Wednesday, October 28, 2009

Bursting the 7 (Seven) Myths behind Legal Process Outsourcing

Myth 1> LPO stands for PLPO (Para-Legal Process Outsourcing) and/or there is a compromise in quality.

The legal process outsourcing industry is at nascent stage, but at the same time is growing both monetarily and intellectually. Although it is true that High cost, more routine, lower risk legal works are easy to outsource, it in no way circumscribe the potentials of legal process outsourcing. The PLPO perception is a backlog, as the Legal outsourcing industry begun with routine work. Suffice it is to mention that various important players like (SDD and Lexadigm) have prepared Briefs and Motions to be filed in US courts. Our attorneys are trained for Multi jurisdictional research and assist:-

  • US debt collection attorneys prepare Consumer Complaints, Briefs, and Motions for FDCPA, FCRA, FCBA and TILA violations.
  • Social security attorneys in filing FIT, research on GRIDS, De novo appeal before ALJ.
  • Bankruptcy attorney in intake form fill up and entering the information on Bankruptcy software.
  • Foreclosure attorney in preparing complaints, motion and briefs to help the homeless.
  • Contract review and management attorneys in contract Review including red lining and blue lining.
  • Merger and Acquisition attorney for due diligence.
  • For E-discovery solutions with cost advantage.

Quality is a term that changes face with new situations. Clear guidelines, good teamwork and 100% quality check are the factors that coordinate in determining standard. It requires involvement from both the ends, keep a track of milestones and guidelines and the Outsourced service provider will ensure quality. We however, from our end add extra input to provide best quality deliverables. Had all vendors failed in providing quality this industry would have collapsed by now, the continuous growth reflects value.


Myth 2 > Legal Outsourcing compromises confidentiality.

Assuming that U.S. and U.K. are the countries outsourcing majority of legal processes, ABA Model Rule 1.6 and UK Data Protection Act 1998 are relevant for our purposes. An epitome is that there has to be a mechanism for "adequate protection of data". Many LPO's including ours, appreciate security concerns and have rigorous IT and client data confidentiality standards. We for instance ensure employee frisk, I.D card entry, finger print attendance system and strict restriction on using mobile phones and data storage devices. Our other security measures includes restricted entry, 24*7 CCTV surveillance, round the clock security guard, visitor log, access control to work station, software and hardware security, Limited internet access, data locking in server, data encryption, client password facility for milestones access.


Myth 3> It is unethical to outsource.

Till date the following Bar Opinions have dealt with outsourcing:

  • ABA Ethics Opinion 08-451, Lawyer's Obligations When Outsourcing Legal and Nonlegal Support Services (2008).
  • Florida State Bar Association Opinion 07-2 (2008).
  • North Carolina State Bar 2007 Formal Ethics Opinion 12 (2008).
  • Association of the Bar of the City of New York Committee on Professional and Judicial Ethics Formal Opinion 2006-3 (2006).
  • Los Angeles County Bar Association Professional Responsibility and Ethics Committee Opinion 518 (2006).
  • San Diego County Bar Association Ethics Opinion 2007-1. (2007)


Although all of them favors Outsourcing, the San Diego opinion is the most elaborate document stating in its relevant part that work done by Indian attorneys' under supervision of US attorney is not "unauthorized practice of law".


The précis of all the opinions is that a lawyer may outsource legal or non-legal support services provided the lawyer supervises and remains ultimately responsible for rendering competent legal services to the client {Model Rule 1.1, 1.5, 1.6, 5.1, 5.3 and 5.5.1 ABA}. Hence it is not unethical to outsource.


Myth 4> Outsourcing results in a loss of jobs in the outsourcer's country.

Job creation is a mysterious, little understood and complex economic process (to detail which is beyond the scope of this article). What may seem as a loss of job initially may create 3 times more jobs than anticipation. Let us understand it with the simplest possible example:-


Say an US company outsources Rammon's job to Ram in India. Rammon's company's savings are addition to the GNP for US, which gets utilized creating more jobs, probably one for Rammon. Our Ram with more money in hand starts behaving American and consuming American foods, goods and other luxurious lifestyles. Due to increase in income there is demand in raw materials for House and cars, these comes from US. There is rise in demand for luxurious goods, goods meant for rich, US is a large exporter of that. Indian companies willing to attract customers like Ram, needs to produce goods and services of American standards. This requires borrowing or Outsourcing American technology, expertise and R & D. With monies in hand Ram is also willing to complete his online MBA from a reputed American University. In the long run all these are factors generating jobs.


