Transcript of "2009 India Offshoring: A New Model for Legal Services"
By Indira Saladi
shoring: A New Model for
Off shore 'ôf-'shôr, adverb, adjective and preposition, dates back to 1720.
The Merriam-Webster Online Dictionary describes offshore as “from the shore” or “at a distance
from the shore” and “outside the country.”
Offshoring refers to moving an activity or task from a country where it costs more (“high-cost coun-
try”) to another where it costs less (“low-cost country”). For example, moving activity from the United
States or the United Kingdom to India is considered offshoring.
The United States and the United Kingdom are generally considered high-cost countries, while
China, India and Chile are considered low-cost countries.
Because much of the offshoring of legal services is being shifted to India, the rest of this article as-
sumes that India is the “choice” offshoring venue.
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Law departments are being challenged to attorneys consider advertising or contract
reduce budgets for outside counsel matters reviews drudgery? If so, offshoring those
and provide more services at lower costs — a responsibilities may garner acceptance.
demanding task for any general counsel. One The activities that a specific corporation
viable solution is offshoring. IndIra SaladI is performs in volume or those that are costly to
senior intellectual prop-
This article discusses the challenges, issues erty counsel with Mo- execute vary depending upon specific business
torola, Inc. Her practice
and questions that in-house attorneys should focuses on identifying,
factors. However, such activities generally
keep in mind when considering offshoring to protecting and leverag- relate to litigation, corporate/commercial
ing intellectual property
other countries, but particularly to India. of the radio Solutions agreements and intellectual property opera-
business of Motorola. tions. for example, tasks for offshoring candi-
For many years, Saladi
Why Offshore? led Motorola’s patent dacy include: litigation activities such as
There can be many reasons to offshore, but offshoring activities document reviews or research (legal and busi-
and established the
two are most commonly cited: company’s India office, ness information); corporate/commercial ac-
1. Reduced fees: If an activity costs $150/hour which performs patent- tivities such as drafting and revising, abstrac-
related activities for
in the United States, the same activity may its US attorneys. She tion, due diligence, corporate governance and
cost about a fourth of that in India. and graduate degrees in
credit analysis; and intellectual property opera-
2. Increased Capacity: Having resources in electrical and computer tions activities such as trademark and patent
engineering from the
a low-cost country may enable increased University of Illinois at searches, drafting, analysis, prosecution, en-
capacity in the high-cost country. for Urbana-Champaign and forcement and monetization. Any activity can
the Illinois Institute of
example, if an attorney in the United States Technology (respective- be structured to benefit from offshoring, but
offshores review of an agreement to India, ly), and a law degree care should be taken not to run afoul of export
from the University of
then the attorney can reallocate that time Chicago. Saladi can controls. However, once structured, companies
be contacted at indira.
and apply it to higher-value services, such email@example.com.
should ensure that offshoring is beneficial.
as strategic counseling.
Benefiting from cost savings and increased A Look at the Business Models
capacity, a law department is better able to adapt The business models for offshoring are gener-
to client demands. Unexpected large projects ally categorized as outsourcing, hybrid or in-
or unplanned sophisticated work is more easily sourcing. Depending upon the activity chosen to
accommodated either from a budget or a human resources offshore, one model may be more appropriate than others.
perspective. flexibility is achieved.
Therefore, the law department can provide more ser- Outsource Hybrid Insource
vices without expending the additional costs normally KPO/LPO KPO/LPO or Indian India office
associated with providing higher-value services. law firm partners
There are significant issues (e.g., quality) to consider with US attorney
in order for offshoring to be successful (addressed Indian US law firm
later in the article). But once tackled, offshoring may Law Firm partners with
be embraced by in-house counsel as a way to manage
Indian law firm
What Activities to Offshore? Outsourcing refers to the practice of engaging a third
The biggest benefits of offshoring are gained from party — either a law firm or a vendor in a low-cost coun-
those activities that are scalable and costly (whether in- try — to perform legal activities. for example, a corpora-
ternal or external, and whether time-intensive or requir- tion may decide to engage a vendor in India to perform
ing highly specialized expertise). That is to say, if the certain work. This vendor would generally be known
volume and the cost of the activity performed within the as a Knowledge Process Office (KPO) — if the vendor
corporation is high, starting with a small group focused focuses on high-end, complex, knowledge-based tasks and
on that activity and then ramping up to meet demand for processes such as market or investment research, patent
that activity makes sense. Offshoring can be performed application drafting, legal and analytic services, or sourc-
on activities that require a lot or a little aptitude, so skill ing and information management and more. If a vendor
level alone may not be a good indicator of whether to do is focused only on legal tasks, it is generally known as a
it or not. Consider offshoring repetitive tasks and work Legal Process Office (LPO). Whether KPO or LPO, the
that US in-house counsel dislikes doing. Do department vendor can be captive, providing services for one specific
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corporation or client, or the vendor can be shared, per- tions. for example, if you’ve never attempted offshoring,
forming similar work for a number of clients. Recent Wall one way to test the waters is to ask your favorite US law
Street Journal and National Law Journal articles estimate firm to try offshoring with you using a hybrid model.
