LPO Outlook for 2012

Fronterion, an international management consultancy which focuses exclusively on advising law firms and corporations on outsourced legal services recently published a report on the Top Ten Trends for Legal Outsourcing in 2012.

The Top Ten Trends for LPO in 2012 are:

1. Profitability Squeeze for LPO

The shrinking gap between wages in the developing and developed countries will squeeze margins for LPO vendors in 2012.

2. Growth Beyond Litigation Support

Large‐scale litigation was one of the first outsourced legal services to gain widespread adoption and remains by far (particularly in the US) the most popular. In 2012, LPO vendors more than ever, will seek to diversify service lines – from contract management to due diligence on M&A transactions – as legal professionals become more comfortable with LPO collaboration both on and offshore.

3. Technology and LPO Combine

In 2012, technology platforms will be increasingly bundled together with traditional LPO offerings, combing two of the most important trends shaping the legal profession. This means using software systems as well as low‐cost human labour to provide cheaper and more efficient legal services. Advances in technology will expand the scope of LPO offerings. In the long term, certain manual LPO services may become superfluous. Bundling LPO services with technology offerings will be an essential differentiator for outsourcers in 2012.

4. Adoption of LPO Techniques

The adoption of LPO techniques in 2012 is a serious endorsement of the LPO approach and will shape the practice of law. In 2012, Fronterion projects a definitive shift as law firms and legal professionals act more like LPO vendors. That means replicating the LPO approach of process, reporting and project management. Compared to the traditional practice of law, LPO techniques deliver more scalable and transparent services through better management and consistent quality. This trend has already started in 2011.

5. Law Firm Insurers Target LPO 

As outsourcing becomes more common, LPO services may create new risks for legal professionals that will be addressed by law firm insurers in the coming year.

6. Changes in the Executive Ranks

The skill set required for leading an LPO in this evolving industry, along with growing pressure on existing management to produce results, will likely result in management changes in certain LPO vendors in 2012.

7. LPO Faces Formidable Competition

As clients increasingly expect value based options in 2012, law firms will be forced to use LPOs and will likely include LPOs in RFP responses. However, LPOs may face intense competition from mainstream legal vendors such as staffing firms, discovery vendors, and law firms with specialized delivery centers.

8. Winner take all Mentality

In 2012, the LPO industry will continue to be dominated by a few key players. It is not expected that there will be a radical change in the LPO industry in the coming year.

9. Changing Professional Guidelines

US and UK law firms are evolving toward greater openness to alternative legal service delivery and LPO‐inspired approaches – driven by technology and a fundamentally changing legal profession. Next year U.S. and U.K. professional and regulatory bodies are due to publish the results of studies on the impact of outsourcing. Regulators have been slow to offer guidance to legal professionals wrestling with the changes in the legal profession. LPO will increasingly be under a spotlight in 2012.

10. Evolution of the Law Firm Client Relationship

In 2012, in‐house legal departments will increasingly contract directly with LPOs. Some corporate in‐house lawyers will actually prefer to tap the expertise of LPO providers directly. For example, due to the LPOs’ focus and service volumes, they have increasingly demonstrated superior expertise compared to their law firm counterparts for certain tasks, such as searching documents for key words and phrases. These developments will continue to create fundamental questions around the role of the law firm.