In today’s rapidly evolving legal landscape, law firms and in-house teams are constantly seeking innovative solutions to streamline their operations while maintaining high standards of quality and efficiency. One such solution that has gained significant traction in recent years is Legal Process Outsourcing. This blog explores the concept of Legal Process Outsourcing, its benefits, challenges, and its growing impact on the legal industry.
Legal Process Outsourcing means exactly what you would expect from the title – the outsourcing of a legal process from one party to another. This can be said to be distinct from certain ALSP services such as contract overflow where a process is not being outsourced as such, more supported.
An interesting angle to Legal Process Outsourcing is that in the past it has often been law firms, and not business and their in-house legal teams, that have taken advantage of this by the outsourcing of lower level work such as local court appearances, legal research, due diligence or litigation disclosure exercises. In-house legal teams however are now at the forefront of demanding creative solutions from their legal providers and ALSPs and Legal Process Outsourcing is one of the key tools in the armoury for creating a fully optimised and efficient legal team.
The key benefit is achieving cost and efficiency savings, as outsourcing tasks that don’t need to be done from a quality or expertise perspective by a law firm or in-house team both frees up those team members to focus on other things, and potentially carries out the work for less than it would cost the firm or in-house team to do it themselves. In actual fact, law firms who are charging out the outsourced work to the client can make potentially higher margin on the work outsourced than that which is done themselves, depending on how this is priced to the client.
Convenience could also be a factor as intensive processes may demand large numbers of staff with the supervision, management and other costs that this requires, or the jurisdiction of the work would mean employing teams in foreign jurisdictions. Peaks and troughs in this work could also be difficult to manage efficiently meaning an outsourced provider might be more appropriate if they can manage the process within their team which can be reallocated as required. Finally, firms and in-house teams can leverage off specific expertise and resources of an outsourced provider such as technology and AI which the firms or in-house teams may not have, which again allows the provider to carry out the work more cost effectively and efficiently than the client.
As with any outsourcing or utilisation of a service provider, there will always be key considerations that must be thought about such as will the provider adequate protect the relevant data and hold it in an acceptable jurisdiction, does the provider have sufficient skill and experience to successfully carry out the work and is the process fully mapped out and planned sufficiently so that there is full transparency and clarity as how the provider is going to work successfully alongside the client.
Contractual terms will need to be entered into with clear guidelines around the instructions given to the provider, and liability will always be point that requires clear thinking given the potential losses that could be incurred by the law firm or the provider – a firm may have a higher cap with its clients than the provider is willing to give, meaning there will be a gap which could be on the law firm to make good should something go wrong, but equally where the service is low cost it would be unrealistic to expect harmonised caps without forcing the provider to increase prices to balance risk.
In-House Legal Solutions (“IHLS”) has helped both law firms and in-house teams with outsourcing certain processes to make their operations more efficient. For example, IHLS has worked alongside a magic circle firm providing outsourced solutions as part of their advice on financing transactions, freeing the law firm time from time intensive workstreams where time is often written off, allowing them to reduce the cost of certain workstreams where their detailed expertise is not necessary and allowing them to remain overall within budget on the advice work as a whole.
IHSL has also provided a fully outsourced solution to in-house teams in banks, investment funds and advisory businesses for managing high volumes of transactional NDAs, engagement terms and related agreements. These are managed directly by the IHLS team with the business teams involved, allowing the in-house team to step away safe in the knowledge that the parameters set out for those documents will be met. Not only does this free up time allowing the in-house team to focus on more critical matters, but it also allows the in-house team to leverage off IHLS’s market knowledge of terms acceptable to certain counterparties thus speeding up the overall process.
It is clear that Legal Process Outsourcing is not only a good idea but one that will continue to grow in use with the continued drive for efficiencies brought about by clients demanding better value for money and more creative cost structures, and the increased availability of outsourcing options in the market. Law firms that do not look to harness the opportunities on offer risk being left behind to become uncompetitive amongst their peers, and in-house teams that do not explore the possibilities for efficiencies will find the pressures on them to deliver more risk management for less very difficult to satisfy using traditional in-house methods.
Although the legal industry continues to embrace and be focussed on digital transformation and AI, the role of alternative providers in performing more and more Legal Process Outsourcing is set to become increasingly prominent. By understanding the benefits, challenges, and best practices associated with Legal Process Outsourcing, law firms and legal departments can leverage this innovative solution to optimise their operations and better serve their clients in a rapidly changing environment.
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