that LPOs in India generate about $250 million in annual Regardless of the business model, it’s important to have
revenues. forrester Research estimates that the world wide an individual in your organization serve as the interface to
industry will grow to $4 billion in revenue by 2015. those in the low-cost country. If you are fortunate enough
Insourcing on the other hand, refers to a corporation to have someone in your department that is particularly
opening its own office in a low-cost country to perform well-suited to do business with other cultures (e.g., is
legal activities that normally would have been done in cosmopolitan), or is descended from one of these cultures,
the high-cost country. If you decide to insource, consider consider leveraging that an individual.
leveraging existing resources. Does your corporation have
a sales office, a technology design center, a call center/IT Offshoring Concerns
department or a manufacturing facility in India that can There are many issues that need to be addressed for suc-
be used as a basis to establish an insourced office? cess in offshoring legal work. What kind of quality will the
In the hybrid model, a US attorney assists with the off- work product have? Are there time zone or turnaround issues
shoring activity performed in the low-cost country. In other because the work is being done in another country? Are ex-
words, the corporation sends its work to either a KPO/LPO port control laws an issue? How do you comply with US legal
or Indian law firm that performs some of the work and has ethical rules? How do you defend your practices in litigation?
a US attorney complete other parts. Having a US attorney
involved may alleviate the risk associated with offshoring. Quality
In yet another hybrid model, a corporation sends its work to Quality is a valid concern and should be addressed explic-
a US law firm that partners with either a KPO/LPO or an itly and directly. Putting clear expectations around certain pa-
Indian law firm to complete the assignment. rameters can proactively help prevent potential quality issues.
There are advantages and disadvantages to each of the Policies. The corporation, either alone or with a part-
models. from a GC’s standpoint, three models include: ner (e.g., a KPO/LPO), should define policies that clearly
communicate expectations both for the corporation
Outsourced and for the KPO/LPO. for example, if the corporation
In this model, the corporation does not have to worry decides to offshore confidentiality or nondisclosure agree-
about hiring; attrition; employee career management; pro- ments (NDAs), a policy with respect to this activity may
cesses and LPO; specific issues; low-cost country-specific specify rules with respect to acceptable NDA clauses. for
issues; or workload issues. example, binding arbitration is not acceptable. The policy
An outsourced model may be most appropriate for ac- can further state acceptable fallback language that can be
tivities that don’t require lots of oversight or lots of control. negotiated for value (e.g., binding arbitration) in a favor-
An activity that is considered a legal commodity — for able forum, but in no event will apply to patent disputes.
example, document proofing — can be outsourced in a Processes. The corporation, either alone or with a
straightforward manner. partner (e.g., a KPO/LPO), should define processes that
clearly provide steps to follow for both parties. for exam-
Insourced ple, to ensure that a completed patent application meets
In this model, the corporation can manage employee the corporation’s expectations (namely quality), a process
attrition and the quality of completed activities. In addi- should be implemented that requires its US attorneys to
tion, the corporation does not need to consider conflict of be engaged in the offshoring process by providing feed-
interest risks and, additionally, may gain a tax advantage back at appropriate points in the drafting process.
by leveraging US-India tax agreements. Templates. Because legal activities necessarily rely on
An insourced model may be most appropriate for command of the English language, offshoring to a coun-
activities that require oversight or require control. An try where English is a second language presents risk.
activity that necessitates a high degree of control by US Minimizing the amount of free-form writing performed
attorneys (e.g., patent application drafting) may be most by offshore individuals reduces the possibility of poor
appropriately insourced. quality. One way to achieve this is through templates
where standard language and phrases are outlined. In
Hybrid addition, templates outline the format or structure that
Having a US attorney serve as an intermediary may the final product must meet so that the completed proj-
ensure that the completed work product meets US expecta- ect adheres to US in-house quality standards.
