Legal Process Outsourcing vs Legal Service Outsourcing

Guest post by Aurea Westfehling, Cognia Law

Legal Process Outsourcing (LPO) can be defined as the process whereby certain routine and replicable legal services are outsourced to cheaper destinations overseas. The LPO model is based on the premise that the outsourced legal work is carried out by experienced and qualified paralegals and attorneys using best standard practices developed over time, the emphasis being on the practices and processes designed to make the undertaking of the tasks more streamlined and efficient. In looking to outsource certain legal functions, the theory is that standardised, easy to replicate and commoditized tasks that can be carried out without a high level of legal acumen and training, can be carried out by cheaper resources in alternate locations. 

Whilst India has always been the largest LPO destination in the world (having the advantage of a legal system founded mostly on English common law), South Africa is fast emerging as a desirable offshore centre for LPO. Although India has the advantage of being able to offer quite possibly the lowest labour cost, South Africa is rapidly finding traction as an attractive alternative, being able to provide not only a large qualified and highly-skilled pool of legal professionals and a legal system completely aligned to English common law, but also a cultural fit with the United Kingdom and the United States - with time zone sharing being seen as an added benefit.

Traditionally, two key elements have been at play when clients desire the use of an LPO:

  1. The tasks have to be easily replicable, relatively simple tasks. Inversely, clients have been reluctant to allow any tasks which may require an element of legal intuition and legal application to be outsourced to the LPO sector; and

  2. The focus has been predominantly on cost-saving.

Previously, the focus has been on tasks that require a low level of legal expertise and acumen. However, there has been a distinct shift in the industry.  Clients are asking more and more whether their legal counsel are providing not only a cost-effective option, but also the most efficient service offering possible.

The understanding that cost saving is not the only advantage that LPO can offer is becoming increasingly apparent. The concept of saving time is seen as a corollary benefit to companies. In the LPO industry, there are entire teams of dedicated resources focused on carrying out certain duties. Clients can gain more operational efficiencies by focusing on core business activities while having access to a breadth of skills, technological expertise and service offerings at a reduced price.

The emergence of the Legal Service Outsourcing (LSO) industry is changing the face of legal outsourcing. There is a move to supporting more sophisticated legal practice, work which requires legal skills, training and experience, with services directly feeable to clients. Coming out of LPO is a new LSO concept, where innovative legal solutions are enabled by technology and best fit resources, with an emphasis on competent legal oversight.

This “high end” of LPO is moving towards the LSO model, and the new functions of LPO companies no longer exactly fit the original mould. The spheres of due diligence, compliance, document review and specialised contract management are requiring more sophisticated resources. In the South African market, there is deluge of legally qualified individuals who are choosing to step out of the historical model of working for a law firm and seeking alternatives within the formal employment market. The LSO industry is offering these individuals the niche employment opportunities they have been looking for, allowing them to prosper, flourish and grow in their legal knowledge, whilst remaining outside the realm of traditional law.

It is clear that LSO will continue to grow as a recognised industry, being adopted far more widely across organisations. The value chain provided by the LPO industry is set to spread with the concept of wider legal full-spectrum outsourcing becoming more and more prominent: the emergency of LSO is well underway.

Watch this space.

Aurea Westfehling is Head of Legal Services and General Counsel at Cognia Law. Aurea heads up the Shared Services Team at Cognia Law.

Following several years as a commercial law specialist and legal advisor in the banking sector, most recently for Investec Bank (Mauritius), Aurea brings with her a keen insight into the legal and compliance aspects of the financial services sector. Aurea commenced her banking career at First National Bank as a tender process controller and contracts manager and later moved across to Nedbank Private Wealth (formerly BoE Private Bank), where she spent the next 7 years as a commercial legal advisor. Aurea also headed up the Nedbank Private Wealth Johannesburg litigation department.  At Investec, she was instrumental in specialised finance, and international lending transactions, as well as being involved in various compliance projects.