The Legal outsourcing industry in India owes its genesis to two phenomenon simultaneously – the advancements in IT & IT enabled services and secondly the skyrocketing hourly billing rates charged by the main stream law firms. The paper analyses the correlation between the billing structure of US law firms and its impact on Indian LPO market.

'Killing me softly…', is what most clients must have felt about the fee structure followed by US law firms, to borrow the words from the popular 70’s song. Major Law firms in the United States have for some time been strangulating the bottom lines for corporations by their obsolete billing structures and skyrocketing billing rates.

Gone are the days when law was considered to be a noble profession dedicated to the pursuit of truth and justice. With the rise of corporate transactional law – it has become the business of law.

Standard billing structures adopted by firms globally include the following:

Hourly rates – This is the most common arrangement. The attorney is paid an hourly rate for the hours he or she works on the case. Before the recession provided for some respite – some law firms reported a high of upto $1000 per hour for partners and $ 835 per hour for associates. This may still sound justified as they play a critical advisory role for their clients. The real interesting part is the amounts paid to and charged for the newly qualified attorneys and trainees who would end up doing a bulk of clerical jobs with rates upto as high as $ 200 to 400 an hour. This is one particular area which leaves a big hole in the clients' pocket.

A retainer arrangement allows for a fixed fee to be paid up front before legal representation commences.

A contingent fee is based upon the final settlement or outcome of the proceedings.

With the recent debacle of American economy – clients have started keeping a close watch on the legal spends also. There is an increased persistence to use more efficient methods and stress on lump sum fee basis rather than an hourly charge out rate. Clients are keen on being provided the option of outsourcing for non advisory areas like document review and e-discovery.

The pricing of services provided by law firms also reflect two most important costs- i) The cost of acquiring and training legal talent and ii) Overheads expenses like real estate & maintenance.

Clients realize this and are therefore scouting better ways of production of services without paying a premium for these two.

Median Salary by Years Experience for Attorney/Lawyer¹

Distribution of Full-Time Salaries —2008²

As is well illustrated by the above two figures, the average salaries for US law graduates/trainees and newly qualified associates is amongst the highest in the world, upto about 25% of these newly qualified associates earn a staggering 160,000 $ a year.

Compare this to the average annual remuneration of an Indian qualified lawyer – about 10,000 $ annually, the cost difference highlighted here turns into significant savings when utilized efficiently.

A classic recent example was that of Rio Tinto, the global mining giant which went ahead and hired a good number of Indian lawyers for its transactional needs at a price which was a fraction of what any firm would have charged domestically.³

This can translate into work done at costs which are upto 1/3 of costs incurred by in house counsels or about 1/7th of what a law firm would charge.

The second cost factor is that of real estate. A lot of work, thanks to the developments in information and communication technology, can now be done anywhere on the planet. Thus clients do not have to pay a premium because the work is done in a swanky New York office space, as the same work can be done at a similar setting created in Gurgaon, but where the prices would be a fraction again.

These dynamics of cost and pricing make Indian LPO industry a suitable ally for the US Legal market.

About KPO Consultants

KPO Consultants is the pioneer consulting company which provides business solutions exclusively to the LPO industry. We work with the established and aspiring LPOs to set up their LPO ventures and overcome their complicated business problems and also help management make big decisions affecting top line growth of their company. KPO Consultants offers consulting in areas of strategy, operations, technology, marketing and sales, human resources, and strategic alliances. We also provide end-to-end support across entire business lifecycle; building business synergies from the scratch till realization of its benefits and ongoing developments. We have served several clients in the United States, the United Kingdom, Singapore, Philippines, Mauritius, India, Canada, Australia, and many more countries.

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