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Hiring Criteria. The corporation can select candidates or A two time reduction is achieved. In addition, you will need
third parties (e.g., a KPO/LPO) with specific attributes. for to implement appropriate IT systems, such as a document
example, if technical expertise is required, then the corpora- server, to support such a business model.
tion can choose candidates who have a certain degree of You may also want to consider a shift in the work day at
technical competence by requiring that they pass an exam the offshored office. for example, if your US office is located
that tests for such skill. If legal competence is required, then in Chicago, have those located in India work from 1 pm until
the corporation can select candidates with the specific legal 9 pm. This way they are working until about noon in Chicago.
credentials. If verbal English skills are necessary, then the
corporation may require call center training. In all cases, the Timing — Turnaround Time
corporation can test for English writing proficiency to mini- You will likely have to answer two questions concern-
mize the amount of training relating to that skill. Because the ing offshoring and timing: Will offshoring increase the
population of qualified candidates in a low-cost country such turnaround time of the legal activities? And will the
as India is so large, the ability to tailor the selection criteria time from start to finish increase now that you are using
to the required task is relatively easy. When I was looking for a low-cost resource to perform the activity?
electrical engineering candidates for a six-month internship
program, I received over 4,000 resumes in a matter of days.
Chart 1: Time Differences
It’s important to address
quality, because where the India
quality is high, resistance (IST) Savings
to offshoring drops away. 12:30 am 2:00 pm 1:00 pm 3:00 pm 2:00 pm
1:30 am 3:00 pm 2:00 pm 4:00 pm 3:00 pm
2:30 am 4:00 pm 3:00 pm 5:00 pm 4:00 pm
Training. Whether the training is related to specific
corporation policies, newly created processes or updated 3:30 am 5:00 pm 4:00 pm 6:00 pm 5:00 pm
templates, conduct training early and often to ensure that 4:30 am 6:00 pm 5:00 pm 7:00 pm 6:00 pm
the quality of the final work product meets the corpora- 5:30 am 7:00 pm 6:00 pm 8:00 pm 7:00 pm
tion’s requirements. Training must also be periodic and 6:30 am 8:00 pm 7:00 pm 9:00 pm 8:00 pm
refreshed so that information is not forgotten. In addi- 7:30 am 9:00 pm 8:00 pm 10:00 pm 9:00 pm
tion, training for the US attorneys is also necessary so 8:30 am 10:00 pm 9:00 pm 11:00 pm 10:00 pm
that they can understand how offshoring works, as well
9:30 am 11:00 pm 10:00 pm 12:00 am 11:00 pm
as the expectations required to make it effective.
10:30 am 12:00 am 11:00 pm 1:00 am 12:00 am
It’s important to address quality, because where the
quality is high, resistance to offshoring drops away. The 11:30 am 1:00 am 12:00 am 2:00 am 1:00 am
same US attorneys that would not touch offshoring with 12:30 pm 2:00 am 1:00 am 3:00 am 2:00 am
a ten-foot pole will now beg you to allow them to partici- 1:30 pm 3:00 am 2:00 am 4:00 am 3:00 am
pate because the practice allows them to be more effec- 2:30 pm 4:00 am 3:00 am 5:00 am 4:00 am
tive in their responsibilities. 3:30 pm 5:00 am 4:00 am 6:00 am 5:00 am
4:30 pm 6:00 am 5:00 am 7:00 am 6:00 am
Timing — Time Zone 5:30 pm 7:00 am 6:00 am 8:00 am 7:00 am
Consider the time zone differential as an advantage. Since
6:30 pm 8:00 am 7:00 am 9:00 am 8:00 am
the waking hours of the United States overlap only by only
7:30 pm 9:00 am 8:00 am 10:00 am 9:00 am
a few hours with the waking hours of India, and since the
business hours do not overlap at all, (see chart 1 on time 8:30 pm 10:00 am 9:00 am 11:00 am 10:00 am
differences), one of the best ways to benefit from India-based 9:30 pm 11:00 am 10:00 am 12:00 pm 11:00 am
resources is to design a process that takes advantage of the 10:30 pm 12:00 pm 11:00 am 1:00 pm 12:00 pm
time differential. Implement a system that allows work to be 11:30 pm 1:00 pm 12:00 pm 2:00 pm 1:00 pm
performed in the United States during US business hours
and then handed off to India during Indian business hours. Normal Sleep Hours
In such a fashion, an activity that would normally take 16 US Normal Work Hours
business hours can be reduced to eight in the United States.
