PANGEA3 LLC

Two Pangea3 executives, Kevin Colangelo, Vice President and General Counsel, Legal Services, and Greg McPolin, Vice President and Managing Director, Litigation Services, are attending the Controlling Legal Costs conference December 8 and 9th, as part of Pangea3’s sponsorship of the event. This is the second year in a row that Corporate Counsel magazine is hosting this conference, held at the Harvard Club in New York, NY. The conference is strongly focused on delivering practical solutions to increasing legal costs, with the top legal counsel from some of the world’s most prominent corporations, and thought leaders from legal services providers presenting on topics from five themes: Assessment, Discipline and Strategy; Metrics, Budgeting and Reporting; Process Improvement and Resource Deployment; Alternative Fee Arrangements and Reducing Cost from Electronically Stored Information.

For more information, see the conference website.

We are pleased to announce that Pangea3 is now part of Thomson Reuters, the world’s leading provider of intelligent information to businesses and professionals.

Thomson Reuters and Pangea3 are committed to serving the legal workflow needs of corporate legal departments and law firms worldwide. With the expertise, support and global reach of the Thomson Reuters organization and legal products like Westlaw, we are confident that we will be able to provide an even more comprehensive suite of legal services and support for corporate legal departments and law firms worldwide.

As we move forward, customers can continue to turn to their current service/sales and other business contacts at Pangea3 for information and service.

Both Pangea3 and Thomson Reuters are excited by the new opportunities this acquisition will provide the legal marketplace, and we look forward to serving your needs now and into the future.

Click here for additional information in response to FAQs.

Read Press Release.

Greg McPolin, Vice President, Litigation Services at Pangea3, has been asked to lend the voice of his vast experience, both as a litigator and as an outsourcing and e-discovery expert, to a webcast put on by DRI – The Voice of the Defense Bar. The webcast is called, “Small World: The Ethics of Legal Process Outsourcing and Off-Shoring,” and Greg and the other presenters will cover themes in that vein that are useful to a range of in-house counsel, outside counsel and law firm managers. They will include avoiding the unauthorized practice of law when outsourcing, keeping client information confidential and preventing conflicts of interest when outsourcing — topics that should be top of mind for anyone considering legal process outsourcing.

Greg isn’t the only expert being consulted. Khristi Doss Driver, a member of DRI’s Electronic Discovery Committee and a member of the law firm Haskell Slaughter Young & Rediker will chair the webcast, and Stacy L. Moon, of Fees & Burgess PC, and DRI’s Lawyers’ Professionalism and Ethics Committee will also present. The webcast will take place on Thursday, December 2, from 1:00 p.m.- 3:00 p.m. Central Time. Register online beforehand, and be sure to check out their member and bulk registration discounts.

A few weeks ago, our blog entry “Legal Process Outsourcing Changes Legal Industry,” discussed the ongoing movement towards outsourcing in the legal field. This fall, Legal Ethics Opinion 1850 from the Virginia Bar association also gave a nod to “the uptick in [legal] outsourcing.” With LEO 1850 on outsourcing of legal services, the Virginia Bar addresses issues that could potentially be caused by outsourcing and recommends a framework for the ethical execution of an arrangement it calls “highly beneficial to the lawyer and the client.”

First among the recommendations is that proper due diligence is done by the hiring lawyer or law firm on the contract lawyers or LPO being hired. It’s the hiring party’s responsibility to ensure that the outsourcing partner is competent and can actually deliver the legal services promised, within the same ethical bounds as the lawyer. In order to guarantee that this standard of behavior is being met, the hiring party should supervise the outsourcing partner as thoroughly as possible. Overall, the opinion emphasizes that the buck stops with the lawyer—i.e., the work the outsourcing partner is hired for is still the responsibility of the hiring lawyer, regardless of to whom it’s been delegated.

It thus remains the lawyer’s responsibility to “maintain independent legal judgment regarding the client’s matters,” unimpeded by the outsourcing partner. The client is ultimately the most important party in the arrangement, so it should give consent before any confidential information is shared with the contract lawyers or LPO provider. Further, the lawyer should be extra-careful that the outsourced party has the proper procedures and security measures in place when confidential information is involved.
These guidelines are in line with the ethics opinions released by the ABA and bar associations around the country. As yet, only a draft opinion is available.

