Legal Outsourcing: The Endangered Associate

For the past 30 years United States manufacturing jobs have been outsourced to foreign countries as a means to save both time and money. [1] Long thought to be immune from outsourcing, American workers in the service industry have also recently been replaced by cheaper, foreign workers. [2] For example, customer service and technical support telephone numbers are often rerouted to call centers in India. [3] As service providers themselves, should lawyers and law student be worried that they may be replaced by a cheaper alternative? Is there a substitute for seven years of higher education and a degree worth six figures in student loans? In actuality, there is, and in-house legal departments and law firms alike are taking advantage of the opportunity.

The Dallas law firm Bickel & Brewer began the phenomenon of outsourcing legal work in 1995 when they realized they could hire a lawyer in India to work for just $2.00 an hour. [4] The company created by Bickel and Brewer now handles legal work not only for their firm, but for other clients based in the U.S. as well. [5] While most of the legal work currently outsourced is low-level paralegal work, some companies are beginning to focus on more specialized and sophisticated services such as patent applications. [6] Lexadigm, a legal outsourcing company in India, boasts they can provide the same quality work as large law firms while only charging 1/3 of the price. [7] Salaries for their attorneys start as law as $6,000 per year. Even at $36,000, the salaries of their top earners pale in comparison to the starting salaries at top firms in the U.S. [8] Among the services Lexadigm offers are preparing trial and appellate briefs, document review, preparation of patent applications and competitor patent review, contract drafting, and a myriad of legal research services. [9] Lexadigm has also drafted briefs for submission to both Circuit Courts of Appeals as well as the U.S. Supreme Court. [10]

There are several incentives for firms to outsource their legal work overseas to countries such as India. The first and most obvious is the cost savings to clients as a well as to the firms themselves. While a lawyer fresh from a top American law school may start as a new associate as a firm for up to $160,000 per year, the starting salary for a lawyer at Lexadigm is only $6,000 per year. [11] While Lexadigm's starting salary is up to three times larger than the starting salary at most Indian law firms, the cost savings to firms in the U.S. is staggering. [12] In 2003, Bruce Masterson, the C.E.O. of Socrates Media L.L.C., opted to hire a firm from India to tailor leases for each state at a cost of $45,000, a price tag that was $355,000 less than the estimate his outside counsel had quoted. [13] By utilizing offshore legal services, law firms can realize up to an 80% savings for basic legal work such as legal research, patent review, and transcription services. [14]

Another advantage of outsourcing to India is the difference in time zones. [15] An attorney can electronically send work to India as he is leaving the office, and return the next morning to the completed assignment. [16] The ten hour time difference also has its drawbacks. [17] Supervising the Indian attorney and communication in general becomes more difficult with both attorneys essentially working opposite hours of the clock. [18] There is also the issue of quality control. [19] While preparing patent applications is one of the most common outsourced legal tasks, [20] patent applications must be very specific, and poor drafting could leave a company holding a virtually worthless patent as well as opening up the drafting firm for malpractice. [21]

Though most attorneys may not believe they are easily replaceable by outsourced foreign attorneys, the truth is that more and more firms are opting for this cost saving measure. Ten of the highest grossing U.S. law firms were asked to comment on the trend toward outsourcing legal jobs; seven of those firms declined to comment. [22] Only one, Mayer Brown Rowe & Maw, stated they did not outsource any legal work overseas. [23] When a client requests outsourcing to save money, firms such as Jones Day and Kirkland & Ellis send basic legal work to India, saving the client a substantial amount in legal bills. [24] A Forrester Research Inc. forecast estimates that 50,000 legal jobs will be outsourced to other countries by 2015. [25]

The outsourcing of American jobs to foreign countries is a touchy subject, and many firms do not want to risk alienating clients and damaging their reputation by an often unpopular practice. [26] As more firms opt to use this cost saving measure, however, the court of popular opinion may sway in the opposite direction, making outsourcing a more acceptable alternative. [27] David Perla, co-chief executive of a New York and Mumbai based offshore legal service company, speculated that law firms were not ashamed of using the practice, but instead wanted to maintain the competitive advantage offshoring provided. [28]

With technology advancing in leaps and bounds everyday, countries become interdependent on each other for economic success. This globalization is a double edged sword for the U.S. legal market. Law firms are able to offer their clients more service for less money, and general counsel can appease their corporate shareholders with higher profits. Unfortunately, legal jobs in the U.S. are cut in the same fell swoop. While there has not yet been an exodus of outsourced legal work, if this practice becomes standard many firms will have no choice but to outsource as well to compete.

Sources.

[1] Darya V. Pollack, Comment, "I'm Calling My Lawyer. . . In India!": Ethical Issues in International Legal Outsourcing, 11 U.C.L.A. J. Int’l & For. Aff. 99, 101 (2006).

[2] Brian O'Neill, Outsourcing Legal Work to India: That Giant Sucking Sound from the East, American Jurist, Nov. 11, 2005, available at http://www.americanjurist.net/home/index.cfm?event=displayArticlePrinterFriendly&uStory_id=8d5a5609-cdac-4bc1-ad9c-7eed34092e78.

[3] Id.

[4] Daniel Brook, Made in India: Are your lawyers in New York or New Delhi?, Legal Affairs, May/June 2005, available at  http://www.legalaffairs.org/issues/May-June-2005/scene_brook_mayjun05.msp.

[5] Id.

[6] Id.

[7] Id.

[8] Id.

[9] Lexadigm Website, http://www.lexadigm.com (last visited Sep 21, 2007).

[10] Mary C. Daly & Carole Silver, Flattening the World of Legal Services? The Ethical and Liability Minefields of Offshoring Legal and Law-Related Services, 38 Geo. J. Int’l L. 401, 410 (2007).

[11] Cynthia Cotts & Liane Kufchock, Jones Day, Kirkland Send Work to India to Cut Costs (Update 2), Bloomberg, Aug. 21, 2007, http://www.bloomberg.com/apps/news?pid=email_en&refer=home&sid=akN.rUGvG.5M.

[12] Id.

[13] Id.

[14] Edward Poll, Outsourcing: A Multi-Level Solution to the Cost/Value Dilemma, Law Practice Today, July 2005, http://www.abanet.org/lpm/lpt/articles/mtt07051.html.

[15] Brook, supra note 4.

[15] Daly & Silver, supra note 10, at 411.

[17] Id.

[18] Id.

[19] Joel R. Merkin, Recent Development: Litigation Outsourced Patents: How Offshoring May Affect the Attorney-Client Privilege, 2006 U. Ill. J. L. Tech. & Pol’y 215, 217 (2006).

[20] Daly & Silver, supra note 10 at 409.

[21] Merkin, supra note 19 at 217.

[22] Cotts & Kufchock, supra note 11.

[23] Id.

[24] Id.

[25] Id.

[26] Merkin, supra note 19, at 216.

[27] Id. at 217.

[28] Cotts & Kufchock, supra note 11.

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