Do two outsourcing stories in one week presage a trend?

The decision by Rio Tinto to send some legal work to India comes at the same time as Pinsent Masons announces its plans to send first-pass litigation review work to South Africa. Once you strip out the protectionist reactions of those who do this work now and those who make money from their work, you see the next obvious step towards globalization, and opportunities for those – lawyers and their firms – who ride the wave.

I picture Professor Richard Susskind as having a big wall chart on which he traces the progress of his various predictions over the years. Perhaps they are colour-coded according to the amount of derision they faced as he rolled them out – bright red, for example, for the idea that lawyers might communicate by e-mail or put legal information up on publicly-available web sites. I see him putting a big red tick beside them as the world catches up, or perhaps – since the adoption tends to be incremental – a graph showing the rate of adoption. This would almost always start with a gradually-rising line and then shoot upwards as the herd follows the early-adopters.

Two stories last week will have added to one of his graph lines – the idea that lawyers will distribute some of their work outside the firm to places where it can be done more cheaply. On 19 June, the Times reported (Rio Tinto’s legal switch puts pressure on London) that Rio Tinto has hired a team of lawyers in India to try to reduce its annual £60 million legal bill by 20 per cent, recruiting 12 lawyers in Delhi to work for it on tasks such as reviewing documents and drafting contracts. On 22 June, The Lawyer wrote about Pinsent Masons’ decision to outsource some of its litigation work to South Africa, becoming, the Lawyer said, the first UK firm to offshore the work of qualified lawyers (Pinsents – first firm to offshore work of qualified UK lawyers)

Richard Susskind weighed in with an article in the Times Rio Tinto deal heralds huge changes. The key sentences are perhaps

There is no legal job whose complexity and value elevates it entirely beyond market forces and

the recession will highlight for all time that traditional law firms are inefficient, that new ways of sourcing legal work are possible, and that legal costs can be cut dramatically.

Some of the comments originally posted on the Pinsents article were interesting. The first couple, for example, seemed affronted on behalf of all those trainees and newly qualified lawyers who would not get to cut their teeth on tasks requiring basic skills because (it was implied) some beastly foreigner would be doing the work instead. More sensible was the one which read: Lawyers (especially from London) benefitted massively from globalization. Here comes the next phase.

The litigation work which Pinsents are outsourcing apparently includes first reviews of documentation on UK and US-related investigations at around a 50 per cent saving on each role. The firm is quoted as saying “Does it need some of the best brains in Britain to do that work? We wanted to offer an alternative to our clients – it’s the same work and the same quality, but at a lower cost.”

One of the comments on this point reads as follows:

It WILL result in unacceptable drops in quality. Being unable to communicate properly with the people doing the work offshore will lead to the same frustration, errors and delays that arose when the call-centre industry started outsourcing.  It’s a very sad development for UK employees and UK clients. I only hope that the regions are protected from this to an extent, since personal relationships are so much more important and deals generally smaller.

This encapsulates a number of views which are worth pausing on, specifically (because that is my patch) in respect of litigation.

The reference to “unacceptable drops in quality” is predicated on an assumption that (in this case) South African lawyers are somehow less competent than English ones. Assume that is correct – I don’t assume that, but let that pass for the sake of the argument. The cost of this stage will apparently drop by 50%. The concept of “quality” in this context is already a relative one in the sense that no-one is achieving 100% accuracy or anything like it in determining whether documents should be marked one way or the other – I use this neutral expression because “relevance” (the obvious generic term) is not the UK test and the American test of “responsiveness” is meaningless without a US-style Request to be responsive to. The whole subject of search accuracy is one which is on my summer agenda and I will not pause now to invoke the many learned articles which exist on the subject (bung < TREC Legal Track > into Google if you want to pursue the point now). In the circumstances, the risk of a further drop in alleged quality (if you believe that quality will drop at all) is probably acceptable for a 50% saving in costs.

I imagine the letter to the clients:

“Dear Client. We are about to embark on a first-pass review exercise which, by all accepted measures, will find fewer than half of the relevant documents and return a mass of them which is irrelevant. You can have this done by our trainees and paralegals here in England for £x per hour – lovely people and they do need the experience – or for half that price we will send it to a team in South Africa whom we have specially trained to do such jobs”.

Put like that, it does not sound that unacceptable, does it? And it is not as if Pinsents’ clients are forced to send their data to South Africa. I imagine there are many cases where, for example, privacy and data protection considerations will make it unacceptable regardless of quality or price.

Let’s move on the next part of the anonymous commentator’s observations – that it is difficult, frustrating etc to communicate with people doing the work offshore, with call-centres cited as a precedent. Here is one of those issues which it has become hard to discuss in Britain because as soon as one begins to imply that different people do something differently to those who usually do it, some grim, dim, whey-faced harridan (Harriet Harman, the Deputy Leader of the Labour Party, for example) will accuse you of racism, sexism or whatever other -ism is filling their cluttered little heads that week. This attitude has stifled debate about race (and women and every other allegedly disadvantaged group you can think of) for over a decade. Even if, like me, you are not in the least bit afraid of the debate, you might easily give up because of the sheer effort of trying to argue with people who are impervious to argument.