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To ensure that turnaround time is not increased because Conflicts of interest. When sending work to a US law firm,
of offshoring, define response time metrics. for example, the the law firm addresses this responsibility and performs the
time period between receiving a request and handling that conflicts check. When offshoring, however, unless specifically
request must fall within a specific time parameter. In the requested and made a part of the operating policies, the KPO
case of a response to an office action in a patent or trade- may not perform a conflicts check against your and other
mark application, it is important to define the time that the clients’ matters. To mitigate against such a risk, ask about the
request is received by the low-cost resource to the time that KPO/LPO’s other clients. Better yet, use a KPO/LPO that is
a proposed response is received by the US attorney. Defining captive and not shared — that is, ask that the individuals work-
this turnaround time within a specific number of days will ing on your matters not be shared with other clients.
help to ensure that turnaround time issues are addressed. Loss of confidentiality. An attorney has a duty to preserve
In any case, monitor metrics for compliance. Incentivize for client confidences. A GC may be concerned with maintain-
meeting specific metrics, via additional compensation, spe- ing confidentiality regarding the information being offshored.
cial projects or recognition awards, for example. finally, use A corporation should investigate facts concerning data and
operations research methodologies to refine metrics. personnel security. Inspect facilities. Is there secure access to
computers and buildings? What types of computers are used?
Export Control (At least one KPO doesn’t allow employees to write to remov-
A corporation considering offshoring technology or propri- able memory and none of the computers at this KPO have
etary technical activities — including patent-related work, soft- removable drives.) Use employment agreements and confi-
ware development and manufacturing — should take care not dentiality/non-disclosure agreements to reduce risk and have
to run afoul of US export controls. Obtain clearances. Do not recourse in case of a negative outcome.
rely on the foreign filing license issued by the USPTO for the
offshoring of patent activities. Actively performing the clearance
may be easier than you think. Many corporations have a trade
When offshoring, the
compliance department that already has this expertise. Piggy- corporation must ensure that
back on such compliance efforts or engage internal resources to
put in place a process to perform a clearance prior to offshoring ethical rules relating to the
technology. If you don’t have internal resources, learn export
control clearance processes or engage with specialists to under- practice of law are followed.
stand how to put a clearance process in place.
Otherwise, consider performing activities that rely on Litigation
public information. for example, patent prosecution lends During litigation, defending your offshoring practices will be
itself to being offshored since corporations tend to publish important in many respects. If you address privilege and ineq-
their applications at 18 months. Where the information has uitable conduct while defining your offshoring process, you can
been made public, the activity can be offshored without proactively help to prevent potential issues during litigation.
running afoul of US export controls. Loss of Privilege. The privilege log and the communica-
tions subject to privilege are often a battle. Define policies
Ethics to ensure that the US supervising attorney avoids shifting
When offshoring, the corporation must ensure that ethi- decision-making responsibility to offshored resources, so
cal rules relating to the practice of law are followed. Com- that the US attorney provides consistent direction. Outline
pliance with these rules is taken for granted when sending policies and processes with respect to written communica-
work to a US law firm, but must be accounted for when tions. for example, ensure that email communications by
sending work overseas. offshored individuals state that the work is being performed
Unauthorized practice of law. An attorney may not aid a under the direction of a US attorney. If legal advice is being
non-attorney in the unauthorized practice of law. An attorney sought via email, include privileged nomenclature.
often delegates tasks to clerks, secretaries and other lay people, Inequitable conduct. Did the resource in India perform
which is proper if the attorney maintains a direct relationship a Google search to learn the technology and forget to at-
with the client, supervises the delegation and has complete pro- tribute relevant documents necessary for citation to the
fessional responsibility for the work product. Make sure that USPTO in an information disclosure statement? Define
the offshoring process requires that the US attorney oversees policies and processes to ensure that all such information is
and approves the project. Review the ABA Model Rules of Pro- captured and given to the US attorney.
fessional Conduct and various state and local ethics committee It is important to address these issues by providing your
decisions to ensure that offshoring does not amount to the staff with training so that the policies and procedures are
unauthorized practice of law. understood and adhered to.
