Blame it on Rio

Back in December 2008, Brian Dalton wrote about the growth of legal process outsourcing (LPOs):

“As clients are demanding more for less, law firms may find LPO more relevant than the LBO in 2009. Slashing legal costs ‘was emerging as a trend even before the credit crunch; now it is an overriding imperative,’ declares Richard Susskind, in a look at the ‘soaring’ Indian legal process outsourcing (LPO) industry. For a while now, some law firms have been outsourcing back office (e.g., IT) functions. Increasingly, however, the outsourcing option becomes more attractive for certain (‘routine or repetitive’) legal work, such as research, doc review and due diligence … LPO companies hire Indian legal graduates with starting salaries at about $7,000. Compare BigLaw's $160,000 base for first-years doing what often amounts to the same type of work.”

In June 2009, it looks like international mining conglomerate Rio Tinto has been sweating the same math. In an effort to shave 20 percent off its annual legal spend—some $100 million—the conglom has hired its own Indian legal team. While the outsourcing of legal work to India has been steadily growing, Rio Tinto is the first major player to cut out the law firm middleman and take charge of the process, building its own team of 12 Delhi-based lawyers to tackle work that might otherwise have fallen to its (seven times more expensive!) lawyers in London. The mining company, oft represented by such pricey heavyweights as Linklaters and Baker & MacKenzie, will now punt its own work overseas. And it’s not just mundane legal processing we’re talking here; less routine and more complex matters will be handled by the mining giant’s Indian crew—a crew expected to double in size within a year. Already, the India unit has saved the company more than $1 million.

Rio Tinto’s Indian legal team was assembled by CPA Global, a Jersey company specializing in trademarks, patents and acts. So optimistic is CPA on the scope of the market that it has invested more than $50 million on legal facilities in Delhi; plans to add another 500 Indian lawyers within the year; and hopes to someday field more than 3,000 lawyers in Manila, New Zealand and South Africa.

As it might evidence a seismic shift in legal practice, Rio Tinto’s maneuver is putting the fear of God (Ganesha?) into BigLaw. But fussing and backtalk is not an option, not with GCs under such pressure to cost-cut. Unless they wish to antagonize clients, BigLaw will have no choice but to welcome their Indian co-horts and adjust to this new sphere of competition in the traditional way—by particularizing and differentiating value. The customer, as ever, is king.

                                                                   -posted by anu rao