The Global LPO Conference 2010, organized by KPO Consultants, offers a smorgasbord of events that will acquaint both buyers and sellers of legal process outsourcing with the array of offerings from LPO providers based in India and beyond. Speaking at the event will be a who’s who of executives from legal outsourcing companies. Pangea3 co-CEO Sanjay Kamlani will be a key speaker, presenting twice during the course of the conference. The two day outsourcing extravaganza will include one-on-one meeting opportunities and a “Global LPO Mall” divided into “Zones” with displays from LPO vendors and software companies, a “Training Zone,” for the LPO training institutes that prepare Indian lawyers to work at LPOs, and yet another zone for LPO vendors from LPO destinations outside of India.

The conference will be at the Radisson Hotel, Noida, November 13-14. If you’re interested in the conference but Noida is a little far, KPO Consultants is conveniently hosting the event online. The virtual conference contains almost all of the functionality of actually being in Noida, allowing one to not only attend presentations and panels, but also participate in Q&As, chat with exhibitors at the Global Mall, and hold one-on-one meetings with the LPO vendors.

Pangea3 co-CEO David Perla will be the only representative of an LPO provider at the Practising Law Institute Outsourcing Seminar that began yesterday and ends today. The conference is focused not so much on the pros and cons of outsourcing, as the nuts and bolts of getting a deal together. The 123’s of negotiating a legal outsourcing agreement will be covered in such sessions as “Outsourcing Contracting Process” by John F. Delaney and William A. Tanenbaum of Morrison & Foerster LLP and Kaye Scholer LLP, respectively, and “Risk Allocation, Liability Limitations and Dispute Resolution,” presented by George Kimball, Senior Counsel of Hewlett Packard Company.

David’s session, “Ethical Issues in Legal Process Outsourcing,” will offer the sole MCLE Ethics credit of the conference. His presentation, today from 3:30-4:30, covers ethics opinions from various bar associations, confidentiality, avoiding practice of law and appropriate billing, among other things.

In total the conference is worth 14 MCLE credits in New York, and the state-by-state information is available on the PLI website. If you’re not in New York for the live conference, or in Mechanicsburg, Philadelphia, Pittsburg or Boston for the Groupcasts, you can catch it as a Webcast online.

Read Press Release.

In a recent Legal Intelligencer article, “Law Firms Feel Pressure From New Breed of Competitors,” Gina Passarella, with the help of some legal consultants and Pangea3 co-CEO David Perla, paints a picture of a changing legal industry. Passarella writes that “…the industry is moving away from a monolithic provider of legal services—the law firm—to a fragmented service platform where the competition isn’t just a broadening array of law firms, but legal process outsourcers and other non-law firm legal service providers….” If the article is to be believed, the legal industry is becoming efficient, innovative, adaptive and competitive.

And not everyone believes. When words like efficient are applied to legal, it can be hard to swallow. To Peter Kalis, chairman of K&L Gates, LPOs are better compared to a “gnat in an elephant’s ear” than true predators of law firm business. Kalis maintains that while firms need to continually change their value propositions, it’s only to be more competitive with each other.

Passarella disagrees. She counters, “The LPOs are increasingly capitalizing on the void left by firms that haven’t adapted their value propositions.” Pangea3 is on track to grow 250% this fiscal year, getting increased business from both corporate legal departments and law firms. According to Perla, some of the more forward thinking partners at law firms are showing interest and getting educated, and Edge International consultant Jordan Furlong describes LPO as “permanent…driven…by the marketplace.” Janet Stanton, partner at consultancy Adam Smith Esq., also describes the change in legal work distribution as permanent, comparing the imminent rejection of the notion of law firm associates doing document review to the abandonment of tape decks in luxury cars—a permanent innovation driven change.

