Benefits Of Legal Process Outsourcing For Your Business
Summary: Legal process outsourcing helps to reduce costs, effort, overhead, and increase legal scalability. Businesses using outside firms for unspecialized legal help are reaping substantial cost savings and your business can too.
Business process outsourcing (BPO) has gained a hefty head of steam over the last few years, growing more than 11 percent CAGR per year since 2017, based on data from Reuters, and expected to continue doing so until 2023.
Legal process outsourcing (LPO) is a subset of BPO which helps to reduce costs, overhead, and complexity by slashing out the time-intensive yet simple tasks, such as document management and review. These administrative tasks often account for the majority of legal fees.
Legal tasks are notoriously expensive but absolutely vital to most business operations. Contracts, NDAs, non-compete agreements, and other legal documents form the backbone of inter-organization structures. A study performed by KPMG showed that between 58 and 90 percent of litigation costs were billed for document review.
Document review is a vital portion of litigation, but most businesses consider it to be very basic in terms of service provision. Junior associates are frequently rented out at $300-$400 per hour by mainstream firms. LPO allows businesses to outsource tasks like document review for much cheaper while retaining top legal talent at much costs for specialized legal advice.
By outsourcing legal processes such as document review, businesses have saved as much as 30 to 50 percent—sometimes translating into tens or hundreds of millions of dollars. Some service contracts have been filed with LPOs for well over a billion dollars. One such deal was inked between Cameron McKenna, a UK-based legal firm and Integreon in 2010.
Reduced Legal Overhead
Legal overhead can crush companies who are unprepared. LPO allows businesses to outline the costs associated with a certain venture or project, then set aside funding for those specific services. Internal tasking can be limited to only specialized legal consulting, freeing up both business funding and legal talent to focus on providing opinions and consulting as-needed.
Overhead may include costs in the form of cash, human capital, and even equipment or infrastructure. For example, electronic case filing for US courts is limited to 10MB, requiring documents to be split into multiple parts before submission if they will exceed this size limit. This translates to approximately 150-200 pages at standard resolution.
Many court and legal proceedings still take place at some points on paper, requiring document scanning and physical copy retention—or worse, utilize digital copies without hyperlinks.
Improved Legal Flexibility
Many leading LPO firms bill on an output basis as opposed to a pay-per-hour billing style, allowing businesses to not only pay less but contract out more of the materials they need. Rather than internally assemble documents piecemeal, LPOs can offer a cohesive set of documents for use by a business, closing potential gaps and lowering risk for businesses that utilize their services.
Lower risk operations can provide additional leeway—for example, leveraging freelancers and external contractors as opposed to investing in new employees for short-to-medium-term projects, and even structuring new, limited-scope partnerships. Both of these can require specialized contracts to mitigate risk. This can even include reviewing contracts sent by freelancers and other contractors.
Beyond increasing basic operational freedom, LPO allows businesses to scale their legal operations near-infinitely, taking on staff as-needed through their LPO provider, often for cheaper than hiring fresh talent. This is important in both general practice and operations as well as bet-the-company litigation.
Efficient Contract Management
Ink and paper are tools of yesteryear. Legal process outsourcing opens doorways to more effective means of contract management through digital transformation. By storing contracts in digital format, businesses not only reduce their risks in case of catastrophic events such as fire damage, but also increase efficiency through easy-to-search repositories. This is one instance wherein a contract abstraction service which extracts the most vital information from an array of contracts comes in handy. In the same vein, having an LPO manage contracts means that your business is less likely to miss an expiration date, since that data will always be close at hand and can be delivered as a notification when renewal time is near.
Utilizing an LPO saves time, because it removes the need to track and manage all aspects of contracts from countersignatures to SLAs, renewal terms and price changes, and other similar aspects of contract management which can quickly become cumbersome. Our LPO service at Premikati leverages the well-trusted Ariba® Contract Management Professional™ software to effectively manage every aspect of the contract lifecycle.
Adept Risk Management
By managing contracts through an LPO, your business gains the peace-of-mind of standardization which can substantially reduce compliance risks. Businesses are able to be alerted to any non-standard contractual agreements outside of the pre-approved format. This standardization and control via optimized and automated processes ensure businesses align with their regulatory responsibilities and tread carefully when any changes are at hand.
Premikati is a management consulting firm that is specifically tailored to procurement and supply chain. We offer our clients LPO solutions including abstraction, contract management, and even specialized solutions such as M&A. Learn more about us here.