal with it within 72 hours of the sale.’
Any further changes will largely depend on the willingness of the client to embrace a new approach to legal services, but this won’t just impact on legal process outsourcers – it will affect everyone in the market.
‘What I’m convinced is going to happen is that a legal platform will emerge that will handle the invoicing and e-discovery process,’ says Ron Wills, senior director of legal affairs at the IT security company McAfee. ‘If it’s built fairly openly like an app store, what we’ll see is a complete upheaval of the legal market. The lawyer you hire ends up being a polisher, tailoring all these components to the unique nature of the case. When it happens, then the LPO will have a huge role to play.’
HOW DO YOU FEEL ABOUT THE QUALITY OF SERVICE PROVIDED BY LPOS GENERALLY?
1. LPOs are cost effective but their final work product lacks quality – 10%;
2. LPOs are cost effective and produce high quality work, but they do not compare with law firms – 26%;
3. LPOs are cost-effective but I would not use them for more complex matters – 49%;
4. LPOs are just as capable as law firms, if not better – 3%;
5. LPOs are superior to law firms in certain work areas such as document review – 12%
IN-HOUSE PERSPECTIVE: FUNKE ABIMBOLA, MANAGING COUNSEL (UK AND IRELAND), ROCHE
While legal process outsourcing (LPO) has not entrenched itself in the UK legal market yet, there are an increasing number of clients who are looking to dip their toes in the water. Funke Abimbola, managing counsel at the pharmaceutical company, Roche, is one of them.
‘It’s something we’re more open to now than we would have been historically,’ she says. ‘Initially there were concerns around security and having another third party doing this sort of work for you. Having seen how the market has developed and how the security has developed, it’s been a natural progression.’
As with most clients, the search for value is the main driver. ‘Unbundling legal services to benefit from economies of scale is very much the flavour of the moment,’ she says. ‘My budget is not unlimited so I have to justify external legal spend and the more value we can get from that the better. That will continue even after there aren’t the same constraints on budgets.’
Abimbola estimates that around 10% of her legal budget could go towards LPO, primarily for ‘routine, non-niche work’.
‘For run-of-the-mill work, I don’t see what the value-add is for using members of our law firm panel,’ she says.
‘Moving away from a chargeable hour and agreeing the value on the work is what I’m looking for. I think it’s fair to say that most of the providers have been very adamant about not using the chargeable hour as a costing, which is great. They’re looking at the value.’
That the pressure on in-house legal teams is increasing is not in doubt. 87% of respondents say that it is now more difficult to manage legal risk related to company data compared to five years ago. A further 69% have seen an increase in spending on managing legal risk and compliance over the last five years. Adding to this pressure has been the general increase in civil litigation that companies are experiencing and the greater scrutiny they are receiving from regulators, both of which are reported to have the biggest impact on increasing their legal risk and associated costs. This increase in pressure has not, however, translated into an immediate flood of instructions for LPOs. Of those surveyed, 61% had never used a non-law firm provider to handle legal work such as disclosure or related legal risk management, while only 14% had done so on a frequent basis. When it came to managing and assessing data risk, the percentage of non-users rose to 64%.
On the face of it, this doesn’t appear to be a ringing endorsement from the market. However, if you take a glass-half-full perspective, a 40% hit rate is pretty good for an industry that only really came into being in the mid-2000s. (For a more detailed look at the history, and future, of LPO, see ‘Back to the future’.)
Dig a little deeper into the survey results and the sector spread of clients tells its own story. Non-law firm providers are much more popular among industries such as financial services, telecoms, healthcare, life sciences and the services sectors, where the economies of scale, particularly for repetitive, volume-based contractual work make LPOs an attractive option. Our findings indicate that LPOs are particularly popular for investigations, compliance and regulatory work, as well as due diligence and general litigation support (including e-disclosure).
‘What’s really clear to us is that financial services will continue to be a sweet spot because of the number of regulatory issues that are arising,’ asserts Khan, himself a former head of disputes and contentious regulation at Lloyds Banking Group. ‘Most regulators demand data with very short notice and it’s very hard for clients to be able to manage the data, especially with the various places that e-documents can be found. And if you’re going back a number of years it makes it much harder.’
WHAT KIND OF WORK HAVE YOU USED NON-LAW FIRM LEGAL PROVIDERS FOR?
PERCEPTION OF QUALITY
On a scale of 1-5 (1 poor; 5 excellent) rate the quality of service you would expect from the following providers at managing high-volume tasks like document review or due diligence
PERCEPTION OF VALUE FOR MONEY
Rate your perception, on a scale of 1-5 (1 poor; 5 excellent), of the value for money in managing high volume tasks including contract review, data analysis and e-disclosure
The geographic spread of clients who use LPO is also telling. Among the US-based clients, 50% had used non-law firm providers to handle legal work, whereas in the UK (where the majority of respondents were based) it was 38%. This chimes with the fact that the LPO market in the UK is less developed.