In times of recession it’s hard to ignore that legal departments are costly, and it’s easy for boards to question legal spend. As the UK construction industry struggles to avoid the “R”-word assignation for the second time in as many years, legal departments in big construction firms have the opportunity to proactively prove their worth, showing flexibility and innovation in cutting costs. In an article that appeared in Building Magazine, Pangea3 co-CEO David Perla explores this topic and proposes LPO as a solution. When he breaks down the numbers, the value provided by legal outsourcing is significant. Document review consumes over half of a large construction firm’s litigation budget, which itself is typically 80% of the overall legal budget. The hundreds of “top-tier career lawyers” employed by leading LPOs, like Pangea3, in India have the numbers to take on large-scale document review projects, and they blow onshore paralegals and contract attorneys out of the water in terms of skills. Considering the staggering amount of electronic discovery that goes along with litigation, LPO saves substantial time and money, which allows a more extensive, higher-quality document review.

The number of professional negligence claims in the construction sector tends to rise in opposite and direct relation to the economy. For example, in 2008 the number of these cases in the commercial court increased by 150%. Until the economy betters, the cases will continue to increase, and the construction firms that win them will also win the diminishing number of contracts. The smart legal departments will prove their worth by simultaneously cutting costs and strengthening their litigation strategies. Those looking at the future will look to LPO.

Read the “Outsourcing abroad: Indian takeaway” as it appears in Building Magazine.

Anthony Lin wrote an intelligent, well-rounded article about LPOs that appears in this month’s American Lawyer. “The Global Issue: Inside the Revolution” is both thoughtfully balanced and solidly optimistic about the future of LPOs. Lin’s stats show LPO providers’ rapid growth, for example citing that Pangea3 “has gone from 350 lawyers at the beginning of the year to 450 lawyers at press time, and hopes to double that number within the next year.”

He also makes a necessary distinction between the end-of-the-world-as-we-know-it predictions often tossed around prophesying the eminent demise of law firms, and reality, and his equilibrium of approach is evidenced by his numbers. The volume of legal outsourcing business is estimated to be $1.1 billion by 2014—impressive for a new industry, and catching up to the $1.5 billion U.S. temp lawyer business—but small change when looked at against the $230 billion billed by U.S. law firms in 2007. Pangea3 co-CEO Sanjay Kamlani also puts growth predictions into perspective, comparing LPO to business process outsourcing (BPO), rather to other legal service providers or law firms. “Large BPOs are used to selling a hundred [full time equivalents] at a time. I don’t know that you could sell a hundred FTEs to an in-house legal department for lawyer work.”

“The tsunami is yet to come,” but the LPO tide is definitely rising.

Read Full Article.

The 7th Annual Litigation Trends Survey Report, recently released by Fulbright and Jaworski leaves no doubt: the economy is changing the way corporations approach litigation. Of the 403 respondents to the survey (a statistically significant number), nearly half blame the drab economy of recent years for anticipated increases in litigation. Along with that comes the belief harbored by 50% of the U.S. respondents that the legal industry will permanently change because of the economy. Legal spend is under attack, over half of U.S. respondents expecting alternative fee arrangements to remain prevalent, and a quarter believing stringent cost control is a permanent trend. At the same time, electronic discovery is more important than ever, with over 40% of companies bringing in $1 billion or more in revenue planning to increase spending on e-discovery in the next year.

This particular combination, an atmosphere of increased litigation and increased e-discovery spend, but decreased legal budgets and general acceptance that change is gonna come, is the perfect environment for legal process outsourcing. It’s not a surprise that litigation services outsourcing is currently exploding. So no wonder ValueNotes DatabasePrivate Limited expects LPO to grow from what it currently estimates is a $440 million industry to a $1.1 billion industry by 2014. The decks are stacked in LPO’s favor, and litigation is just the beginning.

British blogger Ralph Savage uses Pangea3 as an example in a response post to the Law Society Gazette’s article, “Will LPO Pose a Threat to Junior Lawyers.” In the Law Society Gazette, Rachel Rothwell proposes that as LPO attracts both private equity and jobs, firms will no longer have a need for junior lawyers and will stop employing and training them. Savage does not argue with Rosette’s logic in “Do Western Lawyers Have an Opportunity with LPO.” Instead, he adopts an “if you can’t beat ‘em, join ‘em” stance. The firms continue to feel the effects of the recent economy, and when presented with an opportunity to outsource and save money they logically embrace it. Trainee positions will decrease, but Savage has a point: as legal jobs for junior lawyers in the West become less abundant, jobs for young lawyers in India will increase. Not only is India well equipped to receive expatriates, but outsourcing creates a whole new chance for adventure in a young legal career. As Savage puts it, “if I was a trainee looking for an opportunity to travel and work, or a professional with transferable skills I know [working in India] would certainly represent an interesting prospect.” When one door closes, another opens and LPO has broadened the realm of possibilities for both recent law school graduates and seasoned Western lawyers.

