Integreon

by Matthew Banks, Ron Friedmann, and Mark Ross

Integreon’s LPO experts, Matthew Banks, Ron Friedmann and Mark Ross take a look at what to expect in the LPO world in 2010.

Someone once said that less happens in a year than you might think but more happens in a decade than you might think. That’s the way we feel about the legal profession and LPO. So rather than offer a list of dramatic and sweeping 2010 predictions; we tender below some likely developments consistent with broader trends that will continue to play out over 2010 and beyond, bringing significant growth to the LPO industry. We also break with traditional year-end predictions because our list exceeds the customary ten items.

LPO is part of the bigger picture of evolution of legal services. Legal organizations are now, more than ever, actively trying many new and related approaches: technology, back office restructuring, process improvement, LPO, alternative fee arrangements, and better knowledge management, among others. So, in that context, here is what we think 2010 will see:

1.  More organizations will outsource more work to more LPO providers.

2.  The third party provider model will dominate. We don’t expect to see many captives in the legal market; it’s too difficult and they fail.

3.  In the U.S., expect the ABA to provide more detailed guidance on how to outsource legal services ethically. While in the U.K., the Law Society, to date silent on the subject, will publically comment for the first time.

4.  There will be lots of talk about alternative offshore locations to India but none will yet emerge of such scale. Onshore and near shore will be the main alternative and could grow as quickly as offshore.

5.  LPOs, which are already good at what they do, will get even better. More experience brings better service.

6.  LPOs will expand what they do — more capabilities and services inching a little higher up the value chain but still based around the core services available today: discovery, contracts, compliance, research, and IP. In addition to moving higher up the value chain, LPOs will also expand into consumer related and high volume legal services such as conveyancing, personal injury, wills and probate.

7.  Document review however, will retain its #1 spot as the service most often outsourced, at greatest volume, and by far the greatest revenue generator for the LPO industry.

8.  Organizations will start to develop multi-functional teams on an FTE basis, rather than single function transactional work. For example, corporations will engage core teams to handle a variety of legal dept work such as contract management, compliance, etc. The underlying economics of a dedicated team is better both for customers and providers.

9.  LPO pricing will be stable.

10.  Revenue growth for the LPO market will be rapid and some providers could double in size over the next year or two.

11.  The biggest LPOs will reach 500+ lawyers working on document review, contract management, and due diligence projects. While concurrently, some smaller providers will exit the market altogether.

12.  We will see more Rio Tinto type publicity, but less than you might expect because law departments have no vested interest in making public their private outsourcing arrangements with third party providers. Law firms, in contrast, are more likely to publicize outsourcing because, as service providers in a competitive market, they may see it as a competitive advantage.

13.  Generally, law firm activity will be reactively driven by clients. Although a number of major firms will cement “preferred LPO provider” relationships. However, many or most top law firms will have had exposure to LPO one way or the other by end of 2010. That said, the first few firms to do something new are always long in coming; once a handful have acted, the market can tip quite suddenly.

14.  U.K. law firms will continue to be more active in offshore outsourcing than US law firms. US law firm activity will more likely be a mix of offshore, near shore or onshore.

15.  Recent blog posts have debated whether process is the future of law. In part, yes, but there will be a polarization between what clients are prepared to pay premium rates for and what the market will force into new models. Not all law will be process driven but LPO will help to increase the scope of what can be process driven.

16.  Procurement will drive more law department purchase decisions. Their drive to efficiency will push more work to LPO; their drive to systematize purchasing may slow down sales cycles. 

17.  The biggest LPO single client contract value will exceed $10M annually.