‘In the UK, it’s definitely less mature than the US,’ says Stacey Coote, director of AIG’s legal operations centre for EMEA and APAC. ‘In the US if you have litigation you generally use an LPO, whereas in the UK there is a lot of litigation that goes on and the LPOs aren’t used. It’s just a lot less mature here, but it is certainly getting there.’
LPOs must also overcome the perception that the quality of their work is not on a par with law firms. While most of those surveyed agree that LPOs provide the best value for money, when it comes to high-volume tasks, like document review or due diligence, the belief in the UK is that the quality of service will be much better at a law firm.
Again the gulf in perception between the UK and US is reflected in the fact that US clients rank LPOs and alternative providers much more highly for quality of service (see tables).
‘In the US circa 2005 there was probably a similar perception,’ says Greg McPolin, the managing director of Pangea3, an LPO that is owned by Thomson Reuters. ‘Clients might say: “I like how the dollars and cents work out, but I can’t give you the important work, just the heavy stuff that no one else wants.” We took that and then their confidence improved.’
Khan adds: ‘I can understand the reluctance and it will take time, but soon people will realise that, actually, law firms all use the same process. The cost differential will be the first thing that makes difference, but the quality and added value will be the game changer.’
SELECT THE SENTENCE THAT MOST ACCURATELY REFLECTS HOW YOU FEEL DIFFERENT PROVIDERS ARE EQUIPPED TO CONDUCT E-DISCLOSURE AND RELATED LITIGATION SUPPORT
1. LPOs and law firms need to work together. You can’t use one without the other – 58%;
2. LPOs and other alternative providers utilise technology more effectively than law firms – 25%;
3. Law firms have the requisite knowledge and expertise needed to properly provide these services. LPOs don’t understand this – 17%
HAVE YOU USED A NON-LAW FIRM PROVIDER TO HANDLE LEGAL WORK SUCH AS DISCLOSURE OR RELATED LEGAL RISK MANAGEMENT?
WOULD YOU USE AN LPO PROVIDER FOR E-DISCLOSURE WORK?
HAVE YOU USED AN LPO OR SIMILAR SPECIALIST PROVIDER TO MANAGE AND ASSESS RISK IN YOUR DATA?
GRADE YOUR AGREEMENT WITH THE FOLLOWING STATEMENTS (1 = STRONGLY DISAGREE, 5 = STRONGLY AGREE)
Collaborate and listen
The comfort that comes with the tried and tested will also give law firms, as well as the Big Four accountancy firms, a considerable head start. Unlike LPOs, they at least have a track record that goes back more than a decade. The brand recognition that they bring to the table will be hard for LPOs to compete with. In addition, existing advisers also have the advantage of knowing the client.
‘Where I’ve seen the issues is where LPOs are new to the organisation,’ says Coote. ‘The advantage law firms have is they know the organisations inside out, whereas the LPOs are starting afresh. That is the challenge for them and something where they could learn from the law firms.’
Building personal relationships and adapting the service to meet the client’s needs will be critical for LPOs to succeed, though the client will have to be equally proactive in maintaining that successful connection.
‘Any kind of important stewardship ultimately ties to one or two key relationships,’ says Ron Wills, senior director of legal affairs at the IT security company, McAfee. ‘People approaching LPO like a random service member or geek squad – they are going to fail. It’s the same with the law firms. When it gets down to it, it is a personal relationship with one or two people.’
In most instances, the LPO will not only have to tailor its relationship with the client but will also have to work closely with the client’s chosen law firm. This is especially the case in litigation support, where 58% of clients emphasised the importance of LPOs and law firms working together, since ‘you can’t use one without the other’. This, however, is often easier said than done. ‘As you would expect, because it was impacting an area that law firms were servicing, the initial introduction of LPOs faced some challenge,’ says Coote. ‘One of the things we did was that we got our LPO firms and law firms to meet and have conversations, and after this there was much better collaboration.’
The consensus is that in areas like litigation, it’s this confluence of law firms, LPO and litigation technology that will bring the most effective combination of value and expertise to in-house legal departments.
‘I genuinely believe that the most effective operating model for delivering legal services is one of a symbiotic relationship between law firm and LPO provider,’ says Mark Ross, vice president of LPO at Integreon. ‘Neither law firms nor LPO providers can achieve end-to-end legal services delivery in a single manner.’