Pangea3 is a featured provider in a New York Times article about legal outsourcing which prominently quotes two of our own, Vice President of Litigation Services, Greg McPolin, and Associate Vice President of Litigation, Chris Wheeler. “Legal Outsourcing Pulls Western Talent to India,” is rosy about the future of legal outsourcing, Heather Timmons even quoting Harvard Law’s David Wilkins who says on LPO, “This is not a blip, this is a big historical movement.”

Two important aspects of the LPO industry are repeatedly highlighted in the article. The first: LPO is now a “…mainstream part of the global business of law.” Some of the largest, most well respected companies in the world outsource legal services, because it makes them better companies—more efficient and more cost effective. This is not about labor-arbitrage; it’s about transformation of the way legal services are delivered and consumed.

Secondly, rather than glossing over the thorny issue of “wait-aren’t-you-giving-India-the-work-of-hard-working-domestic-lawyers,” the article takes it head on—and finds that while there is no going back from LPO now that the service has been introduced, providers are also not poised to replace traditional law firms (nor are we interested in doing that). Timmons brings attention to the fact that, “Employees at legal outsourcing companies in India are not allowed by Indian law to give legal advice to clients in the West, no matter their qualifications.” Rather, LPO providers have created streamlined, client driven business models, and do not replace the specialized skills of senior lawyers. Again, it’s about change and transformation, not about cheaper lawyers.

The New York Times agrees that the business of law is changing, to the benefit of those who need to hire lawyers. To read the full article click here. Timmons’s point that many seasoned Western lawyers are jumping at the chance to go to India is further emphasized in The Wall Street Journal Law Blog.

It seems the bad economy is good news for the legal process outsourcing (LPO) industry. ValueNotes, which publishes independent research on the industry, came out in June with “Outsourcing in the Changing Marketplace,” an article listing a deluge of factors that have contributed to the LPO industry’s fast assent in recent years.

ValueNotes cites “the downward pressure on costs, growing litigation, increasing compliance measures and the increasing use of technology” as the four crucial reasons companies are turning to LPO providers for legal services, and they are dead on with their analysis. As the economy improves, these forces remain prominent; both corporations and law firms continue to scramble to cut costs in order to post profits and remain competitive. LPOs allow lawyers to both lower costs and reallocate their time to high value work.

At the same time that corporations and law firms would like to use LPOs more, LPO providers are improving their technology, growing more experienced and becoming even more capable of quickly producing front office legal work. As a result, contracts with legal process outsourcing providers are expanding in number and volume, and all signs suggest that the offshoring trend will continue surging forward in the legal services market. KV8PZ7PYM73Z

Pangea3 has become an even more global company of late, with offices expanding at hypersonic speed on three continents. In the past year we’ve added over 250 employees; where are all these people located? Here’s a quick update.

Delhi: In March we ramped up our Delhi office, purchasing 14,000 square feet of gleaming office space in Noida, a riverside Delhi suburb and buzzing hub of international industry. Our new state-of-the-art facility will grow with us, adding 300 more seats to the current capacity of 165. We have received thousands of resumes, and in the past few months alone we have hired over 100 of India’s most accomplished law school graduates. Eventually this office will overtake its 36,000 square foot Mumbai sibling in size and number of employees.

Europe: No strangers to the Continent, we have been working with European clients since 2006 and we’ve had an office in Europe since 2009. We recently added a London base as well, to better service customers in the UK and supplement our growing business in Europe.

Australia: In April we announced our entrance into the Land of Oz, cementing a strategic alliance with Australian firm Advent Lawyers. We will supplement their low cost/highly specialized legal work and with Pangea3, Advent will drastically increase the range of services they are able to offer.

You can find more information about our recent growth on our website.