There was equal resistance for globalization in many countries. The governments chose to engage Machine diggers in place of workmen with spades. Despite specific jobs being lost in the short run, the total number of jobs has increased since globalization. At the time, there were people who objected. But on that basis, no economy replaced each man with a spade with 50 men using teaspoons. On the same vein outsourcing jobs to other countries frees up labor that can then be more industriously employed. According to the McKinsey Global Institute, for every $1 outsourced, the economic gain to the United States as a whole is $1.12 to $1.14; whereas the country to which a job is outsourced gains just 33 cents.


Myth 5> My Indian LPO vendor will compete with me.

All the LPOs work in a module where they are assisting US law firms and in-house legal departments to achieve cost effective legal support. Indian LPOs are not law firms and do not practices law in any domestic or foreign location. They are engaged by foreign attorneys and work on set guidelines to assist them. Selecting a foreign vendor for your outsourcing needs leverages more time for you to concentrate on other core competencies, increase client base and face challenges. The LPO vendor is a partner in your growth and not competitor.


Myth 6>
LPO vendors need Malpractice Insurance.

Since an LPO is not engaged in practice of law, it does not require insurance cover for malpractice. The law firm outsourcing work should ensure from their insurance agent, for the coverage of vendors' attorneys. LPOs do not take Malpractice Insurance (at least my LPO does not have one).


Myth 7> Legal outsourcing creates instant savings and carries no obligations.

Everything cannot be outsourced though outsourcing is everywhere. Outsourcing is delegation; you outsource your graphic design work and marketing your products and services. Legal Outsourcing is more like hiring a new associate; you assign him routine work till he is adapted to handle critical situations for you. Remember, we begun our legal practice this way but with the passage of time we gained more confidence, exposure, knowledge and acumen.
After gaining speed outsourced associate extends your capabilities. As law firm attorneys or in-house counsel in the West close their offices, their assigned work is attended to and completed in India due to the time zone advantage. To wit, there is a gestation period of about 1 month in legal outsourcing but the long-term benefits are unlimited.

Friday, October 16, 2009

A comparison of 4 most popular LPO locations.


 

In this article we will try to make a comparison between India, China, Israel and Philippines for the best LPO locations. The Databox below would help in our assessment.

 

India

China

Israel

Philippines


 

Total Population (as on Oct. 2009)


 

1,170,940,000


 

1,333,420,000


 

7,448,200


 

92,227,100

Median age (half the population is above and half below)

25.3

34.1

29.1

22.5

English speaking people

90,000,000

10,000,000

100,000

48,800,000

Law Graduates

1,180,000

162,146

40,469

45,000

Legal System

(common law or others)

English Common Law

Civil law system

Common law influenced by German Civil law

Spanish Law influenced by US common law

No. of law colleges

> 128

25

10

8

Internet users (in millions)

68

169

2

4.9

Govt. economic policy (1-5);

1-best, 5-worst

2

3

2

2

Time difference with US (EST)

9.5 hrs.


 


 

[Local time in Delhi,
10:33 AM on Saturday, Oct. 15, 2009.

Local time in New York, 1:03 AM on Saturday, Oct. 15, 2009]

12 hrs.


 


 

[Local time in Beijing, 1:03 PM on Saturday, Oct. 15, 2009.

Local time in New York, 1:03 AM on Saturday, Oct. 15, 2009]

6 hrs.

[Local time in Israel, 7:03 AM on Saturday, Oct. 15, 2009. Local time in New York,
1:03 AM on Saturday, Oct. 15, 2009
]

12 hrs.

[Local time in Philippines,
1:03 PM on Saturday, Oct. 15, 2009. Local time in New York, 1:03 AM on Saturday, Oct. 15, 2009
]

Time difference with UK

4.5 hrs.

[Local time in Delhi,
10:50 AM on Saturday, Oct. 15, 2009. Local time in London,
6:20 AM on Saturday, Oct. 15, 2009
]

7 hrs.

[Local time in Beijing, 1:20 PM on Saturday, Oct. 15, 2009. Local time in London, 6:20 AM on Saturday, Oct. 15, 2009]

1 hr

[Local time in Israel,
7:20 AM on Saturday, Oct. 15, 2009. Local time in London, 6:20 AM on Saturday, Oct. 15, 2009
]

7 hrs.

