On a morning train ride into the city, Jane confided in her old friend Jim, a fellow attorney, about her plans for a big change in her career.

“I’m thinking about leaving my firm,” Jane said. “I want a chance to build my own practice and call the shots. In a bigger firm, you just can’t do that.”

“So what’s holding you back?” Jim asked. Several years earlier, he had left a large law firm to start his own litigation boutique.

“The big thing is money,” Jane said. “I don’t mind taking a salary cut for a while, but I don’t have cash to set up an office, buy equipment, and hire secretaries and paralegals—let alone an associate. And I don’t want to sign my life away to some bank. How did you do it?”

“I didn’t have much money either,” Jim confessed. “The thing is, you don’t need as much as you think. You’d be amazed at the help you can command if you’re willing to outsource most of it at first. Secretaries, legal assistants, research assistants, technical support, even lawyers—all can be outsourced these days. And you pay only for what you need. Come have lunch with me today, and I’ll tell you how to get started.”

Ever since Thomas Friedman published his 2005 best seller, The World Is Flat: A Brief History of the Twenty-First Century, people have been talking about outsourcing. They are right to do so. In the Internet age, people are outsourcing just about everything you can think of—from word-processing to tech support, from personal assistants to experienced lawyers.

Although the Internet wasn’t designed with outsourcing in mind (and outsourcing started before the Internet age), the Web has connected people seamlessly across the globe. It has also let them share files and work together easily, providing the predicates for an outsourcing revolution that we are only beginning to understand.

While lawyers are sometimes slow to adopt new trends, many are embracing the revolution with gusto. Indeed, some experts predict that U.S. law firms and other entities will outsource up to 40,000 legal jobs by 2010, and twice that many by 2015.¹

Indeed, outsourcing can be the great equalizer for small law offices that want to compete with the big firms. With a good outsourcing relationship in place, you can quickly enlist additional legal, technical, or administrative help when you need it, but you are not forced to carry a large staff and overhead and worry about keeping your employees busy during slow times.

To outsource is to send work traditionally handled by your employees to an outside person or company. Despite recent hype, this practice isn’t new—most people have been outsourcing for years, often to others just down the street.

For example, most people outsource the production of the electricity they use to a local utility and look to the local dry cleaner to clean their suits. (I like to outsource dinner to a local Mexican restaurant.) More seriously, law firms often outsource payroll, tax returns, copy work, deliveries, IT support, and lots of other tasks.

What’s new is the ease with which lawyers can outsource work to remote parts of the globe. Today, you might consider hiring a paralegal or secretary who lives in another state or even a different country. You can speak with him or her over the Internet without incurring a long-distance charge. You can also send files to someone thousands of miles away faster than you could walk to an office down the hall with a dictation cassette.

Outsourcing does not require you to send work overseas. “Onshoring,” as it is sometimes called, keeps the work within U.S. borders. International outsourcing, or “offshoring,” can be done through people on your payroll or through an outsource relationship with another company.

Why Outsource?

There are three reasons to consider outsourcing, and all can be compelling.

Reduce costs. This is the most common reason to outsource and the one that makes offshoring so attractive. Countries like India offer a well-educated labor force of English-speaking people willing to work for a fraction of U.S. wages. To pick one example, trained lawyers in India can be had for $30 an hour. Compare that to legal assistant rates in the United States at $125 to $150 an hour. Put another way, an Indian attorney makes about $12,000 a year, much less than the typical starting salary for U.S. legal assistants, let alone associates.²

These price differentials apply across the board for other jobs. Document coding by temp workers in the United States can cost from $30 to $50 an hour. You can get the same work done in the Philippines or Barbados for 20 percent of that rate, probably $5 or $6 an hour. With a big project, the savings add up.

Cutting fixed overhead (employee salaries) is another attraction. Outsourcing allows you to pay for what you need, when you need it. This enables you to conserve capital while preserving the ability to ramp up when there is a need. Also, if the work is done at another location, the outsourcer is usually responsible for facilities costs—space, computer systems, furniture, and so on.

Outsourcing vendors can invest in efficiency-enhancing processes that can be leveraged across multiple clients. This can drive costs down. Because they eat, sleep, and breathe what they do, these companies are often better at their work than you could be. And, for work that can be performed off site, outsourcers can take advantage of cheaper labor rates available in other parts of the world. When outsourcing is done right, everyone can win, including your clients.