Pangea3 recently expanded our discount to Corporate Executive Board’s General Counsel Roundtable (GCR) members under GCR’s Vendor Preferred Pricing Program. Our new offer will provide GCR members with an exclusive annual discount in all of our service lines: litigation, intellectual property, corporate, and risk management and compliance. We were the first to be invited to join GCR’s Vendor Preferred Pricing Program, and we’re proud to continue working with Corporate Executive Board’s GCR. In the words of Pangea3 Co-CEO David Perla, “The General Counsel Roundtable is an excellent resource for thought leadership, best practice information and benchmark reports ….We are pleased to participate in this program and to provide GCR members with additional savings on our end-to-end legal solutions.” To learn more about this new discount, read the press release.

With the credit market still tough as building nails, it’s more important than ever that construction companies know the deal they’re putting together is a good one.

In a recent article in Building magazine, Pangea3 Co-CEO David Perla convincingly explains the important place legal process outsourcing (LPO) providers should have in construction’s wakening mergers and acquisition activities.

By nature, large scale construction firms have a vast number of contracts. Bad contracts can fly under the traditional due diligence radar, and a host of rotten apples can eventually spoil the stability of the acquiring company. Perla points out that while it would be absurdly expensive and tedious for a traditional law firm to go through each contract during due diligence, lawyers from an LPO provider are well equipped for the job and can do it at a fraction of the price.

“Deep dive” due diligence may not be the first topic a board of directors thinks about, but in this market boards are bound to recognize its necessity.

To read the full article, see the July Issue of Building Magazine.

In a recent Lawyers Weekly article, entitled “Lawyer on Tap,” Angela Priestley writes about the growth of the legal process outsourcing business in Australia, highlighting Pangea3’s recent partnership with Australian firm, Advent Lawyers. Priestley sees LPOs as an increasing presence in Australia, a country where the outsourcing of legal services is a newly growing business. Pangea3 Vice President and Managing Director - Legal Services, Antony Alex, is quoted extensively, clarifying the importance of LPOs. “It’s like attorneys on tap. You turn on the tap and get a whole stream of well qualified, very articulate and very smart lawyers….”

Antony describes a future with a “…leaner, meaner and more efficient way of delivering legal services…a world where general counsels get value for money and, more importantly, their services delivered in a timely manner that makes them more effective and efficient managers of the legal department.” For in-house counsels, the ability to outsource basic but time consuming legal work results in invaluable savings, allowing them to focus on more complex and sensitive tasks. In turn, they have placed pressure on law firms to reduce their bills through LPOs. Though prices are significantly reduced, the quality of work is very high, ensured by Pangea3’s high ratio of experienced and gifted US/UK trained lawyers to Indian lawyers, perhaps the highest in the LPO industry.

John Knox, Managing Director of Advent Lawyers, believes that Australian law firms are both aware that they could be more efficient, and ready to embrace a viable alternative to “having ten backpackers, 12 paralegals and other people all doing a document review.” While some of the Australian lawyers quoted in the article mention quality concerns, Knox believes that with increased familiarity with legal outsourcing, their fears will be dispelled and they will embrace the efficiencies it offers. In her editorial note for Lawyers Weekly, entitled “Outsource or Get Out,” Priestley vehemently emphasizes the significance of LPOs in Australia. “Some mid-tier law firms and innovative general counsels are already realizing the potential of LPO. If large law firms don’t put their hands up to play too, they risk missing the game all together.”

Read the full article entitled “Lawyer on Tap.”

The Hildebrandt Institute is hosting the 8th Annual Practice Group Management Forum on June 2-3 in New York. The event will provide latest updates related to practice group management in today’s changed economy. Our Co-CEO, David Perla, will be speaking on the “New Models for Success: Legal Process Work Redesign/Process Improvement - Changing the Way Legal Work is Performed” panel on June 3rd from 9:00 AM to 10:30 AM. The session highlights include:

• Significance of Process Improvement for law firms
• New approaches to legal matters
• Capitalizing upon disaggregation and legal outsourcing trends
• How to implement process changes with the practice group

Read event description on pangea3dotcom.

