RSS feedsBanks, insurance companies and even accountants have been outsourcing routine functions for a long time. In-house lawyers – and those in private practice – have been slow to follow that lead. But that is about to change.
With pressure mounting within the in-house legal departments of many large domestic and international companies – both to contain the cost of their legal function and, at the same time, become more involved in the review and adjustment of routine contracts, for risk management purposes – new ways of dealing with contract review need to be found.
The tentacles of the Sarbanes-Oxley Act extend to many companies operating in the UK. Where previously organisations checked some aspects of legal risk by senior managers, asking juniors to verify either verbally or by 'signing off' on legal risks in ways designed to flush out 'exceptions' or major risks, now systems need to be put in place to enable these companies to demonstrate that they have proactively examined all contracts and assessed their legal risk.
Finance directors, risk managers, internal auditors and general counsel need to be in a position to put their names to the fact that careful risk assessments have been undertaken.
The cost of employing additional lawyers in Europe or the US to undertake large-scale reviews of routine contracts would be prohibitive. The cost of instructing UK, European or US lawyers in private practice to tackle these reviews would be even greater. Hence a growing trend to explore low-cost country sourcing options.
TALKING THE TALK
The latest research shows that India is mounting a serious challenge to China as the first choice for low-cost country sourcing. One advantage is that, due to India having so many disparate languages and dialects, English is the common language for the professions in India. All corporate and commercial legal and accountancy work is conducted in English, university legal training is conducted in English and so is the daily business of the Indian courts.
A second advantage is that Indian lawyers can requalify as English solicitors more easily than, for example, Scottish lawyers. They need only pass the Law Society's examination in legal practice and accounting stage. So training up Indian lawyers to take on large-scale reviews of English-generated contracts is relatively straightforward.
Many lawyers have already done just that. Others have postgraduate UK legal qualifications and all undergo customised training to familiarise themselves with what UK and European clients expect from their professional legal advisers.
Specific training is also given on the areas of UK contract law on which legal teams there will be working on procurement, IT or distribution contracts. Additionally, clients often extend their internal training regimes to embrace Indian lawyers.
The third advantage that India has over other contenders is the sophistication of its legal regime, a particular advantage over China. Commentators suggest that, at present, there seems to be a distinct lack of transparency regarding how companies operate in China, which relates to the legal framework around companies, their trading and their reporting. The laxity of the legal regime impacts in numerous different ways. Intellectual property rights, for example, are much harder to establish, and thus protect, in China compared to India.
The fourth benefit India has to offer is its significant lead on technology and connectivity, compared to its other low-cost country competitors. This is clearly crucial to any outsourcing business model: anyone looking to set up an outsourcing business model needs to be able to create and store contracts electronically. This allows one to build an archive that can be searched and audited both in India and remotely.
A client's general counsel or whoever has been appointed to act as liaison with the remote legal services provider can be given secure access to the part of the IT platform in which that client's work is being undertaken. Regular progress reports can be provided and face-to face meetings often scheduled with the legal services provider’s local UK management.
EAGLE EYES
Today, general counsel manage their external legal providers much more actively and closely than ten years ago. The legal services provider in India simply becomes an additional part of the team or panel of external legal providers being used.
Strength in technology and telecommunications is clearly vital to this process.
Naturally, cost is crucial part of the reason behind outsourcing. The cost savings are significant. Legal service providers are able to bill their lawyers out at half the cost charged by top firms in the London legal market, simply because of its Indian cost base.
Read together with the clear advantages over competitors regarding language, re-qualification and training, sophistication of legal regime, and technological lead India is certainly looking fighting fit in the competition for the title of low-cost country sourcing destination of choice.
This is particularly so given how well its advantages suit the professional services market and given the growth in the global market for professional services. Perhaps it’s more a case of Crouching Dragon, Hidden Tiger than the other way around…
Robert Glennie is co-founder of NewGalexy Partners, a Mumbai-based outsourcing provider
