The boom in Indian Legal process outsourcing industry can be considered as the result of 19th century British bureaucrat, Macaulay. India has its legal system in English which, Law firms in Western countries consider as an advantage.

“We feel India has a unique advantage of having its own legal system in English,” says Jonathan Kelly, partner at Simmons & Simmons, a UK law firm. “Thus, there is no language barrier for Indian lawyers when they wade through legal documents of the US and British companies.”

Most of the former British colonies including India have similar foundation in law. The educational and legal framework in India is formed by Macaulay intended to create “a class of persons, Indian in blood and colour, but English in taste, in opinions, in morals, and in intellect”. Macaulay, who is usually lamed for creating slaves of Britishers and clerks in India, became paved the way for the LPO industry in India.

Pune-based research firm ValueNotes forecasts that the LPO industry is expected to grow 30% in the next two years. The LPO industry in India has grown to $250 million in March this year, from $ 146 million two years ago.

The recent economic recession in the developed nations became responsible for the growth of LPO companies, where as their technology counterparts faced decline in business. Clifford Chance, Eversheds, Simmons & Simmons and Osborne Clarke, some of the top global legal firms, are outsourcing some work to Indian companies such as Integreon, MindCrest, and Pangea3 as their clients cut fees as part of their overall cost reduction.

The average amount a company spends in US for its legal service is $ 400 an hour. The charges in India come to one third of their cost.

Neeraja Kandala, an analyst with ValueNotes, says that large corporates in the West have been outsourcing other processes for quite some time. But legal processes are the latest addition, given that firms are facing pressure to cut law budgets.
Reviewing and drafting legal contracts, reviewing claims, discovery procedures that complement litigation processes and monitoring compliance by clients are the kind of work done in LPO industry. Legal costs for the fortune 500 countries come to around $ 100 million per annum.

Companies that deal with intellectual property, which includes technology and pharmaceuticals cost around 4 200 million.

According to experts the legal works being outsourced to Indian companies reduce the cost to half. “Due to the slowdown, our clients had to either squeeze more (value) out of the same legal budget or cut the spends. This made us think about ways to improve client servicing at lower costs,” says Simmons & Simmons’ Kelly. “There was a need to innovate servicing without sacrificing quality.”

Simmons & Simmons (S&S), one of the top laws firms in UK with revenue of 250 million pounds, has outsourced its back-end legal processes to Mumbai-based LPO Integreon for one year. The work includes litigation reviews, due diligence exercise, and financial transaction analysis. Mr. Kelly expects to bring down cost to 30-50% with this. Indian companies have the advantage of being familiar with the English legal system. This helps them to do work and perform more than what they are paid to do.

Pangea3 helped a US logistics company avoid multi-million dollar law suits for corrupt practices as it studied millions of documents to avoid price-fixing charges. “The team reviewed over a million complex pricing and purchase order documents spanning over a period of eight years,” says Sanjay Kamlani, co-CEO at Pangea3. “The client was exposed to the hidden danger of violating the US Foreign Corrupt Practices Act.”

More and more orders are flowing to the legal companies and more jobs are created. “We have seen a two-fold rise in contract value in the past two years. The tenure of work has also increased from a few months to 3-5 years,” says MindCrest’s MD Rohan Dalal. MindCrest has its delivery centres in Mumbai and Pune, which has its headquarters in Chicago. Its headcount has increased to 700 from 400lawyers in 2008. The headcount is expected to cross 1000 next year.