It appears that Magic Circle firms have fallen in love with outsourcing. Most American associates will hope that like Mad Cow disease, the outsourcing craze stays on English side of the ocean. The Lawyer reports:

Allen & Overy (A&O) has become the first magic circle firm to outsource legal work as an increasing number of UK firms embrace legal process outsourcing (LPO) in a bid to reduce their overheads.

The firm has partnered with LPO provider Integreon to outsource basic litigation document review to teams in New York and Mumbai, in what could generate a 30-50 per cent cost saving.

Anybody think we’ll see some geographic hypocrisy in the comment thread? Outsourcing to New York = good, outsourcing to Mumbai = bad? Or will everybody simply agree that outsourcing = apocalyptic?

After the jump, The Lawyer has an excellent chart that shows us where British firms stand with regards to outsourcing.

It wasn’t that long ago — just back in August 2008 — that the ABA changed its rules to allow the outsourcing of American legal work. In the midst of the recession, a lot of people are still trying to figure out if outsourcing will cause a more fundamental change to the nature of the Biglaw business model than anything we’ve seen during the credit crunch.

Now, the ABA is asking its lawyers to share their opinion on outsourcing. This week’s ABA Intellectual Property Law section e-letter contains a link to a very interesting survey. Here’s the description from the e-letter:

Outsourcing Task Force Seeks Survey Input From You

The American Bar Association’s Outsourcing Task Force is conducting a survey on outsourcing. The objective of the Task Force, at the Request of ABA President-Elect Steve Zack, is a Report with Recommendations to the House of Delegates on the subject at next year’s Annual Meeting.

An important means of collecting input from a broader cross section of the
ABA is an online survey which can be accessed at: http://www.zoomerang.com/Survey/?p=WEB229LAVJNGRM.

As input from the broadest possible range of American lawyers is critical, the Task Force would greatly appreciate if every member could take a moment to complete this survey.

Immediate Past Section Chair Gordon Arnold is a member of the Task Force and serves as its Liaison to the Section of Intellectual Property Law. He strongly encourages all to complete this survey.

IP lawyers, here is one chance to voice your opinion.

After the jump, some we post a couple of the questions the task force is asking.

Baker & McKenzie, which held the #2 spot in terms of revenue for 2008, has taken a dip in 2009. The firm’s fiscal year ended on June 30, and AmLaw Daily reports that global revenue fell by 3% for the firm.

As noted in Morning Docket, profits per partner took a bigger hit, plummeting 17%, thanks to the recession:

Baker & McKenzie reported Friday that global revenue declined 3 percent to $2.11 billion and profits per partner fell a more significant 17 percent to $992,000 in fiscal year 2009, bringing an end to a four-year period over which the firm experienced consecutive double-digit revenue growth and an 85 percent increase in profits.

While Chicago-based Baker & McKenzie, which generated 66 percent of its fees outside the United States, highlighted the role currency exchange rates played in the falling benchmarks for fiscal year 2009, management admitted the economic downturn negatively impacted the firm’s financial performance.

As we’ve previously reported, Baker has been a leader in terms of outsourcing legal work. The new profit numbers should mean that the trend continues. More details after the jump.

Today we sat down with Gururaj Potnis, director of Manthan Legal, who was in New York to attend a legal conference. Manthan is an Indian company that describes itself as a “leader of offshore Legal Process Outsourcing.” According to Potnis, Manthan has roughly 280 lawyers — 140 senior attorneys, and 140 more junior colleagues who do paralegal-type work — and they stand ready to help law firms cut costs (and increase profits).

Potnis thinks a “tectonic shift” is taking place in the legal industry, and he believes his company is well-positioned to take advantage of the new market. According to him, he’s got law firm clients on his side: “For the first time, the large law firms are being asked by their customers: ‘Are you efficient?’” The market change that we are now seeing “is 99% being driven by customers.”

Manthan Legal is positioned differently from its Indian competitors in legal outsourcing. It works primarily for law firms rather than in-house counsel:

Right now, 90% of the [outsourcing] industry is being driven by corporate counsel [i.e., in-house lawyers]. At some point in time, they’ve been exposed to the concept of having to get the maximum amount of work from the minimum budget….

[I]n the short term, the corporate counsel will drive [the outsourcing trend]. But in the long term, the law firms will have to develop an alternate billing model.

