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    New Legal Week Survey Finds 15% of UK Firms Use LPO

    Legal Week just published No LPO Rush Despite Cost Pressure (Legal Week, 5 May 2011),  an in-depth look at the UK legal process outsourcing (LPO) market that includes in-depth analysis, numerous charts, and a key findings summary.  It is based on a 575-lawyer survey by Incisive Media Research that Integreon co-sponsored.  We present some highlights and comments here.

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    LPO Penetration is Up and Rising. The survey found that LPO penetration in law firms is up substantially from other recent reports.   For example, in a June 2009 blog post, we reported on surveys that found only about 5% of firms had used LPO.   Now, Legal Week finds 15% of UK law firms use LPO services.  Furthermore, over half of respondents – both LPO users and non-users – believe that law firm use of LPO services will grow over the next year.  Given another trend the survey identifies – growing cost pressure – it is reasonable to conclude that LPO penetration will continue increasing.

    On the law department side, 6% report using LPO.  We think this lower penetration reflects a client preference that law firms partner with LPOs.  The survey results support this view:  both firms and departments “give the biggest vote to a solution where the law firm supervises the outsourcing. Amongst law firms, the vote here represents nearly 52 per cent of respondents. In the inhouse sector, nearly 29 per cent support this approach.”

    Work Suitable for LPO Spans Several Practices. The survey provides insight on the areas most suitable for LPO work.  Scoring highly among both inside and outside counsel were litigation document review, e-discovery (e-disclosure), and contract management .   Significant minorities also believe compliance, library/research and know-how, debt recovery, and conveyancing are suitable for LPO.

    Using LPO is Not a Risk to Law Firm Brands. Some law firms seem to worry that using an LPO might send clients the “wrong” signal.  The survey show this fear is unfounded.  A vast majority, about 75%, of both inhouse and firm lawyers believe using an LPO “does not diminish the brand.”   The article also notes that some of the largest and best-known UK law firms use LPO and so observes   “If the leading firms are using LPO, it is difficult to see LPO as a sign of weakness.”   This is consistent with our view, summed up by my colleague Matthew Banks in the article, saying

    “Rather than see their brand diminish, those law firms that embrace LPO will gain a competitive edge. What we term ‘LPO 2.0’ involves close collaboration between law firm and LPO provider. The LPO provider’s solutions are so closely integrated into the firm’s overall value proposition that they are simply viewed as part of the suite of solutions the firm provides to its clients. The firm’s brand is enhanced.”

    The Real Issue is Lower Cost, Not LPO. We recently suggested that the question is no longer “outsource or not” but rather “what’s the best way to centralise non-core support functions in a low cost location?” (See Legal Outsourcing – A Changing Conversation by Mark Ross and Ron Friedmann in Outsource Magazine, 17 Nov 2010.)  Legal Week reaches a similar conclusion:

    “Outsourcing is typically seen as the relocation of repetitive work to India. But LPOs can take many different forms…  LPOs are being developed by many firms in the UK. Some are doing forms of it by outsourcing routine work from their City offices (where salaries and other costs are higher) to regional offices where they can offer lower charge-out rates. Other firms – particularly the big name international firms – are working with regional law firms to outsource those processes on which they can add little extra value.”

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    We think the results confirm our view that lawyers have become comfortable with LPO and that market pressures will continue to favor LPO adoptions.   We understand, however, that not all share this view.   For those who remain skeptical about LPO, the article does a nice job presenting contrasting opinions.

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