Although Indian call-centres are presumably far from the model which is proposed here, there is no doubt that public perception of outsourcing is coloured by individual experiences which are less than favourable. For one thing, those who have outsourced are those whom we hate anyway for their combination of greed, dishonesty and indifference to the customer – utilities, ISPs, computer support, financial institutions, British Telecom and Network Rail, for example. In addition to those whom we need to contact, many cold-calls originate from Indian call-centres, beyond the power of the UK’s Telephone Preference Service. The low-grade staff speak poor English and it can take some time to work out if the call is from your credit card company telling you something vital about your account or from a con-man trying to sell you something which you don’t want, and which will not work anyway, in an accent which is not his own – we had enough of that from Tony Blair.

That, as I say, is the common perception which the commentator taps into in relation to outsourcing generally. It is an unfair perception in that UK and US law firms, or companies like Rio Tinto, can pick the cream to work for them, train them as they wish and pay them at rates above the local norm, leaving the dross to give inaccurate and incomprehensible advice to people who want to know how to travel from Pwhelli to Lostwithiel by train on a Sunday afternoon (as a tip, 50% of Network Rail calls are still handled in the UK thanks to a union agreement, so if your first call finds someone who doesn’t know Lincolnshire from Lanarkshire, hang up and start again).

The last point made by the anonymous commentator on the Pinsents site concerns his perception that relationships are more personal in the British regions than they are in London, and that this and the smaller size of deals might protect regional firms from being pushed by their clients into outsourcing. The point is worth making, but I think it misses the essential purpose of outsourcing as we are seeing it happen. The functions which are selected for outsourcing are the very ones which require little personal connection with the client. The communication difficulties referred to above will not be suffered by an unwilling third party (as is the case with call-centres) but by those who set up the arrangement – Rio Tinto, Pinsents or whoever. The client has little or no personal connection anyway with the people who actually undertake first pass review in those cases which are big enough to delegate that function. The American model, which has teams of contract lawyers shut up for months in windowless rooms in the low-cost Quad Cities of Illinois and Iowa, involves no client contact beyond a line item in the bill.

The whole point of the outsourced model is to keep local the things which actually require a smart office, a personable and knowledgeable lawyer, and a support system, and to distribute elsewhere the functions which do not need these things. The cost of bringing staff into London does not stop at the premium which has to be paid in salaries. Modern communications means that many of them could work from home – but why stop there when the same systems can give you quality services at half-price from abroad?

The quality point is easily met. Either these services will deliver low-cost services of adequate quality or they will not. A number of outsourced call-centre operations were, it is said, moved back home because the level of customer-dissatisfaction was disproportionate to the savings. I doubt that we will see a press release if that happens in the two cases referred to here, but word will doubtless get out.

Let us go back to the point about low-level work for trainees and newly-qualifieds to cut their teeth on. Do they really want to do first-pass review of litigation documents? US Magistrate Judge John Facciola is constantly expressing concern on the part of those who find themselves doing this kind of work (the picture I paint above of people stuck in windowless rooms for months comes from him). It suits some people, who are happy to use their skills to work shifts for part of the year and take the rest of the time off, unconcerned by prospect of promotion or the allure of the backstabbing and scrabbling for personal advantage which makes up so much of office life. I am not convinced that the up-and-coming young lawyers at Pinsent Masons gain much from doing this kind of work.

It is a job, they say, and any job is better than none, especially at a large and reputable firm. Well, it is only a job as long as the clients are willing to pay the rates which law firms must charge to make a return on what they pay their staff, and it is no good sneering at law firms for seeking to make such a return. Buying at one price, adding some value and selling at a higher price is called being in business, and it makes no difference if your product is cotton-weaving, ship-building or professional practice. The buying price – salaries, rents and all other components of the service – has gone up. The added value can apparently – we shall see – be supplied by others. The end sale price is too high, judged not by some abstract concept of value in the mouth of some whining “screw the rich” socialist but by reference to what the clients will pay.

Richard Susskind is sometimes accused of making the weather rather than merely predicting it. It may well be the case that some of his predictions have added a veneer of respectability to radical developments like sending an e-mail to a client or publishing free legal content on the web, the two examples I gave earlier. I do not think that anyone is looking to him for his imprimatur in the outsourcing context. He just said that, one day, and sooner than we think, some traditional elements of legal services would become too expensive to deliver in traditional ways, and that clients would drive different ways of working.

There are two broad ways of doing this, particularly in litigation which is the area of my main interest. One is by spinning off functions to others, by express actions (like outsourcing), by abandoning them or because legislation or regulation forces a separation. The other is by delegation to technology of hitherto manual functions. The two – divestment of function and use of technology – come together when the mechanics of disclosure is passed to a technology company which brings both applications and services to the task, leaving the lawyers to get on with being lawyers. I will write separately about that shortly.

It needs a new kind of lawyer to manage disclosure on this basis – one whose skills include project management and costs control. This new breed will have enough understanding of the technology to know what is being done, but will nevertheless remain lawyers, with lawyerly skills and training and with the skill to communicate with the clients – which is, of course, a two-way process. This seems to me to be a more interesting prospect than handling first-pass reviews and a better path to seniority. Not every firm will want, need or be able to outsource its work abroad, but the decisions to do so by Rio Tinto and by Pinsents may provoke some serious thought as to which functions law firms can add value to and which they would be better to delegate outside the firm. That may be just down the road, if the result is a package which is demonstrably offering better value to clients. As I say, more on this shortly.

About Chris Dale

I have been an English solicitor since 1980. I run the e-Disclosure Information Project which collects and comments on information about electronic disclosure / eDiscovery and related subjects in the UK, the US, AsiaPac and elsewhere
This entry was posted in Discovery, eDisclosure, eDiscovery, Electronic disclosure, Litigation, Litigation costs, Litigation Support, Outsourcing. Bookmark the permalink.

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