Technolawyer recently published an interesting article titled “Buyers Guide to Legal Outsourcing” by Marin Feldman in the BigLaw Newsletter and Technolawyer Blog. The article featured Jonathan Goldstein, Vice President and Managing Director, Legal Services at Pangea3 in a thoroughly engrossing discussion on legal process outsourcing (LPO). Marin asked insightful questions and Jonathan provided helpful information touching several important areas of legal outsourcing including:

• What potential buyers need to consider while evaluating an LPO provider
• Key drivers behind LPO
• When not to outsource
• The cost saving outsourcing model
• Ethical dilemmas of legal outsourcing
• Popular LPO destinations of the world.

Today, Pangea3 reports a fourfold increase in its clientele in the U.S. and a radical growth in the European LPO market, since 2006 when Jonathan, a former large firm lawyer, joined Pangea3. The article serves as a great guide for potential buyers, influencers and spectators of the legal offshoring industry in today’s changing economic climate where the pressure to do more with less is obvious. Read full article.

Pangea3 is proud to sponsor the Argyle Executive Forum Chief Legal Officer Leadership Forum, taking place in San Francisco on May 11 from 8:00 AM to 6:00 PM. The CLO Leadership Forum will provide practical strategies to address a multitude of challenges facing today’s in-house counsel. It will bring together legal and executive leaders from a large number of public and private large cap and mid cap corporations along with select advisory community members to discuss a wide array of topics including:

• Ethics within the GC’s office
• Pro bono initiatives
• Preventing and responding to corporate misconduct
• Managing and protecting enterprise information
• IP challenges.

For additional information about the CLO Leadership Forum, please visit the Argyleforum website.

Red Bridge Strategy, Inc. is hosting the 2010 Global Legal Process Outsourcing Management Boot Camp on the week of May 17th in Mumbai and Delhi, India.The Boot Camp will educate GCs, law firm partners and senior corporate attorneys on important issues regarding legal outsourcing and how to evaluate legal outsourcing providers. Pangea3 is pleased to be invited to speak at the event along with other industry experts. Read the press release below for more information.

Red Bridge Strategy Announces Global Legal Process Management Boot Camp May 18 – 20 in Mumbai & Delhi, India

CAMBRIDGE, Mass.–(BUSINESS WIRE)– Red Bridge Strategy, Inc., a management consulting firm focused on cross-border business functions, today announced its 2010 Global Legal Process Management Boot Camp. The Boot Camp will provide a comprehensive overview of the topics that legal executives must consider when evaluating the globalization of legal operations and legal process outsourcing (“LPO”). Seminars and discussions will be led by an all-star team of industry experts from Integreon, Pangea3, Red Bridge Strategy, UnitedLex, ValueNotes, and others. Presentations will include:

Organizations considering offshore LPO need to understand when outsourcing is appropriate, what globalized processes can provide, who the credible vendors are, and how to structure engagements. Delegates will receive the first-hand exposure necessary to evaluate their needs and options by hearing from both vendor and independent industry experts, touring the facilities of leading providers, and experiencing the culture and infrastructure in which the providers operate. The Boot Camp will be particularly valuable to senior corporate attorneys seeking to quickly evaluate the viability of legal outsourcing for their organizations and for law firm partners who wish to better understand a new paradigm for their matters.

The Boot Camp begins in Mumbai on Tuesday, May 18th, allowing participants to begin their trips from the U.S. or U.K. on Sunday or Monday respectively. Presentations will continue on May 19th and 20th at Mumbai and Delhi-area industry facilities. On Friday, May 21st participants are free to attend to other business in India, visit the Taj Mahal, or return to the U.S. or U.K. arriving the same day. Registration and additional information are available at www.RedBridgeStrategy.com, GlobalLegalwordpress.com or by contacting MSullivan@RedBridgeStrategy.com

About Red Bridge Strategy, Inc.

Red Bridge Strategy is an independent firm offering consulting and advisory services to corporations and law firms evaluating legal process outsourcing. The company does not provide outsourcing services, nor is it affiliated with any outsourcing providers.

There is a lot of information on the internet and in the media about how to get started with legal outsourcing but there are very few resources available that discuss common mistakes when considering legal outsourcing. A new whitepaper by Vantage Partners hopes to provide law firms with guidance about what not to do with regards to LPO. Here are the key takeaways from the paper:

1. Understand why your clients want to outsource. Understand your clients pain points and show how you can assist them and provide value.

