What is legal process outsourcing?
This article is part of a series addressing popular topics and questions that clients and the public may have about the legal profession.
To keep up with the needs of their clients, law firms and corporate legal departments often offload certain tasks to external third parties.
Legal outsourcing allows the organization to increase its capacity, direct its energy toward its strengths, and increases profitability, according to “A Guide to Legal Process Outsourcing for Law Firms,” an article by the legal practice management software company, Clio.
Learn more about Clio legal software and what makes it one of our 2023 Readers’ Choice awardees for top legal tech.
Typically, the most commonly outsourced jobs are those most repetitive in nature, such as document review, says Joshua Lenon, lawyer in residence at Clio. Other commonly outsourced legal tasks are contract drafting, litigation-related tasks, and globalization-driven work, said an article from Logikcull. For the latter, companies working in multiple jurisdictions may want to direct their litigation support, overseas transaction assistance, and regulatory matters to lawyers from the various jurisdictions in which they operate. As globalization continues to expand, this type of outsourcing likely will too, said Logikcull.
“Most legal work is feast or famine,” says Lenon, who is also a certified privacy professional with the International Association of Privacy Professionals. “Especially in a lot of the smaller law firms, you're either working on a matter or a case, or you're looking for business, but you're never doing both at the same time to the same degree.”
“Work will come in and you'll need help with it, so legal process outsourcing really makes it easy for you to pull on the type of staffing that you need, on demand. Then when times get lean, you don't have that overhead of maintaining full time employees.”
Lorne O'Reilly is lead counsel at Dow Canada. When it comes to the work he and his team outsources, it all comes down to “capacity and competence,” he says.
“Where I feel like I'm not entirely comfortable with the nature or needed expertise, we will head out right away and we target the strongest counsel we can get to address the issue.”
It also depends on how much work the team is handling, whether there are transactions or projects underway that will command a significant amount of attention.
“It's important that… I get my client's needs addressed, we ensure that we don't drop the ball on any sort of request, and then, once again, we find the strongest lawyer to assist on those items that we do need to send out,” says O'Reilly.
“Outsourcing doesn't mean we're not doing work. We have to manage those communications between our clients and external counsel. We cannot let external counsel essentially become that direct conduit. We need to know what's going on.”
Small and medium-sized corporations often do not need a full-time lawyer on the payroll, but their legal issues are complex enough that they do need a lawyer who is familiar with them and their operations, says Matthew Seymour, president at the flexible and on-demand legal services provider, Conduit Law LLP. Conduit is a small firm, with a handful of clients. The most common issues with which it deals are proposed changes to employment agreements, commercial leases for their client’s premises, commercial agreements for business partners, regulatory advice, as well as privacy law, which is a speciality.
With most of their clients, Conduit sets a fixed number of hours, monthly, that they will work on their file. This provides the client cost certainty, says Seymour.
“The other benefit to the client is when we work very closely with them, we get to know their business. We get to know their personnel. We get to know their approach to risk. We get to know the environment in which they're operating. And our advice becomes more on point, the longer we work with them, and their costs eventually start going down.”
“The traditional method of offering legal services by the hour is fading and you've got more qualified experienced lawyers working on their own, often from home,” he says.
Legal process outsourcing is a growing trend, and the market is expanding quickly. Pre-COVID, the market for legal outsourcing companies was worth $8 billion. By 2027, it is projected to top $30 billion, said the Logikcull article.
The growth includes within Seven Sister law firms, some of whom are building their own teams of on-demand, independent contractors that can assist client projects when they need work at a certain price or a tight timeframe, says Lenon.
But not everything a law firm or legal department does can be outsourced.
When outsourcing, firms want to maintain control over the client relationship and ensure they do not give their service-provider direct access to their clients, says Lenon. The firm should still be an intermediary, so it can check the quality of the outsourced work.
Strategy is also an area that law firms and legal departments cannot outsource, he says. “You need to have somebody who really knows the heart of the matter that you're working on to make sure that all of the outsourced services are heading in the right direction.”
“I don't think there's any task that can't be outsourced,” says Seymour. “The lawyer in these situations is providing advice. We're not the commercial actors in these relationships.” The client makes the final call, he says. “With that in mind, there is really no limit to the role we can play as an outsourced resource.”
One of outsourcing’s biggest challenges are conflicts, says O'Reilly. While they can identify the best lawyers to assist with a particular matter, that lawyer may have another client relationship that precludes them from taking it on.
It can also be a challenge to identify a top lawyer with the specific experience that aligns with more unique task, he says. Dow recently launched a multi-billion-dollar project dealing with hydrogen and carbon sequestration. “These are new areas, new items that you have to deal with… Dealing with nuanced issues that could arise in that space may make it difficult to find the right counsel for that issue.”
