In the third quarter of 2008, America is facing economic challenges that were not thought of just two months ago. What can businesses do to be able to cope with the constraints on demand, credit and growth? How will the economic downturn affect law firms and lawyers that serve the business community?
It’s an established fact that companies can only examine changing two streams of revenue which are income and expenses to boost the profitability. If revenue is low and is not anticipated to grow significantly in the next few years the clients of law firms will be forced to cut back on expense in order to make it through. Legal fees will come scrutinized to the max. Legal outsourcing, although an emerging sector, is now gaining momentum and is being discussed in more corporate boardrooms. As pressures to outsource grow lawyers are pondering whether they should decide to outsource legal work offshore or defy it. In the context of the global economic crisis as well as the growing loss of American jobs, why do an U.S. law firm want to think about outsourcing legal services? Are there legitimate reasons for that legal outsourcing targeted is a must for any U.S. law firm?
A few weeks ago, I got an email an attorney who was contemplating outsourcing certain aspects of the legal function for his firm. He was facing opposition and challenges from his law firm , who would like to keep the status quo, he contacted me for my opinion on what he could tell his colleagues. What are the reasons why a firm should outsource legal work overseas which is viewed by some as risky and risky, rather than sticking to the plan, performing it “the way we have always done it.” I responded to him by providing the top ten arguments for law firms to think about outsourcing their legal services selectively:
1. PRUDENT, TARGETED OUTSOURCING WILL RESULT IN REDUCED LAW FIRM OVERHEAD
outsourcing certain legal tasks to qualified service providers in India can result in substantially lower costs for the law firm that is outsourcing. When evaluating the costs of outsourcing, the law firm would be prudent to calculate the actual costs associated with employing one paralegal or lawyer. The costs are based on salary and bonuses and health insurance, holiday and vacation pay as well as sick time expense FICA office space and other equipment used by the paralegal, lawyer, and secretarial personnel associated with that lawyer, pensions as well as profit share, automobile and parking expenses, CLE seminar costs, as well as other benefits for employees such as life and disability insurance. The actual annual cost of an attorney earning an annual base salary of $150,000-175,000 is more likely to be to be in the range of $250,000 to $300,000.00 per year. None of these typical expenses are paid to the law firm that employs the services of offshore legal firms that are supplemental to.
2. OUTSOURCING WILL ENHANCE LAW FIRM EFFICIENCIES
Selective outsourcing will increase the effectiveness that your company’s lawyers can achieve. Since Indian lawyers work during the time that American lawyers rest so it’s as if your law firm is operating an all-hour and fully staffed night shift. A certain amount of work could be assigned to an associate after six p.m. after work, and he will have completed the work is put on his desk when the time comes for him to arrive at work the following morning. Legal cases will be processed faster throughout the courts and there will be lesser need for extension of the time.
3. OUTSOURCING WILL RESULT IN IMPROVED LAWYER MORALE
When I was a kid, not all sermons I received from my pastor stayed in my mind. One sermon, which I heard at fourteen, of age , resonates with me. He stated: “Ninety percent of any worthwhile endeavor is pack work, plugging, day in and day out. Only ten percent of our work tasks are necessarily fun and enjoyable.” I’ve always remembered the quote. Over the course of more than two years as a trial lawyer, I loved preparing and presenting cases before juries. But I didn’t always appreciate all the deposition and trial preparation along with research and briefing the review of documents and other routine aspects of the practice of law. Law firms that integrate outsourcing into its business will eventually result in more satisfied lawyers who dedicate their energy and time to the more difficult enjoyable, enjoyable and rewarding aspects of the legal profession. The only “chore” legal work is outsourcing, with those who do the “core” work staying onshore. This gives clients more time to interact with and the development of our lawyers.
4. OUTSOURCING WILL RESULT IN OVERALL SAVINGS IN LEGAL FEES TO CLIENTS
Law firms’ clients especially business clients are looking all over the place to find ways to reduce their legal costs. Many are asking why they should spend, for instance an hourly rate of $200-$300 to review documents. The days are gone where legal costs are paid with no scrutiny. The annual increase in hourly rates won’t be well-received by clients who are looking to cut expenses. The most efficient law firms place the client’s interests above their own interests. What’s best for the client can benefit the law firm in turn.
5. THE RULES OF PROFESSIONAL CONDUCT REQUIRE OUTSOURCING CONSIDERATION
The Rules of Professional Conduct of state that. “A lawyer should seek to achieve the lawful objectives of a client through reasonable permissible means.” (Rule 1.2) 1. “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 must examine and discuss with his client every feasible method to meet the client’s needs. A lawyer is not allowed to be able to charge an unreasonable or excessive cost. It is possible that lawyers are mandated to talk about different outsourcing options as a way to reduce the client’s final fee and advancing the interest for the clients.
6. OUTSOURCING “CHORE” LEGAL WORK PROMOTES CLIENT RETENTION AND DEVELOPMENT
Customers have always questioned the increasing legal costs for the basic “chore” legal work. They felt that they had no other choice. They required legal counsel and desired quality work. Since there was no substantial amount of a difference in fees between law firms and law firm, the clients were more likely to “stay put.” This pattern is beginning change as they realize that they have choices. Lawyers who choose to outsource their work selectively have a happier and faithful client base. Customers who feel that their lawyers look at the whole of their needs as well as the cost of fees are more likely to stay loyal to their law firms, and may even offer referrals to their clients to other firms (whose lawyers do not want outsourcing).
7. THE COMPETITION IS OUTSOURCING
In the event that your firm does not outsourcing, make sure that your competitors are. On August 21, 2007 Bloomberg. com revealed that long-established AMLAW 100 law firms like Jones Day and Kirkland & Ellis are outsourcing due to the pressure of their clients.
8. OUTSOURCING U.S. LAW FIRMS MAY CHARGE A REASONABLE SUPERVISORY FEE
It is acceptable and reasonable to allow U.S. law firms outsourcing legal work to offshore providers to charge a reasonable supervision fee for outsourcing legal work. It is common knowledge that a lawyer outsourcing the legal process, whether it is to an associate contract lawyer, offshore provider, is ultimately accountable to the client for the accuracy and speed of the legal document. If a lawyer outsources researching and the writing an initial brief to an associate junior to him, the lawyer who assigned it will not typically submit the final document to the courts without reviewing and oversight. The same is true for the outsourcing of legal services offshore. Publicly published ethics opinions from those of the San Diego, New York and American Bar Associations show that a lawyer outsourcing offshore can be able to charge a reasonable fee for supervision.
9. CLIENTS ARE INSISTING ON SELECTIVE OUTSOURCING TO ACHIEVE COST SAVINGS
Clients chat with one another. The executives of large companies play are golfers and eat lunch with each other. Corporate General Counsel participate in sessions as well as CLE seminars, sharing knowledge and strategies to improve efficiency and reduce costs. They are aware of offshore outsourcing as well as the huge costs savings which can be made. It’s not acceptable to ignore legal outsourcing, and according to one managing law firm partner said to me, are “no appetite” for it.
10. OUTSOURCING WILL HAPPEN.
The option of doing nothing isn’t an alternative. Many outsourcing companies are. More are contemplating outsourcing, whether motivated by a keen sense of business or financial considerations. Outsourcing is like a huge and threatening wave that is that is just a few miles off. It is more beneficial to surf the waves rather than be enveloped, overwhelmed by its force and left in a state of confusion as to what has happened.