2. Burying your head in the sand is the quick way to get trampled. No one disputes that strategic legal work and bet the company matters are the exclusive purview of experienced outside counsel. But can the same be said for low–to–mid complexity work, particularly repetitive matters? Clients aren’t buying that everything needs to be handled by a partner or a law firm associate anymore.

3. Collaborate don’t be coerced - If your client needs to twist your arm to choose an LPO provider then you have already lost any credit for responsiveness and providing value to your client.

4. LPO should be a strategic decision. LPO should complement your strategy in the industry and you should select a provider that is equipped to handle your client’s documents.

5. Captive isn’t the only answer. Some law firms want to build their own offshore captive but this isn’t the only way firms can outsource. There are other options available, such as using a trusted LPO solutions provider, that don’t require a large capital investment.

6. Change is never easy. Now that you’ve decided to outsource, whether to a third party or your own captive, you need to be aware of change management challenges. Change is hard, particularly if it involves shifting processes, so anticipating and resolving challenges earlier will increase your success.

With a steady rise in the volume of off-shore and on-shore outsourcing initiatives in contract services and legal services, it is imperative that organizations understand both the opportunities and the internal impacts of outsourcing legal services including the re-allocation of tasks and resources. For example, how does an organization take advantage of freed-up staff? To what extent can an organization rely on helpdesk consolidation for improving business information and streamlining processes? What are the key trends in outsourcing contracts?

As a leading provider of legal and contract management outsourcing services, Pangea3 is pleased to answer a broad array of questions on outsourcing contracts in an exclusive interview with the International Association for Contracts and Commercial Management (IACCM) on March 11, 2010. Current IACCM members are welcome to participate in an engaging interview session with our Vice President and General Counsel, Kevin Colangelo, Esq. The session will address the internal impacts and opportunities arising from outsourcing contract and legal services in today’s economy including:

• Contract management as a core compliance function.
• LPO as a tool for the implementation of process-driven contracting within legal and procurement.
• Helpdesk consolidation to improve business information and streamline processes.

Click here for additional event details and feel free to write to us at info@pangea3.com with any questions pertaining to contract outsourcing.

Not surprisingly when the recession hit the legal industry, arguments against the billable hour model resurfaced in numerous articles and blogs. The recession has forced many law firms to not only downsize but, in a bid to show an understanding of the pressures corporate counsel face as well as keep their clients happy, firms are also discounting billable hour rates and providing alternative fee arrangements such as flat-fee pricing. But discounting billable hours doesn’t necessarily equate to cost savings.

In an article by the Boston Business Journal, Christopher Mirabile the president of the Northeast Chapter of the Association of Corporate Counsel and other industry experts, discuss the value of discounting billable hour rates. Interestingly one of the arguments against discounting billable hour rates revolves around value and efficiency. Alternative fees and fixed-fee arrangements place the burden of ensuring efficiency on the law firm or legal services provider whereas the billable hour can potentially promote inefficiency. Essentially, no matter how low the billable rate plummets inefficiencies will cost you in the long run.

According to a recent survey from PricewaterhouseCoopers and the Duke University Offshore Research Network, legal outsourcing is doing well in this recession. Not only is outsourcing (BPO, ITO, HRP, LPO, etc.) growing in 2010, with 62% of all service providers expanding their offerings, but legal outsourcing is the current darling of the outsourcing industry. With over 100 providers in the LPO industry, legal outsourcing is expected to grow at an annual rate of 40% in India. What is the reason for this growth? The changing perception of the legal industry as a result of the economic recession.

In the past two weeks, no less than six articles about upheavals in the U.S. legal industry have hit the legal press. (The titles and links to each article are below). I read these articles carefully, and many times, and tried to figure out just what is happening in the U.S. (and global) legal market. And I think there is a coherent and cohesive theme. When you add it all up, the simple conclusion is that the “social contract” between clients, law firms and law firm associates has been shattered.

