Legal Outsourcing Creates American Jobs

June 2nd, 2011

Back in March, Paul Krugman freaked out about the threats to the legal profession from outsourcing, as well as advances in technology. At the time, I noted that I wasn’t quite as worried, even if long-standing legal jobs dissapear:

What isn’t written here is that the nature of legal jobs will change. No longer will attorneys make their way by doing menial doc review. Attorneys will have to think of how to create value, either through assembling good transactions or engaging in smart litigation. Technology will certainly make this easier, but even so, not all attorneys can do this. Even if the aggregate of legal jobs does not decrease, certain types of positions will no longer be relevant.

Only two months later, we see that outsourcing legal jobs has actually created new jobs for Americans, albeit in a different form. The market adapts. It usually. And of all places, the Times has the story.

Outsourcing firms, the companies that in recent years added to the financial woes of the American legal profession by sending work to low-cost countries like India, are now creating new jobs for lawyers in the United States.

The American salaries for outsourced work, typically in the $50,000 to $80,000 range, may look meager compared with the six figures that new associates might still hope to draw at a big firm. But outsourcing jobs typically pay better than temp work — and certainly better than no work at all.

And at that salary range, American lawyers start to look a bit more competitive with their offshore counterparts — and more attractive to potential American clients that might not be comfortable sending legal work overseas.

“If we’re going to deliver a fantastic client experience, the only way to do it is to have an onshore facility,” said Sanjay Kamlani, co-chief executive of Pangea3, a legal outsourcing firm with offices in New York and Mumbai.

Pangea3, which was bought by Thomson Reuters in November, has just opened a 400-seat office in Carrollton, Tex., a Dallas suburb. The new office means Pangea3 will have lawyers working during United States business hours, on tasks that, because of logistics or American law, can be difficult to perform outside the country — like writing and vetting export control documents, military contracts and some patent reviews.

I should note that “American laws” that prevent this off-shore work will likely decrease in the coming years, as the value of offshoring becomes more pronounced.

What will remain, are logistic problems. Any outsourcing operation needs to effectively manage employees on disparate corners of the globe. This change reinforces the need for lawyers to think outside the box of how to remain gainfully employed. Project management skills–a must for any litigator–become more important when working with offshore employees.

The growth of legal outsourcing tools looks quite promising:

Legal outsourcing companies employ about 16,000 people worldwide, according to Edward Brooks, founder of the LPO Program, which matches legal outsourcing companies with potential clients.

The industry made an estimated $400 million in revenue in 2010, according to the researcher The Datamonitor Group, which was just a tiny fraction of the world’s $200-billion-a-year legal market. But Datamonitor predicts legal outsourcing revenues will grow to $2.4 billion by 2012, based on the industry’s recent rapid expansion. In part because of the harsh economic climate of the last few years, “the reality is that the United States and the United Kingdom have many lower-cost locations and good supplies of legal professionals,” said Mark Ross, a vice president at Integreon, an outsourcing company based in Los Angeles.

Take note graduating law students. I hear Mumbai is wonderful this time of the year.

Though legal outsourcing companies may not provide the mentoring and diversity of experience of a traditional law firm, they are a career option that law school graduates should not ignore, said Cassandra Burke Robertson, an associate professor at Case Western Reserve University’s school of law.

Right now, she said, most graduating lawyers were “happy when they have a job that pays the bills.”