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Resistance to Offshoring venue, mainly because India is a constitutional democ-
Many US in-house counsel naturally resist offshoring racy and a former British colony with large numbers
due to job security concerns. Such resistance can be passive of highly educated individuals with a command of the
where the attorney will send the work overseas when direct- English language and many KPO/LPOs in operation.
ed but will not review the received work. At the extreme, a There are, however, many other countries that pro-
US in-house counsel’s active resistance can sabotage offshor- vide offshored legal services. Australia, Chile, China,
ing efforts. Resistance needs to be addressed head on and Israel, New Zealand, Philippines, South Korea and Sri
not avoided. In fact, US in-house counsel should be engaged Lanka are also considerations. Regardless of the country
in creating and implementing the offshoring effort. you choose, consider currency fluctuations. for example,
The GC should stress the benefits of offshoring. Having the countries of choice in the 1990s may no longer be
assistance with tasks will allow in-house counsel to be more cost-effective with changes in economic conditions.
productive and enable them to produce a higher quality final
work product. The GC needs to also engage in-house counsel Global Market Expansion Means Options
in figuring out how to leverage the offshore resources. Stress The ever-expanding global marketplace continues to
the benefits of having more hands to assist. In-house counsel provide new avenues for doing business. Offshoring is
need to learn to work in a new model where he or she is a one of them. Take advantage of these new business mod-
manager that oversees tasks instead of working independently. els, but keep in mind the questions that should be asked,
Ultimately, offshoring is just another tool in the toolbox the care that should be taken and the planning that must
of available resources — in-house counsel, US outside coun- be done to ensure a successful operation. Once you have
sel and now, offshored resources. All are available to assist taken into consideration all of these issues, don’t think
in-house counsel’s workload which, if properly managed, that you are done and can sit back and forget about it.
can lead to increased job satisfaction. Now the management of the relationship begins.
Where to Offshore? Have a comment on this article? Email firstname.lastname@example.org.
This article has assumed India as the offshoring
ACC Extras on…Outsourcing and Offshoring
ACC Docket about doing business in India. Corporate counsel with
• Canadian Briefings (May 2008). This issue includes articles like expertise in the region will share with you their insights
“Offshore Legal Outsourcing – A New Trend in Canada,” “In- into the Indian legal and governmental system, compli-
ternational Practice Almanac: Manitoba Canada Professional ance challenges, corruption and the FCPA, US export
Regulation,” “Leveling the Playing Field” and “Technology in controls on sales to specific Indian entities, complying
Canada: An Interview With Jill Schatz.” www.acc.com/docket with Indian competition law, obtaining approvals for for-
• Outsource Resource: Outsourcing is a Way of Life (March eign ownership of an Indian company, and much more.
2008). This ACC Docket column covers and discusses the www.acc.com/legalresources/resource.cfm?show=20139
challenges in-house counsel face with limited budget and • Outsourced and Offshore: The Next Level of IP-Related
staff. www.acc.com/docket Services (Feb. 2007). Join our panel of seasoned cor-
porate practitioners — who have experience with the
Article legal implications of global outsourcing and offshoring
• Risk Management in Next Generation Outsourcing (April from both the customer and the service provider side
2008). This paper explores established and emerging — as they share their tips and tools to enable in-house
risks that may arise from next generation outsourcing counsel to structure a global outsourcing deal, address
models and highlights best practice techniques that can a variety of IP-related aspects of a global outsource
be employed to allow organizations to better mitigate arrangement, and manage the inherent risks present
and manage their risk exposures. when certain services are performed offshore.
Program Material ACC has more material on this subject on our website. Visit
• Doing Business in India (Feb. 2007) . This basics course www.acc.com, where you can browse our resources by prac-
will provide an essential overview for anyone thinking tice area or use our search to find documents by keyword.
ACC Docket 102 July/August 2009