And under these alternative billing models, outsourcing may have an important role to play.

What can outsourcing firms offer? Junior associates might not like it, but managing partners will have to start paying attention. More after the jump.

Whenever we talk about outsourcing, a number of commenters disparage the quality of work provided by less expensive, foreign lawyers. But jingoistic rhetoric isn’t going to do anything to stop the movement of legal work offshore. Indian lawyers scored a major victory yesterday, as a suit against Sacha Baron Cohen was tossed out of L.A. Superior Court.

The suit alleged that Cohen (performing as Ali G) suggested he had sex with a woman (who is referred to as “Jane Doe” in the lawsuit) during an “interview” with Gore Vidal. Los Angeles Superior Court Judge Terry Friedman threw out the suit. He ruled:

No reasonable person could consider the statements made by Ali G on the program to be factual. To the contrary, it is obvious that the Ali G character is absurd, and all his statements are gibberish and intended as comedy. The actor, Sacha Baron Cohen, never strays from the Ali G character, who is dressed in a ridiculous outfit and speaks in the exaggerated manner of a rap artist. Ali G’s statements are similarly absurd. For example, prior to the reference to Plaintiff, while ‘interviewing’ the author Gore Vidal, Ali G refers to the Constitution of the United States as having been written on two tablets, clearly intended to confuse the Constitution with the Ten Commandments. Altogether, the program is obviously a spoof of a serious interview program. No reasonable person could think otherwise.

It’s an important victory for comedy performers. But who did the lion’s share of the legal grunt work on the case? That would be an Indian law firm under the supervision of SmithDehn.

More details after the jump.

Remember, way back in August, when the ABA revised its rules to allow outsourcing of American legal work? At the time, we said:

Yet so long as Biglaw remains big business, how long before the work of junior associates can be cost effectively shipped overseas? It’s not like firms want to go to $190K for incoming associates.

People already in the pipeline should be fine. But change is coming to our profession. This ABA decision isn’t the tip of an iceberg, it is the receding sea that anticipates a tsunami.

Note, those words were written weeks before Lehman collapsed, the walls of the 64th precinct started bleeding, and dogs and cats started living together.

Well, we can keep waiting for the ABA to do something to stem the tide of legal job losses. But meanwhile, in a most ironic fashion, the Society of Indian Law Firms is stepping up to try to keep Indian jobs from going to foreign lawyers. The American Lawyer reports:

Lalit Bhasin of New Delhi’s Bhasin & Co calls “totally unacceptable” the idea that the legal profession in India should be treated as a business that “can be acquired, merged, amalgamated, taken over, and sold to global players.” He points to the number of Indian lawyers serving in the judiciary and government, claiming that the profession’s civic role could be diluted by the entrance in the market of foreign lawyers.

But I thought globalization meant … Aren’t we living on a flat … This isn’t how Thomas Friedman said this was going to happen!!!

I need a break. I feel like Jack after Locke blew up the submarine. Check back in after the jump once I’ve collected my thoughts.

Back in the golden days of Biglaw (in the before times, in the long, long ago), associates were fired all the time. Getting laid off for poor performance or low hours is nothing new.

Of course, back when we had a functional American economy, getting fired was a temporary bump in the road. You could always work at a smaller firm or for the government. Back in the day, you could even work as a contract attorney if you needed something to tide you over.

Now … everything is different. And contract attorney jobs are great gets in this market. Yesterday, the National Law Journal ran a piece about the curious case of paying off law school debt while making $35 an hour:

As law firms downsize, laid-off attorneys and new law school graduates unable to find jobs have been turning to an option they may never have imagined at law school: becoming contract attorneys — hired guns for $35 an hour.

Yet in the past couple of months, even that field appears to be showing signs of a slowdown.

People who waited too long to swallow their pride and confront the reality of the financial crisis are finding that contract work has already been snapped up by less prestige conscious job seekers.

And it probably isn’t helping that just as the American legal market is starved for low level work, the ABA has made it easier to outsource doc review to other countries:

Also cutting into their business is the growing popularity of outsourcing to India. Hudson Legal has countered with an ad campaign that encourages law firms to “onshore,” and choose U.S. staffing companies where there are no security or privacy concerns and where they operate in the Eastern time zone.

