V
Does the trend toward standardization and modularization of professional services make outsourcing inevitable?
HiGH-end proFessional serViCes such as accounting and legal support are starting to move offshore in the same way that software services did a decade ago. These knowledge-intensive services are similar to software services in some respects, but different in others. It is useful to examine the reasons behind this trend and the associated implications.
PhO TOGRAPh BY ROBERT NICkELSBERG/GET TY IMAGES
Consider legal services: GE Plastics is credited with pioneering offshoring the legal support function by establishing a captive offshore base in India to draft contracts in 2001.a Since then, the legal departments of other global corporations have followed suit. Law firms are also exploring possibilities either by establishing captive operations, as Clifford Chance had done, or by outsourcing to independent service providers. These so-called legal process outsourcing (LPO) providers are located in Indian cities like Gurgaon, Mumbai, Pune, and Hyderabad to provide legal support in patent filing, contract reviews, legal research, litigation, and compliance.b Instead of having paralegals and contract lawyers located nearby, corporate legal departments and law firms now man-
employees of the knowledge process outsourcing firm evalueserve provide business and market research, data and financial analysis, and intellectual and property rights services to companies worldwide from their office in new Delhi, india.
a Corporate Counsel, March 2003, p. 78.
b Major LPO providers include CPA Global, In-tegreon, Evalueserve, Law-Scribe, Mindcrest, Pangea3, Quislex, and Bodhi Global.
age professionals carrying out equivalent work thousands of miles away.
Why is the offshoring of professional services—legal services in particular— occurring? The main motivator for offshoring, common across all types of services, is wage arbitrage (access to skilled labor at a fraction of the cost in the U.S. or Europe). In legal services, the hourly rate for associates in the U. S. is typically $250–$300, compared to approximately $60 for U.S. paralegals and $30 for Indian legal professionals. Offshoring is a tactic used by global cor-
porations to combat law firms’ billable hour culture, which centers on the notion that costs cannot be estimated in legal work. Whereas in the past, corporate legal departments were regarded as unavoidable overheads, now they are scrutinized for more cost-effective delivery, in the same way factories have been for decades.
Behind this change in perspective is the strategy to enhance competitive advantage by unbundling corporate functions in finance, human resources, IT, procurement, marketing, and so
References:
Archives