Aphelion Insider

I recently spent some time with Bill Henderson, associate professor at my alma mater, Indiana University School of Law - Bloomington, and author of the recent research paper which has focused blog and other discussions about the theory and development of legal services, whether provided by law firms or LPOs: “Are We Selling Results or Résumés?: The Underexplored Linkage between Human Resource Strategies and Firm-Specific Capital,” Legal Studies Research Paper Series, No. 105 (Ind. U. Sch. Of L. - Bloomington, April 2008). Indeed, in the words of The AmLaw Daily, attention by journalists and periodicals to Henderson’s essay has set the legal world “atwitter.” His work has been the impetus for articles in the ABA Journal (”‘Cravath model’ that created have and have-not law grads could implode“), The New York Times (“Analysis: Law schools growing, but jobs aren’t“), and The National Law Journal (”A deluge of law schools“), among others.

One of Henderson’s insights is that graduates of law schools that are not amongst the schools whose names help create and sustain “Cravath system” law firms must prove they are capable of advancing their firm’s abilities and reputations by “doing.” That is, rather than merely practicing with a degree from a law school that is expressly within the scope of the “Cravath system,” graduates from other schools must distinguish themselves by completing their work with excellence and advancing their client’s interests efficiently. In addition, the salary wars among large law firms continue to outpace clients’ willingness to pay the correspondingly higher hourly rates those firms must charge to be profitable. That leaves a market opening for firms to respond to client demands about reducing costs by abandoning the “Cravath system” in favor of a model that proves the firm’s abilities by “doing” the client’s work excellently and efficiently. In light of clients’ increasing focus on whether outside counsel help the client control costs, such a strategy will yield an expanding base of business that will make the new breed of firm profitable in the medium term and successful in the long run.

Legal Process Outsourcing is yet another form of helping clients ensure their work is done excellently and efficiently and thereby reducing clients’ costs. Although LPOs are not law firms, they are in the business of assisting their clients (and their clients’ outside counsel) meet many of the same goals. Indian lawyers excel at demonstrating their value by “doing” their work excellently and efficiently. The efficiency of LPOs and their staff, however, will never be great enough to justify having to repeat any legal work, particularly large scale discovery tasks such as the expansive document reviews and privilege logs that are Aphelion’s special niche.

Therefore, LPOs must not rely primarily on efficiency arguments to attract and retain clients. Instead, like the new firms that find their market outside the “Cravath system,” LPOs must ensure that their efficiency produces excellent work for their clients. No matter how much arbitrage exists between the U.S. and Indian legal markets in terms of hourly rates, that constitutes only the most raw form of efficiency. Such bare efficiency will disappear quickly if the resulting work product needs to be done twice, has latent errors, or is otherwise lacking. Instead, the focus of a LPO firm that wants to be successful in the long term will be meeting (and even exceeding) the quality of work product that is produced by firms in the U.S. but billed at much higher hourly rates. The only way to meet or exceed that quality is for the LPO to stay focused and to set its sights on producing the excellent work product that clients expect regardless of who produces it where or at what cost.