In the last fifteen years, the advent of cheap telecommunications, the WTO Uruguay Round of free trade agreements and a landmark American Bar Association ethics opinion on paralegal services has opened new markets. Outsourcing (or “global sourcing”) is a business discipline based on principles of comparative advantage reflected in the “build-vs.-buy-vs.-ally” paradigm in this new global marketplace. By outsourcing, an enterprise hires the services of a specialized service provider, and the provider’s
functions integrate into the enterprise’s operations. Like ganglia, this integration creates key
interdependencies.

In light of such interdpendencies, achieving sustainable legal process outsourcing (“LPO”) requires a new
paradigm for corporate legal counsel and law firms. While foreign wage levels might be much lower than
domestic “onshore” wage levels, the actual cost savings from outsourcing or offshoring are reduced by the value of ethical risks and the costs of operating a “project management office” (“PMO”) to structure, negotiate and manage the operations. Attrition rates of key employees need to be managed to avoid turnover that could impair business continuity and increase replacement costs. Security, quality metrics, accounting management and audit controls need to be in place. The service provider needs to demonstrate an understanding of the globalizing enterprise’s regulatory environment and strategies for risk management.

LPO requires ongoing hard work and a willingness to take meaningful decisions on such interdependencies and risks. LPO also requires adaptation to change.

Effective LPO requires careful project management. This includes planning and methodologies for
management of risks to operations, security, customer relations, legal and regulatory compliance and ultimately brand value. In-house counsel may need assistance from experienced outside counsel to accelerate enjoyment of intended benefits and, more importantly, to provide judgment, strategy and documentation developed through dozens of simlar transactions and a focus on this area of legal practice.

Established in 1990, Bierce & Kenerson has been supporting service recipients and some select service
providers in their quest for effective business operations using key performance indicators (“KPI”) in
contract stucturing, pricing and renewal. We offer this “Introduction to Legal Process Outsourcing” to help
globalizing corporations and their law firms and sourcing consultants understand issues relating to global
sourcing, the role of external legal counsel and considerations in the selection of individual law firms to support global sourcing transactions and operations.