[Local time in Philippines, 1:20 PM on Saturday, Oct. 15, 2009. Local time in London, 6:20 AM on Saturday, Oct. 15, 2009 ]

     

Source: Wikipedia and official govt. websites.


 

China and the Legal Process Outsourcing Industry: - From electronics, manufacturing, PCB, Operating Systems, 3-G to Hardware Chinese goods are everywhere in market. From Olympics in 2008, 60th birth anniversary in 2009 to the upcoming Worlds' fair (Shanghai) in 2010, china had always and will always surprise the word with clear competency indications. The Chinese influence is set to grow in the years to come. Opportunities of outsourcing to China are enormous keeping in mind the fast economic growth. The Dragon has also diluted its rudimentary communist policies and is helping the Pvt. sector to grow. Since 2005, several IT and ITES services are duty free in China. China based TCL, the largest TV manufacturer backed by the Govt. has shown aggressive acquisition steps. Since 2000, against the populist advocacy, China has taken some strong steps to introduce English as a language. The Chinese leadership now realizes that English has a vital role to play in nations' modernization and development.

    Let it be as it may, imparting English education is one thing and piercing the civil law mentality and instilling Common law jurisprudence is pole apart. China has a long way to go before it becomes an actual threat to other strategic Legal Process Outsourcing Countries.

Israel and the Legal Process Outsourcing Industry: - Israel started to appear on the IT outsourcing map in 2005, when a survey included it in the list of top-20 location for outsourcing. Israel has a unique culture that is influenced by its inhabitants most of whom are Expats or have American parents. Slowly and gradually Israel is picking up as a LPO location. However at present it doesnot gives a tough competition because of the following factors- Instability, influence of German Civil law system and high manpower and other costs. It is neither a location nor cost rival for places like India and Philippines.

Philippines and the Legal Outsourcing Industry: - Philippines is ranked as Asia's second biggest outsourcing destination after India. Advantages like cheaper labor, lower cost of living, and large English speaking educated communities, are the exclusive advantages in Legal Outsourcing to the Philippines. However, to the contrary, Philippines had been slow to attract awareness about itself as an accepted destination for offshore as well as Legal Process Outsourcing. The country though had the same opportunity India had in the last decade but sat around the sidelines and watched India acquiring hundreds of outsourcing opportunities. During the same period Philippines could not materialize much into its kitty. Even today, the penetration of the outsourcing sector in Philippines is said to be 2 to 3 years behind India. Lack of Marketing, Bad security perception, Tight labor market, poor telecommunication infrastructure and dramatic rise in office rental and labor cost are obstacles, Philippines needs to overcome if it desires to overtake India as the Outsourcing superpower.

India and the Legal Outsourcing Industry:- No prizes for guessing, India is the most popular Outsourcing location. Even the Legal Process outsourcing Industry is not an exception. More than 200 LPO's exults India's enormous potential to cater the offshore legal requirements. No other country is even a good competitor to India in the Legal Process Outsourcing Paradigm. But the challenges are stern. India to maintain its status needs to update its Infrastructure, update vocational education, control the real estate prices and control the rise in salary structure of outsourcing professionals. In a previous post some concerns was also raised about practices adopted by new LPO vendors and a need for their introspection.

Tuesday, October 6, 2009

OBAMA TAX REBATE POLICY PROVED TO BE A HISTORICAL FAILURE


Globalization is a reality. And this makes most leaders today realize that populist illusions can't be sustained before they collapse into stagnation and leave their political supporters deeply disillusioned. You can't inflate away your troubles or allow mountains of debt to build up if, as a country, you have to make your living in a globally competitive environment... Building prosperity requires caution and patience. It requires time. Populism is a short cut that doesn't work.


Ever since Obama announced his anti-outsourcing tax rebate policy, contrary to his expectations the volume of outsourced work has increased. The policy was announced to prevent a quo warranto and generate popularity from 100 days of visionless usurping on the most paramount post. The corollary and conclusion is that Obamaenia is fading and monies not materializing. The author believes that the Obama authority has learnt lesson and will show reluctance before making another popularizm stunt.


What went unexpected with the tax policy?


