Within the legal services market, a new model of outsourcing has emerged to supplement the more well-known models that include combinations of onsite, onshore, and offshore. Outsourcers in Israel and New Zealand have positioned themselves between the higher cost, onsite & onshore vendors and the lower cost, offshore vendors. The higher prices that onsite/onshore vendors have been able to command are not so much a function of their geographies, but of their relative skill with the substantive and procedural aspects of the U.S. and U.K. legal systems. This new model reorders these assumptions by providing knowledgeable and experienced western legal resources from individuals who have moved to, or returned to, medium cost locations like Israel and New Zealand.
The Outsourcing Models
Much like early Information Technology (IT) sourcing models, legal services are still primarily performed at a client’s site or at a local vendor office. The traditional law firm servicing a corporate client is a good example of this. These models are known in sourcing as the onsite (client site) and onshore (vendor locations in the same country) models.
As technology and productivity has improved, the components of legal services have become easier to separate, resulting in the component services being subject to their own sets of market forces. As a consequence, early this decade western-experienced attorneys began forming Legal Process Outsourcing (LPO) vendors (i.e. Pangea3, Mindcrest and Quislex) in India. Initially they leveraged low cost resources by offering services that required little western substantive or procedural legal knowledge (e.g., document review) using the so called “offshore” model. (Legal offshoring has since grown dramatically. See ValueNotes Analysis – sluggish growth of only 28% and 16% during the past two years.)
A mixed onsite-offshore model has since evolved that supplements the offshore model with an onsite coordinator, or relatively smaller onsite team, to manage resources from both the onsite and offshore locations to produce services that take advantage of the substantive and/or procedural skill of onsite resources to create more sophisticated services at a lower price than would be possible without the blended onsite-offshore skills and costs.
The onsite-offshore model is well represented among LPO vendors. The Clutch Group is particularly well-known for its onsite services, and also offers offshore services from Bangalore. UnitedLex offers onshore services from an onshore center near Kansas City, MO and offshore services from Gurgaon, near Delhi, India; while Integreon offers onshore services from Fargo, ND (U.S.) and Bristol (U.K) and offshore services from Mumbai, India and Manilla, The Philippines.
New Locations/New Models
In a new form of offshoring, Israel- and New Zealand-based vendors offer an alternative to the traditional onsite/offshore model. Legal services innovators Innodata, targeting the U.S. and U.K. from Israel, and Latitude South, targeting the U.K. from New Zealand, offer resources with significant substantive and procedural knowledge of the target legal systems. (Innodata also has offshore centers in India and the Philippines.) According to Latitude South, many of their resources have previously held – in the US or UK – the same positions as the clients they are serving. In contrast to other offshore vendors, training requirements for these resources will likely be small or nonexistent.
The Appropriate Model
The type of work to be outsourced will influence which model is appropriate. If you have a large project that that can be divided into multiple processes (e.g. 50 state survey or large document review) the scale of an onshore-offshore model will likely be more economical because lower offshore costs will be a much larger component of the total cost. However, if you need a flexible team, occasionally with deep substantive or procedural knowledge, these new vendors may prove an inexpensive and effective method to quickly augment your staff. Increasingly, vendors offering only an offshore model will find it difficult to compete with the knowledge and experience inherent in the other models.
As the industry evolves, the legal services market will become segmented by knowledge and experience making geography less important. In the interim, geography directly impacts how legal services vendors deliver their services, and should be an important consideration in evaluating legal services vendors.
In evaluating which (if any) legal services provider is right to meet your needs, remember that many of the companies mentioned above do not fit very neatly into the categories I have assigned to them. This “shore-based” framework is intended to help shape the considerations that GCs and law firms use as part of a comprehensive evaluation of potential vendors. I encourage any of the companies listed above that wish to position themselves differently to add comments that will emphasize, clarify or dispute what I have posited.