LPO is defined as ‘the practice of a company, organisation, or legal professional procuring legal services from an external provider’ or ‘outsourcing front-line legal services by subcontracting them to a third-party provider.’
P[X]Paralegal is realigning Legal Process Outsourcing (LPO) for the mutual and long-lasting benefit of lawyers and clients alike. This is achieved through our understanding of the strengths and limitations of both LPO providers and legal practices in order to assess who should sit where in the UK legal eco-system.
We believe there is a massive opportunity for all three parties – the legal professional, the LPO provider and the client – to work in synergy and to create ‘win-win-win’ outcomes. Ultimately, if the legal provider – be it the law firm or LPO – is in the wrong seat at the wrong time, then clients will be exposed to unnecessary and unexpected risks.
In our view, the benefits are best realised when LPO is procured and managed by a regulated legal professional - be it a solicitor or barrister - rather than directly by the client.
Practices wishing to maintain strong client relationships and deliver the routine work that underpin their higher-value work have typically chosen to reject LPO. Perhaps this is because they perceive LPO providers as competitors rather than as catalysts for profitability. In rejecting LPO, practices are left with the key challenge of how to lower the cost of delivering the routine and commodity elements of legal work while providing higher-value business support functions for our lawyers.
There is a way. Let us explain.
The rise of outsourcing
The UK legal marketplace has experienced phenomenal change over the past 20 years. Most legal practices are unrecognisable if compared with the organisations they were in the early ‘90s. That pace of change is accelerating, as many look at re-engineering their business models to centre around ‘efficiencies’ and ‘profits’ as key performance indicators, in addition to traditional measures of success such as ‘effectiveness’ and ‘case outcomes’.
Our cost-conscious society has meant that, for decades, outsourcing has been commonplace within the business world. Despite being a relatively new model for the legal industry, outsourcing has already demonstrated the ability to, not only reduce cost through wage arbitrage, but to significantly improve legal functions that rely on operational expertise. These include M&A due diligence, contract lifecycle management, compliance, eDiscovery, and many other functions. LPO providers are engaged for the same reasons clients engage ITO providers and BPO providers - namely, to lower costs, to focus on core capabilities, to access skills, and to scale services.
The demand for LPO is evident when considering that the global LPO market is valued at $1.3bn and growing by 40% per annum.
LPO providers have successfully applied the concept of ‘process improvement’ to legal services, using the well-proven methods of Lean (process efficiency) and Six Sigma (process effectiveness) to reduce cost and improve quality. The improved alignment, allocation, sophistication and use of resources leads to delivering higher quality services at lowered costs.
The danger of by-passing the legal professional
So, while outsourcing is - or should be - a key consideration within the boardroom of a law firm undergoing the re-engineering process, the real opportunity it can bring to the industry as a whole and to the benefits of a client is being stunted by the direct-to-client approach, which many LPO providers are taking. This causes General Counsel to ask who their key relationship should be with in terms of their outsourced legal services - the law firm or the LPO?
Many LPO providers, particularly in the US, have recognised the opportunity and are now frequently bypassing law firms and targeting clients (mainly corporates) directly with their services, thus competing for both the management and delivery aspects of legal work.
With LPOs quoting typical savings of at least 30%, it is easy to see why many corporates are being swayed in appointing an LPO over a law firm as the lead. In fact, a recent example cited an LPO provider charge one-eighth of what was quoted by a Magic Circle firm.
The same report quotes 37% of in-house US attorneys saying that LPOs are ‘better equipped’ than law firms to use advanced technology, data and risk analytics.
However, there is another side to this story. According to a recent survey conducted among the top users of LPO services in the US, a striking 83% recognised that lawyers are paramount in understanding and managing the greater objectives of the legal process and would engage them in cases where outcome quality was of critical importance.
What is the P[X]Paralegal stance?
P[X]Paralegal provide an LPO service directly to lawyers - and only to lawyers.
It is our position that clients reap ultimate benefits when they appoint regulated legal professionals, who, in turn utilise the services of an outsourced non-regulated provider.
It is our strong view that regulated legal professionals should take the lead role with the client and for the LPO provider to work into the ‘lead’. This enables the client to benefit from expert advice, with the LPO provider merely supplying the background harmony to bring efficient and economic benefits to both the client and legal professional.
For the legal professional, LPO can increase profitability while also taking the strain off work pressures within a practice. Moreover, by reducing the overheads within a legal practice, clients can be charged less while still benefiting from the expertise and advice that only a regulated lawyer can provide.
An article introducing The Legal Awards 2015 in World Finance stated: “Throughout the course of 2013, research by Legal Week found that the globe’s top 50 law firms saw their profits shrink by 0.5% - while turnovers rose by nearly 7%. By and large, that’s because firms have been finding it difficult to manage their costs within the fee structure clients have come to demand…One way that firms have successfully trimmed costs in 2014 is…through an increased reliance on paralegals…Paralegal firms cost less, and the typical billing rates prove an invaluable saving against the valuable time of costly fee earners. In 2015, 30% of firms are anticipating to see an increase in their reliance upon paralegals.”
By operating as an LPO supporting law firms, we stand as a catalyst of legal professional service provision rather than as a competitor.