Extend your capabilities. Another reason to outsource is to broaden the services you can offer. If you don’t have a steady stream of big litigation cases, you might not want to pay to have a litigation support staff on hand. By outsourcing to a litigation support provider, you can be confident that you have the immediate capacity to take on bigger cases when they come in the door. It can be reassuring to know that your outsource partner can provide as many bodies as you need for as long as you need them.

Focus on your core. The third reason for outsourcing is a bit more esoteric but no less important: It allows you to focus on your core business. You do what you do best, while using others to do what they do best.

What is your core business? The answer will vary for each law firm, but many outsource basic services like copying, e-mail, and even human resources functions because they are not part of the firm’s core. They also outsource specialty services like electronic-discovery document processing, objective document coding (date, author, description), and even litigation support repositories. Doing so allows their lawyers to focus on legal specialties without being distracted by office-management issues.

Put another way, what is your special sauce? What makes your firm competitive, and why do clients come to you? Businesspeople would urge you to focus on those attributes and ignore as much of the rest as possible. Your core might be employment litigation; focus on that work and outsource peripheral activities like computerized litigation support to a company that specializes in that service. Likewise, if you are a commercial lawyer, use an outsourcer to provide extranet services so you can connect with clients and other counsel and share documents.

One approach to defining your core business is to ask the question: “Does this differentiate us competitively?” Let that be your guide.

What Can You Outsource?

The short answer: Almost everything. Whether your firm is large or small, there is little that can’t be outsourced other than appearing before a judge in court. Nearly every employee function can be outsourced, even the tasks performed by some of your professional staff. Here are some of the options.

Secretaries. Secretaries and word-processing employees are typically a law firm’s third-largest expense, after rent and professional staff. 3 One way to cut these costs is to increase the ratio of lawyers to secretaries—for example, three or four to one. Another is to outsource some or all of your administrative work. Outsourcers based in the United States and other countries provide both large and small firms with services like word-processing, dictation, editing and proofreading, event coordination, conference call set-up, and after-hours telephone reception.

Savings can be substantial. One firm reported $275,000 in savings after outsourcing digital dictation to a team of eight word-processors based in Gurgaon, India. The work is completed overnight and delivered back to the firm in about 12 hours.⁴

Legal assistants. Firms have been hiring legal assistants on a temporary basis for years to supplement staff legal assistants on big cases or to provide support when needed in firms that don’t normally employ legal assistants. Today, many of the jobs that these workers do can be sent offshore, particularly some of the more routine tasks like document coding and review.

A key driver of this trend is the explosive growth of electronic documents. With productions sometimes running into millions of pages, most firms can’t begin to handle the required review. Turning to an outsourcer in those cases may be a necessity.

Literally hundreds of companies offer document review and coding services, both on- and offshore. You can hire onshore objective coding for about $1 a document. You can get offshore coding for as little as 40 cents a document, a 60 percent savings. To beat those prices, your $125-an-hour legal assistant would have to code several hundred documents every hour.

Summarizing deposition transcripts is another job legal assistants and junior associates typically handle. Here, too, outsourcing can be a more cost-effective option. Several companies offer to summarize deposition transcripts for about $1.50 a page. Your legal assistant would have to summarize 83 pages an hour to match that rate.

Attorneys. It may surprise you to learn that outsourcing attorneys has become a booming business in the past few years. 5 It started in the corporate world: GE was one of the early pioneers, setting up an Indian operation to draft patent applications. The idea caught on, and today you can hire outsourced legal help for just about any kind of project.

Legal research is one growth area. For years, law firms and corporations turned to U.S.-based research companies to handle memo- and brief-writing. Today, outsourcers can do that research for as little as $12 an hour.

Small firms, which typically lack a team of associates ready to handle research assignments, are a natural for outsourced research services. By sending extended projects to a reliable research firm (whether on- or offshore), small law firms can handle the blizzard of briefing that often accompanies litigation against corporations and other parties represented by bigger firms, while keeping their team focused on preparing the case for trial.

Small firms might also want to enlist temporary attorneys for subjective document review in large, complex cases. These lawyers can do the review remotely or work in your office.

While much document review is done by U.S. lawyers, some firms and corporate legal departments are sending the work offshore. Last year DuPont signed a major contract with an outsourcer for review of medical records, engineering specs, and other documents relevant to its legal cases. The contract involves the use of 30 Filipino attorneys, including 3 who passed the U.S. bar. DuPont hopes to save 40 percent to 60 percent on document work and cut up to $6 million from a $200 million legal budget. 6 The dollar figures may be smaller for small law firms, but they can reap proportionally similar savings.

