PANGEA3 LLC

The November issue of the India Business Law Journal published an article titled The New Legal Innovators by Sanjay Kamlani, Co-CEO, Pangea3 . The article provides significant insight into legal process outsourcing and discusses major industry trends that are likely to reshape the global legal services market. The original article has been republished as below with permission from IBLJ:

The New Legal Innovators

LPOs are poised to reshape the global market for legal services, argues Sanjay Kamlani, Co-CEO, Pangea3.

Legal process outsourcing (LPO) has come a long way since 2001 when General Electric (GE) made the concept a reality by utilizing in-house counsel in Delhi to handle procurement agreements for its affiliates around the world. In 2003, Lawrence Harnett, the senior counsel for the Americas at GE Plastics, announced that the credentials of Indian lawyers were “impeccable", stating that his clients were “really happy with the work". By 2004, GE reported annual savings of more than US$2 million from its outsourcing programme. At the same time, several other captive centres of excellence had generated an additional US$3 to US$5 million in revenue or cost savings for their corporate parents.

Currently, a group of about 10 top-tier LPO providers, dozens of smaller service providers and captive outsourcing units of many multinational corporations deliver a wide variety of legal services including contract drafting, legal research and related motion drafting, electronic discovery, regulatory compliance and patent prosecution and related analytics. Independent market research by the National Association of Software and Service Companies (NASSCOM), ValueNotes, and various LPO consultants indicate that there are now 5,000-10,000 lawyers working in India-based LPOs, generating annual revenues of US$250-US$500 million. Considering the recent growth of the sector, India’s LPO market can be expected to grow to at least US$1 billion by 2010.

Decision-making lawyers in the US and Europe, particularly the in-house counsel at multinational corporations, have come to appreciate the LPO providers that have successfully brought together impeccable legal credentials with process expertise, including Six Sigma tools and methodologies, lean cell manufacturing and other concepts that have made efficiency a key component of their value proposition. These in-house counsel have visited LPO facilities across India and have seen for themselves that process-expert lawyers are housed in state-of-the art secured facilities that are integrated with international markets through advanced technology.

Many have also found that LPO providers overcompensate for any apprehensions associated with geographic remoteness by offering outstanding customer service. Additionally, clients of LPO services have been pleased with the billing rates of LPOs, especially fixed-price models that eliminate budget risk and give them assurances regarding ultimate costs.
At the same time, clients are aware of the potential pitfalls of outsourcing. Key risks include the possibility of selecting an under-qualified LPO provider, overselling by industry players and the possible inability of the client to conduct a full in-depth due diligence of prospective providers.

The most significant risk facing the LPO industry is the failure of some LPO providers to meet client expectations. Unfortunately this has the potential to taint the entire sector. With a number of LPO providers overselling their capabilities, the likelihood is that delivery failure will occur. It may even occur at a highly visible level. In an effort to minimize this risk and prevent clients from having to engage in their own extensive due diligence of potential LPO providers, industry leaders have rightly focused on establishing a credible certification organization that will set appropriate standards and potentially offer guidance on segments of the industry that meet those standards. With such systems in place by 2010, in-house counsel and law firm partners will be in a better position to assess the competencies of industry players.

As we look towards 2010, the LPO sector is likely to influence standards within the larger legal services industry, including those of Indian law firms. In-house counsel are likely to demand greater efficiency from their legal service providers and push for a move towards fixed-pricing models and baseline standards for service provision.

Six Sigma and lean cell manufacturing tools and methodologies have become the norm for the LPO industry. These tools allow clients to track and verify the quality and consistency of any kind of recurring work product, be it documents being reviewed in the context of a litigation, or documents being drafted in the course of normal day-to-day business. Increasingly, law firms that have traditionally focused on billable hours are being asked to adopt these practices.

Just as performance, defined by volume and consistent quality, is increasingly measured using such tools, billing mechanisms are similarly being defined by the volume of pages, documents and gigabytes, or in terms of full-time dedicated teams, rather than by hours. Service providers and clients will increasingly focus on the relative risks and returns associated with these different pricing mechanisms. Providers who have been trying to hold onto billable hour pricing mechanisms will be pushed towards fixed pricing.

As we approach the end of the first 10 years since offshore centres of excellence for legal services were created and ultimately came to be known as LPO providers, it is clear that the trends that have emerged from this industry will impact - If not lead - innovation in the global legal services industry in the decade to come.

By Sanjay Kamlani, Co-CEO, Pangea3

© India Business law Journal, November, 2009