Integreon

Legal outsourcing has made mainstream and legal media news for years.  There are so many articles that we no longer blog about each one.   Two items in the Times Online last Thursday (18 June 2009) however, caught our eye.  A major multi-national has gone public about legal process outsourcing to slash its legal spend by 20%.

Rio Tinto’s legal switch puts pressure on London by Alex Spence reports on the facts. Rio Tinto deal heralds huge changes by well-known commentator and author Richard Susskind discusses the ramifications.

Spence reports that “Rio Tinto has hired a team of lawyers in India to try to reduce its annual £60 million legal bill by 20 per cent.” It is working with an LPO to recruit a team of 12 lawyers in India to “work for it on tasks such as reviewing documents and drafting contracts.” Rio expects to have 24 Indian lawyers within one year.

Susskind writes “the Rio Tinto deal suggests that imaginative pricing may not fully fix the more-for-less dilemma. Lawyers will need to go further and source their work differently, often by using less costly labour to do routine legal work…. People often assume that outsourcing and the options are applicable only to high-volume, low-value legal work. The Rio Tinto deal confirms this is wrong.”

The Rio deal adds to the list - literally - of corporations that offshore or outsource work.   At least 15 companies have publicly stated that they offshore work to outsourcers or to their own offshore operations (see Outsourced Legal Services list at Prism Legal, a personal site I maintain).

So Rio is just one more company offshoring. Or is it? Specifically, this deal is announced with the intent of significant cost cutting and that feels new. More generally, markets tip when the new and exotic become accepted and common. Geoffrey Moore’s Crossing the Chasm provides one framework for thinking about how markets adopt new approaches. Well before his work, however, economists modeled  adoption of new high tech products (e.g., Polaroid cameras or Xerox-brand copiers) with S-shaped curves: slow ramp up followed by sudden acceleration.

The continuous (smooth) S-curve may not be a good fit for legal. Instead, a discontinuous step-shaped function may apply. Consider legal market adoption of e-mail, document management, marketing, lateral partner moves, or mergers. For each, there seemed to be only a few firms doing it and then, quite suddenly, many or all were. The “step function” reflects law firm decision making: the first few adopters change slowly, gingerly, and quietly.  Firms want to follow.   Once a half-dozen to a dozen have led by adopting the new thing, “the coast is clear” and the rest rush in.

Unfortunately, like calling the bottom of a recession (or the top of the market), it’s much easier to recognize the tipping point after the fact.  Working for an LPO may distort my view but it feels like legal outsourcing is at a tipping point. Of course, we won’t know for some time. Whether the market tips this year or beyond though, I am confident that, as with e-mail, marketing, etc., we will look at outsourcing and offshoring and have forgotten what all the fuss was about.  Just like we did for so many other legal market changes.

[A variation of this post first appeared at the Strategic Legal Technology blog.]