Globalization of knowledge-
intensive professional services
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
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