Atlas Legal: Law on Order

Rocky Dhir explains to Jim Banks how many companies are so dazzled by the ‘easy’ cost savings that can be achieved by outsourcing legal processes to countries such as India that they fail to extract the greatest long-term value from their outsourcing projects.

From a cost perspective, the advantages of legal process outsourcing (LPO) are obvious. Moving legal services to India, where the legal expertise exists to support US and European companies at a fraction of the price of a domestic law firm, seems highly advantageous for companies seeking efficiency, many of which are already starting to push more business to LPO providers.

‘Interest is growing because domestic law firms are raising hourly fees, while corporate general counsels find themselves under increasing pressure to reduce legal budgets,’ says Rocky Dhir, president of Atlas Legal Research, with offices in Dallas and Bangalore.

‘Companies looking for legal services face a dilemma. Either they pay very high rates to large law firms or they pay less to a smaller firm and lose the name recognition and clout that comes from hiring a big firm. The idea behind the legal offshoring model is to bring long-term value – and hence, long-term savings – to companies so that they can better manage their legal budgets.’

Although Dhir does not see his company as an LPO provider in the way people have come to think of them, he accepts that Atlas is often put in the same bracket. An early mover into the offshore legal services market, in 2001 Atlas started training lawyers in India to perform US legal analyses. In 2004, it offered its services to in-house corporate legal departments.

GROWING INDUSTRY

Since the company’s inception, Dhir has seen competition in India’s LPO market grow ever more intense, particularly since 2004, and he sees a flood of new companies rushing to offer their services. India has the same common law legal system as the UK and North America and has a similar legal education system, making it a feasible location for some legal processes.

In many cases, clients hand over functions such as document review and coding, or standardised processes such as filing applications for short-term work permits.

‘LPO fills the gap,” says Dhir. ‘The client only pays big law firm rates for critical functions in big-ticket cases. Document coding and review, which are important for the e-discovery process in the US, are functions that regularly go overseas. The outsourcing of immigration form processing and clerical functions are also popular, as is intellectual property work.’

The potential cost savings on these processes are producing a rising tide of interest in LPO. But while Dhir welcomes the willingness of companies to hand over legal processes to external providers such as Atlas, he sounds a note of caution for clients. He warns that, as in business process outsourcing (BPO), clients must choose their service provider carefully or risk losing the true value of their outsourcing project. Not all LPO providers, he feels, have the same standards.

‘A lot of people don’t know about LPO or are reluctant to try it out,’ says Dhir. ‘For others, price and scale are the drivers at the moment. Clients want the maximum number of people in India for the lowest possible cost. Over the next two years, I expect value to become more important, but right now there is hysteria over cost reduction. They are dazzled by the price tag. It’s like the menu in a fast food restaurant. The prices look great, but the food is not healthy if you eat it regularly. If you are serious about LPO, you have to approach it the same way you would in selecting a law firm. You want a competitive rate, but the expertise is far more important. You need a long-term vision, not a quick fix to boost your share price.”

BEYOND COST SAVINGS

If cost savings are not in themselves a sufficient justification for LPO, where does its value really lie? The answer to this question may only become apparent when a company assesses LPO over a longer period.

‘The short-term approach is to get something done in India for $10 per hour that would cost $60 per hour in the US,’ says Dhir. ‘I suggest that if you can get something done in India for $60 per hour that would cost $600 per hour in the US, that is unlocking the real value of offshored legal services.’

The early years of the LPO market, as in the BPO market, have seen a rush to outsource, sometimes without a clearly thought-out business case, and Dhir feels some rash decisions have been made. He believes the current wave of interest in LPO will lead to a boom and bust cycle in the market, similar to that seen in the dotcom sector, but that, through this experience, the attitudes of both service providers and clients will mature.

The situation is not helped by the fact that many LPO providers go about their business in the wrong way, according to Dhir. ‘There is a pattern, particularly among new entrants, where they get investor capital, set up a big office in Mumbai or Bangalore and staff it with lawyers,’ he says. ‘Then they go to the US to get clients. The problem is that there is not enough focus on attorney training. Projects must be staffed – and attorneys must be trained – to suit the client’s needs. Some projects need specialised skills, and that requires training. You don’t staff a patent case with lawyers who draft wills. The same goes for LPO projects.’

An outsourcing model that focuses on cost differentials, builds a team and then looks for work to keep it busy may be less able to provide the tailored services Dhir feels are so important to unlocking the value of LPO. There are instances where lawyers in India end up doing work that would not be handled by a lawyer were it done in the US, such as short-term immigration applications, hardly the most efficient use of resources.

Dhir is not, however, pessimistic about LPO – quite the opposite. A boom and bust cycle in its early years by no means spells doom for the market. After all, some highly successful companies survived the dotcom crash. He encourages clients to explore the value inherent in offshored legal services, but he advises them to take great care in choosing their partners.

UNLOCKING LONG TERM VALUE

Atlas’ business model is built around a commitment to standards and ethics and a long-term view of client relationships. It prioritises quality control and emphasises training for its lawyers to help it achieve its goal of providing law firm quality at a lower rate.

Dhir advocates moving to LPO steadily, to ensure that clients know what they are buying. ‘Send a test project over first, preferably one where results can be easily measured, in order to build trust and test the service provider’s responsiveness and capabilities,’ he says. ‘Often when a client has built up confidence in this way, there is a sea change and suddenly a cascade of legal processes goes offshore. It is a slow crescendo.’

Atlas stands out among typical LPO providers because of its long-term approach and the fact that it targets services where it believes greater value can be achieved. ‘There is a great potential for what we do, which is more focused on legal analysis,’ says Dhir. ‘We handle higher-end functions such as legal research, legal writing, contract drafting, and complex document review projects on both litigation and transactional matters. Our lawyers can actually draft briefs that win in court. They bring that same intellectual prowess to document review projects. Our lawyer training is second to none.’

Focusing on high-end services and developing resources to match clients’ needs could make Atlas resistant to the pressures that will fall on many LPO providers. At the same time, as clients’ attitudes mature, Dhir expects the company’s value proposition to appeal to many more clients.

As the LPO market becomes more sophisticated, both in terms of what clients are seeking and what service providers can offer, it is likely to keep growing fast, even in the face of the shakeout that Dhir expects. In such an environment, he is confident that long-term, sustainable partnerships will develop that will enable clients to optimise the allocation of legal services. Whether or not there are turbulent times ahead in the market, offshored legal services are here to stay.