LPOs recognise the need to make the relationship work for the client, not least because the client is often the law firm itself. Law firms recognise that there is a client demand to find alternative ways to make their offering more cost-effective. Many firms are going directly to LPOs for this side of the business, or establishing their own low-cost operations in-house. Baker & McKenzie has a well-established centre for volume work in the Philippines, while Clifford Chance (CC) has a ‘Knowledge Centre’ in New Delhi with 60 employees handling matters like discovery work. Law firms have also embraced the onshore or ‘near-shoring’ side: Allen & Overy (A&O) and Herbert Smith Freehills have centres in Belfast, while in 2013 Ashurst opened its own operation in Glasgow. Even in these instances, law firms recognise the need to be flexible. A&O has a panel of three LPOs: Pangea3, Integreon and QuisLex, which it will call upon when required, while CC will work with external providers ‘where we think it makes sense to do so or the client requests we do so’.
Securing the data
‘Companies are nearly doubling their data environment almost on an annual basis, which is insane,’ says Varun Mehta, Clutch Group’s vice president of legal and compliance solutions. ‘The regulatory regime has also been more complicated. It’s more intense and all-consuming.’
For the banks and other financial services companies, getting to grips with this increased pressure sent many scurrying in the direction of legal process outsourcing (LPO).
‘With the re-regulation of the financial services industry post-2008 there is an enormous amount of work that banks need to do to manage these new regulations and manage their internal risk,’ says Greg McPolin, the managing director of Pangea3. ‘This is a huge area of growth for us and we’ve partnered with them to do the heavy lifting, helping them map those rules to internal policies. Picture doing that for tens of thousands of individual promulgated rules, for a bank that has hundreds of trading desks. This entire industry doesn’t exist unless we are technology-enabled from the beginning.’
The fact that outsourcers would have to extract their confidential data has inevitably raised massive security concerns, although some clients contend that legal process outsourcers (LPOs) had better security than their traditional law firms.
‘There was a lot of nervousness when it first started, with no end of IT security reviews,’ says the senior in-house counsel at one major financial institution. ‘LPOs always came out as outstanding and when we did the same IT reviews of the law firms they never came out very well.’
‘Data confidentiality is a big priority for us,’ adds Mehta. ‘The level of security is immense. If you came here you wouldn’t be allowed to bring a laptop to our office, whereas you could at a law firm. We’re ISO-certified and are audited by third parties annually. Can you guarantee 100% that there is no chance of data leak? Nobody can do that. But if someone wanted to take data off our servers, they’d have to go through 12 cameras and six doors to get there. We can’t assume the risk of taking on confidential data from our client and not have the best infrastructure behind it.’
Aside from litigation, clients that are experienced in using LPO are doubtful as to whether the law firm offerings can match those of dedicated, external providers. Most prefer to keep the two services separate and firmly under their own control, efficiency being one of the main reasons.
‘It works much better if you select a preferred partner or partners, and you work with them and they work collaboratively with all of your law firms,’ says Coote. ‘That way you haven’t got tens of different LPOs applying different processes and having access to your data. A big part of the cost is extracting your data and if you’re continuously extracting it all the time, you’re wasting money.’
If efficiency is key, the argument from alternative providers is that law firms simply don’t have the infrastructure in place to truly exploit the available technology.
‘They’re going to suck,’ says Wills. ‘I don’t see a law firm ever being able to create a technological solution.’
A senior in-house counsel at one major financial institution agrees: ‘I haven’t seen any firm set up a function that is anywhere near the quality that the LPO providers have. There are certainly a lot of firms trying, but they’re kind of playing at it.’
This comes to the nub of the issue of how LPOs can succeed in the face of competition, not just from traditional law firms, but also the major accountancy firms. For clients, particularly in the UK, the onus remains on LPOs to prove they bring a certain amount of value to the table, meaning something distinctive that the recognised law firms and Big Four accountancy firms simply can’t replicate. This will ultimately boil down to their ability to marry legal expertise with the latest technology. Clients in our survey are yet to be fully convinced, with only 38% stating that LPOs are better equipped than law firms to use advanced technology and data and risk analytics.
Advocates of LPO are, on the other hand, more positive. ‘There are very few law firms in the world that can credibly say they have the same technology, people, process and training,’ says Susskind. ‘That isn’t to say they don’t do a great job with what they’ve got, but the question is whether a better job can be done elsewhere. If you speak to e-discovery specialists, they will have licences from five or six different packages that do slightly different things in slightly different ways. It’s an industrial level of e-discovery that only a few law firms in the world could hope to match.’
Whether there would be a business case for law firms to try and match it is another matter entirely. Any investment that LPOs make in their infrastructure can be marketed directly to in-house legal teams as well as to the law firms themselves, whereas law firms can’t in general sell their services to other law firms. As a result, it is believed that for law firms the low-cost side will always be something of an adjunct to the higher-end work. For LPOs, this side of their business is their foundation.