Litigation support systems. In the past, large law firms and their corporate clients had the advantage in litigation because they could afford the large technical staff needed to run computer systems for document-heavy cases. Today, those services can be outsourced to companies providing Internet-based litigation support repositories. Connecting via a browser, litigators can search and review millions of pages of discovery documents using the same technology as their corporate opponents.

Several companies provide litigation support repositories independently or in conjunction with firms that process electronic discovery documents. Generally, you pay for the service by the month and use it as long as you need it.

Most outsourcing companies are willing to match their offerings—and often their prices—to meet your needs. You can hire a temporary legal assistant by the hour, week, or month, or even by the case. Typically, you will pay more for a short-term assignment than you would if you were in a position to commit for a longer duration. Your provider will almost always be willing to negotiate a better rate for a large volume of work.

In other outsourcing arrangements, you might pay by the unit. For example, coding outsourcers often charge by the document or the field, and transcript companies charge by the page. Once again, the more volume you have, the better the rate you can negotiate.

For other projects, you may choose to pay a flat rate or contract by the month. My company has a 10-person programming team working in Bangalore, India; they work full time but on a contract basis. We pay by the month for their services but can stop the contract whenever we want, which provides considerably more flexibility than permanent hiring might.

Proceed With Care

All these services can be a boon to a firm of any size looking to perform more efficiently. But just because you can outsource a task doesn’t necessarily mean you should. The decision whether to outsource calls both strategy and ethics into play.

Many businesspeople will tell you to outsource everything you can, citing Forrest Gump’s philosophy: “Don’t own nothin’ if you can help it. If you can, even rent your shoes.” Others take a more conservative view, suggesting that you use outsourcing only to address intermittent needs, like a litigation support project that requires a specialist.

There are strong reasons to be careful before you enter into an outsourcing relationship. One is the fear of putting all your eggs in one basket. If the only outsourcer you are using fails in your tasks or simply refuses to perform, you’ll be in trouble. Companies often spread their work across several different outsourcers to protect themselves against this eventuality.

You can do the same. For example, sending work to several temp agencies that provide paralegal assistance can be smart, even if it might seem simpler to use just one. Likewise, sending all your litigation support work to a single company can be risky in a world where at least the smaller companies could disappear overnight. Check references carefully and make sure your outsourcing partner is reliable and likely to be around for the duration.

Quality control is critical whether you are outsourcing or not. If you send research or other work to an outsourcer, make sure you or someone on your staff checks the work carefully until you build up confidence that its employees have the skills to do the job right.

Lawyers have an ethical obligation to supervise the work of both lawyers and nonlawyers who are retained to assist in the representation. 7 This extends to an outsourcing relationship you may engage as well as to those working in your office.

Another concern that arises during outsourcing is confidentiality, just as it does when you hire your own staff. If a disgruntled outsourcer employee starts leaking confidential data, you may be held responsible. For that reason, some firms redact client names or other identifying information from the materials they give outsourcers. You should carefully check outsourcer longevity and references to make sure you are sending your confidential data to a trustworthy organization.

Outsourcing is a powerful tool that savvy law firms—large and small—can use in the right circumstances to cut costs and provide a broader range of services than they could otherwise offer. In the Internet age, these arrangements are easier than ever to put in place. Whether you are looking to start a new law firm or to improve an established practice, outsourcing is an option you should be thinking about.

Notes

1. Julie Stauffer, Over the Horizon, Natl. 22 (June 2006), (last accessed Jan. 22, 2007).
2. Ann Sherman, Should Small Firms Get on Board with Outsourcing?, Law.com Small Firm Bus. (Sept. 12, 2005), (last accessed Jan. 22, 2007).
3. Ron Friedmann, Why Law Firms Should Consider Outsourcing Secretarial and Document Production Tasks, (last accessed Jan. 22, 2007).
4. Jeffrey Klineman, Outsourcing: Sleepless in Gurgaon, Law.com Small Firm Bus. (Feb. 21, 2006), (last accessed Jan. 22, 2007).
5. Julie Triedman, Temporary Solution, Am. Law. (Sept. 1, 2006), (last accessed Jan. 22, 2007).
6. Pete Engardio, Let’s Offshore the Lawyers, Bus. Week (Sept. 18, 2006), (last accessed Jan. 22, 2007).
7. Model R. Prof. Conduct 5.1, 5.3 (ABA 2004). Bar ethics committees have emphasized that a lawyer must be even more vigilant in supervising the work of outsourcers who are geographically distant, whether on- or offshore. See e.g. Assn. of the B. of the City of N.Y. Formal Op. 2006-3 (Aug. 2006), (last accessed Jan. 22, 2007).