Even if you land a contract attorney job you never thought you wanted, the working conditions remain just as bad as you remember them.

The terrorist attacks in Mumbai reminded everyone that we live in a dangerous world. But as India takes the steps necessary to improve its homeland security, we shouldn’t expect the tragedy to stem the tide of outsourcing American legal functions to Indian companies.

The National Law Journal reports that firms are increasingly proud of their outsourcing initiatives:

As outsourcing becomes more commonplace and corporate counsel and law firms are under increasing pressure to reduce costs for clients, law firms such as Baker & McKenzie; Greenberg Traurig; Milbank, Tweed, Hadley & McCloy; and Shapiro Sher Guinot & Sandler are actually touting at conferences the benefits of outsourcing.

Baker & McKenzie was the last best hope for Heller Ehrman, Greenberg Traurig is conducting stealth layoffs, and Millbank just announced Half-Skadden bonuses. But their outsourcing operations are thriving.

And the wave of firms outsourcing legal services to India is only going to get bigger:

Forrester Research projects that legal outsourcing to India will reach $4 billion by 2015. Some experts, however, find that number too low and others too high. Regardless, other numbers don’t lie — there are an estimated 800,000 lawyers in India and nowhere near that many jobs. Attorneys there charge, on average, $35 an hour, or no more than half of what an upper paralegal or lower-level associate bills, and up to three times less than an upper-level associate’s time.

After the jump, will global terrorism have a chilling effect?

We reported last month that the ABA made it easier for law firms to outsource legal work. But as many commenters pointed out, there would need to be a reason for firms to do that and risk a reputation hit.

Perhaps the market crisis has given firms the perfect opening to begin using low cost legal workers outside the United States.

The Hindu Business Line reports that India is “lawyering-up”:

At a time when the off-shoring industry is plagued with instances of employee lay-offs, companies providing legal process outsourcing (LPO) services are on a hiring spree as demand for litigation services from the US rises.

In the next six months to a year, several LPOs have plans to at least double headcount in order to cater to the increased work flow resulting from the recent turmoil in the US that has seen several financial institutions collapse.

The Wall Street crisis has resulted in increased litigation related to bankruptcy, mergers & acquisitions and other related aspects.

We’ve said before that the first front of this outsourcing battle would be fought over document intensive litigation, when clients demanded the lowest possible costs. Does that sound like a bankruptcy proceeding to anybody?

Indian businesspeople watch CNBC too:

For US companies and law firms, the pressure to put a throttle on costs is immense. By outsourcing to Indian vendors, companies can save about 70 per cent in costs vis-À-vis law firms in America.

After the jump, how Indian firms save 70 cents on the dollar.

Our recent post about outsourcing sparked some interesting debate about whether junior-level work will be shipped out of the country in the near future.

The commenters seemed to break into three camps: (1) you’re an idiot, outsourcing is already here; (2) you’re an idiot, ain’t nobody gonna take my job, USA, USA; and (3) you’re an idiot.

Fair enough on all counts. But wherever you stand on the issue it should be noted that people are trying to convince your partners to outsource, now.

Ron Friedmann of Integreon, a large legal process outsourcing firm, has written a treatise to convince firms to outsource the work most junior associates do for a living. He starts out talking in language managing partners love:

Until recently, firms emphasized revenue growth over cost reduction. They have merged, invested in marketing, added practice groups, and opened offices around the world. Now, however, with a recession likely, cost control is of growing interest.

Most people should know what “cost control” is code for. But let Friedmann do the double talk:

Outsourcing converts fixed costs to variable ones and avoids the need to borrow. Many law firms are under-capitalized. Partners may therefore want to avoid fixed commitments and to minimize borrowing. Similarly, law departments have small capital budgets and like to avoid locking in headcount. For both, outsourcing provides flexibility and avoids capital commitments.

Capital commitments? Like summer associate programs that offer rising 3Ls jobs over a year before they report to work? Great.

Friedmann tries to be funny, after the break.

Remember when “outsourcing” was something that only blue collar workers with “some” high school education had to worry about? Well, those days are long gone, and now the global economy is officially poised to raid Biglaw jobs.

In an opinion (PDF) made public on Tuesday, the ABA declared shipping legal work overseas to be ethically permissible. The New York Law Journal reports that the first causalities will likely be contract attorneys brought in for extra muscle during document intensive litigation.