Over the past few decades, that legal industry “social contract” went something like this:

Aspiring lawyers attended law school and got jobs at law firms upon graduation. Each year, associates received raises based on their law school graduating class and moved into a higher billing rate. And every few years or more firms raised their hourly rates for all classes/tiers of lawyers. As a result, profits per partner, the compensation benchmark at big firms, continued to rise – often dramatically – irrespective of client profitability. Those associates hired worked especially hard for 7-10 years, and some of them made partner. Others left along the way to become in-house counsel (my post-firm career path prior to Pangea3), join smaller firms, join businesses or open their own law practices. Throughout all this time, in-house legal departments, which were and still are made up predominantly of lawyers who had practiced at law firms earlier in their careers, hired law firms to handle a substantial percentage of the company’s work, and paid the perennially increasing hourly rates. This continued, with only minor hiccups, for about the last 30+ years.

Then came the great recession of 2008-2009. Corporations came under massive pressure to cut costs, both because of radically lower revenue, and because of cost structures that were, frankly, out of whack. The legal department, along with the other corporate cost centers - such as IT/MIS, HR, Shared Services, Marketing and Finance – came under pressure to cut costs. However, in this latest recession, legal was treated differently. In the past, legal departments had been able to claim that legal was different, that it was impossible to predict legal costs, and therefore impossible to fix those costs and implement traditional cost saving and cost-certainty measures. However, over the past decade (roughly since the last recession), all of the other traditional corporate cost centers had been subject to institutional cost-cutting and right-sizing, as a result of factors such as outsourcing (especially for Shared Services, IT/MIS and HR departments), technology, six sigma, lean and other process improvements and good old layoffs and downsizing. As a result, those departments (1) had the appearance of being relatively leaner (from a budget and spend perspective, if not from a headcount perspective) when viewed against the legal department and (2) were able to adapt quickly to the need to lower costs and become more productive. This time around, the corporations simply insisted that the legal department do its part to align costs to the business, and to simply figure out a way to control and predict costs.

So, for the first time, the legal departments of major corporations simply started refusing to pay higher rates, refused to accept straight hourly billing and insisted that the law firms’ needs for perpetually increasing profits-per-partner was unsustainable, and that the legal departments would no longer foot the bill. In short, the legal departments changed the legal industry social contract.

And the law firms responded – by decimating the associate ranks and in turns changing the social contract with associates and law students. Why? That part is easy. To cut costs, an organization really has three choices: Real Estate, Technology and Headcount. Law firms couldn’t do much about the first two costs, so the only lever that law firms had in order to cut their own costs (in other words, to maintain their own partner profitability) was headcount. Compounding this pressure from the legal departments was a plain reduction in work, as business itself contracted globally. That combination of forces led the firms to not merely break the social contract, but to do it severely and quickly.

So as I read these articles, it actually all does make sense, except for the New York Law Journal article about firms simply insisting that they need to raise rates. I particularly loved these two quotes:

“We can’t sit out two years without changing, so we are going to do so, hoping that client goodwill from last year will cushion us at this year’s hike,” said another.

One firm was more militant. “Firms need to push back on the clients’ unreasonable demands to hold rates at 2008 levels and give a 15 percent discount off those rates,” it said.

In short, the firms are saying that the clients simply cannot change the deal that was cut so many years ago. But the firms themselves already changed that deal with their associates, and everyone knows that the game has changed – all bets are off. So it’s not merely that the partners quoted above are greedy, it’s that they’re disingenuous. They want legal departments to honor the old social contract, but they’ve broken their contract with their associates and prospective associates.

We’ll see how this all plays out, but it’s clear that legal departments are not going to allow a return to the old social contract. And since everything flows from the client demands on the law firm, it seems pretty clear that whatever new expectation and social contract emerges between firms and associates will not resemble the old regime. The game has changed – we just don’t know how it’s going to end.

1. “No Longer Their Golden Ticket,” New York Times, Sunday, January 17, 2010.

2.“As Economy Stays Down, Firms Say They Will Raise Rates,” New York Lawyer, January 15, 2010. _{[NYLJ Subscription Link]}

3. “Brief for India’s outsourcing lawyers: keep it cheap,” Times of London, January 15, 2010.

4. Inside India’s Legal Outsourcing Machine, The American Lawyer, January 19, 2010 and AmLaw Daily, January 15, 2010.

5. Outsourcing: It’s Cheap and Easy to Do, Above the Law, January 15, 2010.

6. THE AM LAW 100: Revenue, Profits Up at K&L Gates, AmLaw Daily, January 21, 2010.