‘To me there are two big benefits,’ says one in-house counsel. ‘One is savings and the other is the quality. We were hitting 70% savings, which is pretty astronomical. We found the quality of the work was much better as well, because you have the process around it and because you have people who want to do it. They have chosen to do this as a career. If you’ve joined a law firm you don’t want to sit there reviewing millions of documents.’
This pitch has given LPOs a distinctive selling point, not just in terms of finding new clients but also in convincing experienced recruits to join the business. Their argument being that employees with a high degree of technological flair, whether they are lawyers or IT specialists, will not get the same level of career advancement in a law firm partnership where the main focus is on hourly billing.
ANALYSING AND MANAGING RISK
Rate your perception, on a scale of 1-5 (1 poor; 5 excellent), of the value of money in helping your company analyse and manage risk in its own data
IN-HOUSE PERSPECTIVES: CHRISTIAN SOMMER, LEGAL DIRECTOR – VOLUME CONTRACTING, VODAFONE
Alternative legal service providers: Axiom Law, Riverview Law, Qui Prior Law Associates
Vodafone is another keen exponent of legal process outsourcing (LPO), particularly when it comes to repetitive, standard procurement activities and customer claims management. In the latter, the legal department has made a 50% saving on customer claims as a direct result of using LPO.
‘This is quite a radical change,’ says Christian Sommer, legal director for volume contracting. ‘Like every company, we’ve become very lean in recent years. We’re trying to add value and don’t have the number of lawyers in-house to do what we want. One of the benefits you get is better management info as a result. You can spot the trends and fix the problems more effectively.’
The investment in technology is something that Sommer feels gives LPOs an edge, not just over traditional law firms, but the in-house teams as well. ‘We don’t have the software or the skills to get the management info that LPO providers can supply to us,’ he says. ‘They can produce nice spreadsheets from the raw data that we have provided. When you meet with LPOs they’ll bring along someone who is an IT systems expert. They have lots of skillsets that you can’t find in a traditional law firm. I hope that will change, and it needs to change in-house as well.’
Sommer also appreciates the adaptability that LPO offers when it comes to timing. ‘LPOs enable us to more easily deal with peak/off-peak workload scenarios, as they can usually adapt quicker to a changing situation than in-house teams,’ he says.
Sommer is, however, encouraged by the fact that law firms are starting to take LPO seriously, conceding that their brand value still carries weight. ‘Some of the smarter law firms are teaming up with LPOs and are offering their own version of it,’ he adds. ‘They have to if they want to continue the whole piece of work. For an M&A transaction you can easily outsource the due diligence part. One of the attractive things about it is that law firms can guarantee the quality.’
HOW DO YOU FEEL LPOS AND LAW FIRMS ARE EQUIPPED TO HELP YOU MANAGE RISK IN DATA?
1. Law firms and LPOs are both equally equipped to manage large volumes of data and to understand risk – 30%;
2. LPOs are better equipped to use advanced technology and to use data and risk analytics – 37%;
3. Law firms are better suited to data and risk analysis – 21%;
4. Neither – I would rather use a major accounting firm or investigation specialist – 12%
WHAT IS HAVING THE BIGGEST IMPACT ON INCREASING YOUR LEGAL RISK AND ASSOCIATED COSTS (1 LEAST IMPORTANT; 5 MOST)?
WHAT ARE YOUR GREATEST CONCERNS ABOUT ENGAGING AN LPO?
A NEW MODEL
This attempt to harness technology and find new ways to quantify the value of legal service cuts to the heart of the problem that many law firms find themselves facing today. Pricing is a key aspect of this and the belief among a significant and growing number of clients is that the LPO model has helped turn the traditional approach on its head.
‘Unlike law firms, my experience with LPOs is that they feel like they get more business from us if they save us money,’ says Wills at McAfee.
‘Law firms are being challenged in how they offer their services,’ comments Funke Abimbola, UK and Ireland managing counsel at the pharmaceutical company, Roche. ‘The billable hour is not an efficient way of gauging the value of a job.’
What engages many clients about LPO is that it serves as a refreshing counterpoint to all the things that annoy them about traditional law firms, such as their inability to exploit new technology, their intransigence over hourly billing and the rigidity of the traditional partnership (especially in the face of alternative business structures). In the face of all this, there are now alternative routes that clients can take to address large chunks of the legal process.
‘Law firms should always be the first port of call for premium tailored legal advice services,’ says Ross at Integreon. ‘Legal advice will always form a significant element of those services. However an increasing array of legal services can be disaggregated into their constituent elements and allocated more efficiently to alternative resources.’
Most clients seem to agree, with 80% expecting to see the LPO industry expand and improve its service over the next five years. The democratisation of the legal sector, it seems, is well under way.