But we know it won’t stop there. Check in with any other industry that has to face off against a subcontinent of educated, English-speaking professionals willing to do the work for fractions of what Americans demand. It’s not pretty.

To be sure, we can count on the ABA to erect other (largely protectionist) policies, to ensure that high-end legal work remains the sole purview of partners graduates from accredited law schools.

Yet so long as Biglaw remains big business, how long before the work of junior associates can be cost effectively shipped overseas? It’s not like firms want to go to $190K for incoming associates.

People already in the pipeline should be fine. But change is coming to our profession. This ABA decision isn’t the tip of an iceberg, it is the receding sea that anticipates a tsunami.

Make haste for high ground.

ABA Gives Thumbs Up to Legal Outsourcing [Law.com]

Earlier: Biglaw to… Rupees?

Jobs moving from the first world to the third world has been a trend for quite a few years now. Originally in manufacturing and call centers, the cheap services offered abroad are starting to get more specialized, such as tax preparation and even local journalism.

We wrote last year about how clients are putting pressure on law firms to outsource basic legal tasks to Indian lawyers with hourly rates of $20. A recent Washington Post article sounds the outsourcing alarm again for lawyers. It says the kind of legal work being sent to India is expanding rapidly:

Indian workers who once helped with legal transcription now offer services that include research, litigation support, document discovery and review, drafting of contracts and patent writing. The industry offers an attractive career path for many of the 300,000 Indians who enroll in law schools every year. India and the United States share a common-law legal system rooted in Britain’s, and both conduct proceedings in English.

If Hollywood is in on the trend, then you know there’s trouble, since all important trends start in California.

“Ninety percent of a lawyer’s work is legal research and drafting, and all this can now be offshored to India,” said Russell Smith, who worked in a Manhattan law firm called SmithDehn before moving to India to set up an outsourcing company in 2006. “A large portion of our fees in the U.S. is because of office rent. It is often a big decision to hire one attorney in the U.S. In India, we can hire 10 at a time and train them all at once.”

Smith’s Indian company, SDD Global Solutions, handled much of the legal work for the film “Borat.” Other clients include the Washington-based firm Appleton & Associates and U.S. movie studios and television networks.

“My people in India can do everything from here, except sign the opinion letter and appear in an American court,” he said.

Smith’s Indian office recently researched and drafted the motion papers for the dismissal of a libel case against the producers of HBO’s “Da Ali G Show.” Smith said that if it had not been for the cheaper option of outsourcing, the producers would have settled.

On the upside, the article talks about one persisting need for American lawyers: to train Indian lawyers. Indian lawyers tend to write in “flowery, British-style English,” and need to be “retrained to write in crisp, short sentences.” Better get working on those writing skills.

U.S. Legal Work Booms in India [Washington Post]

Do you have a Scrabulous problem? Are you addicted to the online version of Scrabble, which you can play via Facebook?

We had a Scrabulous addiction for a while, until we forswore the game. We’re finishing up current games; in fact, we just scored a bingo right before posting this (“OPERATED” — see board at right). But we are not starting or participating in new matches.

If you’ve been finding your own productivity impaired by Scrabulous, however, you may not need to give up the application. It may be taken out of your hands, over your protest. From the BBC:

Facebook has been asked to remove the Scrabulous game from its website by the makers of Scrabble. The Facebook add-on has proved hugely popular on the social network site and regularly racks up more than 500,000 daily users. Lawyers for toy makers Hasbro and Mattel say Scrabulous infringes their copyright on the board-based word game.

The move has sparked protests by regular fans of Scrabulous keen to keep the add-on running. Scrabulous is currently one of Facebook’s ten most popular applications - little programs that Facebook members can add to the profiles they maintain on the site….

The Scrabulous add-on was not created by Facebook but was built for the site by Rajat and Jayant Agarwalla - software developers based in Kolkata.

Apparently Hasbro and Mattel don’t look kindly on outsourcing to India — unlike, say, law firms. We’ll keep you posted about the fate of this game.

Facebook asked to pull Scrabulous [BBC]

The law firm of Seyfarth Shaw cordially invites its associates… to toast their own obsolescence. Check out the invite below, for “a cocktail reception to welcome the group of attorneys visiting from Manthan Services in Bangalore, India.”