US law states that "any income that is earned outside the US is not taxed until such time it is brought back into the US." By his latest tax policy Obama aimed at an antithesis. He aspired to raise the kitty by another $210 billion in additional tax collections over the next decade for profit earned outside the US by companies having base at US.


Vis-à-vis restrictions were also imposed on H1B1 visa requirements to stop people from developing countries like China and India entering into US. So what was it that the Obama administration tried to promote and what to restraint? Why did not the policy respond positively?


The Obama policy lacked foundation. World trade does not function in isolation; the world is flat, short and too much inter-related. The economies may have different trajectory but are influenced by each others. After Globalization a company searches the world, not just to sell or to source, but to find intellectual capital and Market - the world's best talents and greatest ideas irrespective of nationality. IBM, Microsoft, and Oracle become big corps just because of low cost and strong intelligent and hard working work force in India. The factors that catalyzed this were two forth 1> savings in cost, and 2> US do not have trained human resources to do a certain category of specialized services.


We need to get matured enough to the cost savings economy and start talk sense. Indian call center agent is engaged for 12-15K per month that to 9.6 hours a day. 15 K is about 300 $ in US. Obama administration thought that companies like Citibank will run their call center in US and pay 4000 $ to US call center agent, just for the sake of retaining US jobs. An Indian IT guy can be hired for 20 to 40K rupees which is less than one thousand Dollars per month (40K Rupees is around US $800). How much your computer wizz requires you know Mr. Obama about $100000.00 per year or about $8500/00 per month which is more than 400000 (4 L) Rupees in Indian money per month. How much the companies make due their pay roll in India - believe me it is a mountain of monies and new ideas getting them all for pits just about one eight of the local US Pay for such jobs.


Other area where Obama administration lacked foundation was that the services are getting commoditized day by day. Faster, better and cheaper is the key to success in the market. The Obama administration cannot bind, the new generation (which is an improved bunch and can differentiate quality) to buy GM Chrysler or Fords' lousy cars with lousy engines and sub standard transmissions, just for the sake of retaining US jobs. On the other hand these car companies are earning revenues in developing economies like India. Mac burger, Coke, Pepsi, Dell, HP, IBM hardware, Microsoft, oracle, Google software and Boeing cannot be stopped from doing business in India just for the sake of promoting Indian Companies. Nor can the Indian govt. prevent them from earning revenues, because they offer quality goods at comparative price. US had lost 2, 73,000 jobs in September 2009, so were an equal number of extra workers engaged by outsourcers of the developing countries. NO, Indian outsourcing industry is also affected and is praying for quick recovery of US economy. There may be increase in outsourcing in some sector in the short run but the long-term health of vendor is in the prosperity of customer. When the companies of developed nations will close, from where the developing ones will get outsourced stuffs.


So instead of being analytical to a developing nation's prosperity and announcing boomeranging anti-outsourcing policies the Obama administration could have done better things. Concentrating more on market fundamentals would had helped framing practical policies. Administration could have added more (than $210 billion dollar) by investigating the reasons and locations of revenues pillaged from poor workers in capitalist economy. Mr. Bush donated $750.00 Billion Dollars to his friends before leaving the Presidential Palace to his retreat. It is sensible for President Obama to create a committee and investigate and roll back those taxpayer's funds to the exchequer. Even a billion in investigations ordered on the 100th day celebration should have recovered $210 Billion at least by now. Investigations should have been made to capture the bosses of those big bankrupt organizations who filed for bailout, but paid million dollars as CEO's salary. Control the bank bosses who are nothing but nerds and want to make in hundreds of thousands from the Bank's coffers thus driving foolishly the service charges into billions in the process that exhausted the wealth of the nation and its people. Revamp the Banking industry in USA. The stimulus, without getting credit market work again, without cleaning bad debt is mismanagement. Plan a way out to have better administrative control in capitalist market and stop 1 trillion dollar bailout package next year.


KPO / LPO vendors need to fasten their seatbelts now.


The effect of recession and survival strategy was discussed by the author in a previous post in August and is not repeated for the sake of brevity. The LPO (Legal process Outsourcing) industry claims rejoice of surviving the great depression. The responsibilities ahead are more challenging and the preparedness is outdated. Suffice it is to mention, that this most infant industry was not much hit by recession, there was some stagnancies and decrease in growth rate. But now for the reasons mentioned in the article published in this blog in August, the industry player needs to be prepared to taste the unprecedented boom.

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