Now, Even Law Firms are Doing “LPO”

UK law firm Herbert Smith recently announced that it is opening a wholly-owned document review center in Belfast, Northern Ireland.  Belfast is a relatively low cost, onshore UK location.  See Legal Week, Herbert Smith to open Belfast office to handle disputes document review (24 Nov 2010), and the firm’s announcement.

This move is significant, especially coming on the heels of Thomson Reuters acquiring LPO Pangea3.  Herbert Smith is prominent for its strong and large litigation practice.  A couple of years ago, few would have predicted a top-tier British law firm would do this.  What motivated the seeming change of heart and thinking?

Sonya Leydecker, the partner responsible for the Belfast center, explains that the Belfast Center

“will enable us to offer clients a combination of quality, efficiency and value for money. Clients are increasingly looking to their lawyers for more imaginative approaches to the management of disputes. In particular, complex projects such as disclosure are important but can increasingly be systematised and managed in new ways. The Belfast office will make a new range of resourcing options available to clients.”

We have long considered document review as one of several legal functions that can be unbundled from other legal work so that it can be produced more efficiently.  I now use the short-hand term “LawFactory” to describe such work.

One interpretation of the Herbert Smith announcement is that the market now accepts a key legal process outsourcing (LPO) premise: centralize high volume legal work in a single location with lower costs than the main office and manage it with industrial techniques (e.g., clear metrics, quality control measures, and formal service level agreements).

My colleague Mark Ross points out in A Changing Conversation (Outsource Magazine, 17 Nov 2010) that  the discussion among lawyers is shifting from “should I outsource or offshore” to “what’s the best way to centralize high volume work in a low cost location and instill appropriate processes and controls”‘   That question now supersedes location and even ownership.

This development is good for the market.  Clients will benefit as more firms opt for centralized, low cost service operations, which provide better value.  Firms will benefit because they will retain the higher value work for which clients are willing to pay high rates.  And LPOs will benefit because more firms will want low cost centers and many will not want to build their own.

Building and operating a low cost center is harder than it looks.  Many firms will be happy to have their LawFactory work performed by an LPO.  Integreon, for example, has an established low-cost operation in Bristol plus offers the option to move work offshore, where costs are even lower.

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