Our tipster wonders: “Why pay first-years $160,000 a year for legal research (or document review), when you can use a lawyer from India at a fraction of the cost?”

Earlier: Nationwide Worldwide Pay Raise Watch: Mumbai to $8,160?

Multiple readers sent us this article, from Bloomberg News:

Bruce Masterson, chief operating officer of Socrates Media LLC, asked his outside counsel to customize a residential lease for all 50 U.S. states in 2003. The firm’s estimate: about $400,000. He rejected that price tag and hired QuisLex, in Hyderabad, India, which did it for $45,000.

“It was good quality,” said Masterson, whose Chicago-based company publishes legal forms on the Internet. “We’ve been working together ever since.”

Clients are pushing law firms like Jones Day and Kirkland & Ellis to send basic legal tasks to India, where lawyers tag documents and investigate takeover targets for as little as $20 an hour. The firms are reacting to a trend that will move about 50,000 U.S. legal jobs overseas by 2015, according to Boston- based Forrester Research Inc.

Biglaw partners may soon be telling associates: “If you don’t think $160,000 is enough to review documents for 2200 hours a year, fine. We’ll just ship your job off to India, where ‘Biff’ and ‘Jenny’ will be happy to be document drones — for under $9,000 a year. And if I have a problem with my laptop, they can help me with that too!”

Jones Day, Kirkland Send Work to India to Cut Costs [Bloomberg News]

Right now all everyone can talk about is the prospect — or specter, depending on your point of view — of House Speaker Nancy Pelosi. But for those who follow the legal profession, the Democratic takeover of the House has other important implications.

Meet the incoming chair of the House Judiciary Committee: Rep. John Conyers (D-MI). He’s rather liberal, pretty old (77), and one of the longest-serving members of the House — which is why he’s the most senior Democrat on the influential Judiciary Committee. He’s viewed by conservatives with a mixture of fear and loathing, but to many liberals he’s a hero.

We don’t want to get bogged down in substantive political discussion (ewww), so we’ll just pass along some juicy gossip about Congressman Conyers. From CNN:

Two former staff members of U.S. Rep. John Conyers Jr., D-Michigan, say the longtime Detroit congressman made them baby-sit his children, run errands and work on political campaigns while they were on his congressional payroll.

Sydney Rooks, whom Conyers hired as a legal adviser in his Detroit office, recalls the lawmaker brought his two young sons into her office several times, saying, “Rooks, they’re your responsibility for right now. I’ll be back later.”

Leaving your kids in the care of a lawyer: Isn’t that child abuse? (Or at least neglect?)

We don’t think these allegations are a big deal, ‘cause everybody on the Hill pulls this kind of stuff. But we still find the mini-scandal amusing. For more details, see here and here.

Rep. John Conyers [official website]
John Conyers [Wikipedia]
Maybe Hillary Was Right After All [Wonkette]
Congressman Accused of Using Staff to Baby-Sit [CNN]
JOHN CONYERS, JR. [DiscoverTheNetworks]
Why your vote counts — John Conyers as House Judiciary Chair [MyDD]

Not sure how we feel about this development:

For years, outsourcing has been a dirty word inside the world of white-shoe law firms…. A number of large law firms, though, are starting to tiptoe onto far-flung shores.

The latest is Clifford Chance, one of the largest law firms in the world with 29 offices in 20 countries, which will announce plans today to consolidate and move big chunks of its administrative functions like accounting and technological support to an operation in Delhi, India, by next spring.

Ah yes, Clifford Chance — already renowned for its spectacular associate morale.

We’re sure CC associates will love it when their computer freezes up at 2 a.m. the night before a closing, they call the dubiously-named “Help Desk,” and they spend 45 minutes trying to explain the problem to an Indian woman who insists that yes, she really IS named “Rhonda.”

On the other hand, outsourcing all boring tasks could be good for law firm associates over the long term. Can Bangladeshis be trained to conduct due diligence?

Law Firms Are Starting to Adopt Outsourcing [New York Times via How Appealing]
Outsourcing: Everybody’s Doing It, Even Law Firms [WSJ Law Blog]
Clifford Chance LLP: Associates’ Concerns [Internal Memos]