Comprehensive Guide to Procuring LPO Services in the Philippines
With the growing global competition in almost every trade and industry, outsourcing has increasingly become popular. More recently, we see a similar direction being taken in the legal industry – a shift in the mode of delivery for legal services – outsourcing support functions from secretarial tasks to paralegal works, and now expanding horizons to real legal duties!
Known as legal process outsourcing (LPO),this trend involves the acquisition of legal support services (works by attorneys, paralegals, and other legal professionals) from external vendors found domestically or overseas (commonly referred to as offshoring).Offshore LPO services are procured from countries such as India, Australia, and the Philippines. As an industry and practice, LPO has existed for a few decades, dating back as early as the 1960s.
Similar to other industries and lines of work, law firms always have the tendency to adopt a newer business management model.Almost all sorts of law firms, irrespective of how small or big their operation is, are considering the gains of having a more streamlined enterprise throughout the globe. As can be surmised, outsourcing is one of the major facets that are aligned with this new and growing business system because of the several benefits it offers: expansion of in-house capabilities, flexibility, and overall cost reduction among others.
Most individuals and smaller firms try and do everything, squeezing their time to complete tasks. This may, however, contribute to not only a stagnant growth for the business, but spreading oneself a little too thin can breed inefficiency. With this said, outsourcing other support functions will provide more opportunity for you to focus more on core capabilities and boost time delivery of your services, eventually helping your business generate more profit. For instance, as an attorney, you open a law firm to practice law, not to post in job websites, go through resumes, interview applicants, train employees, and the like. When you outsource, you can do away with such tedious tasks and concentrate more on the profession itself. Furthermore, LPO provides a firm access to high level talent or expertise that the firm itself may not be able to provide. Example, a starting law firm may outsource certain aspects of litigation support, like document review and coding, to niche providers. External legal vendors are very helpful in filling in gaps and enhancing the firm’s internal competency as a result.
Top Offshoring Destination and New Frontiers
Outsourcing is not a perfect solution and like every system, has its downside too. The potential pitfalls of LPO are highly similar to any investment overseas. These include risks in having poor infrastructure support, regulatory or political uncertainties, as well as civil unrest. That is why both individuals and law firms must prudently choose where to put their investments.
India is today’s major destination for legal outsourcing. Legal firms in the US and UK entrust their outsourcing activities to Indian LPO companies because of the primary reason that the Indian legal system is very similar to that of the US and UK. India also has a vast human resource with millions of highly skillful law graduates. Furthermore, aside from the time flexibility, English is the legal framing language adapted for the Indian Penal Code.
Nevertheless, with the increasing demand for LPO services, new frontiers have joined the scene, including a country recently dubbed as “Asia’s Next Tiger” – the Philippines. Between the years 2012 to 2013, the Philippine Stock Exchange (PSE) has hit the highest record close at 7,215.35 mark, a clear proof that the country is gaining momentum, a factor that one should consider when outsourcing support processes.
Why the Philippines?
To date, the Philippines has been closely contending with India as the outsourcing capital not only in Asia, but across the globe.Its outstanding history of political and economic steadiness makes it the ideal choice in the LPO industry.Aside from its sustainable growth patterns, the country is no stranger to the American legal system, being a former colony of the United States for half a century.Moreover, the criminal justice system and property laws of the country are largely based on the American model, and the country has been maintaining a shared jurisprudence with the US.
In addition, among the English-speaking countries across the globe, the Philippines is the third largest, with a literacy rate of 94%, and as of 2014, it is acknowledged as one of the best countries in terms of international telecommunications infrastructure. Add to the equation the very affordable labor costs and you have a perfect “hotspot” for legal outsourcing services.
Among the top reasons for the boom in LPO services demand in the Philippines is cost saving benefits. Let us take for instance a graduate level paralegal or legal employee in London who earns £30,000 to £45,000 annually, compared to a miniscule 5,000 to £8,000annual earnings of an equivalent level employee in the Philippines. This picture is similar in India, but a little higher at £5,000 to £10,000. Imagine how much these firms are able to save when they outsource in these countries.
As of 2014, it is estimated that the Philippines has 66, 000 top caliber licensed lawyers, and LPO companies in the country usually specialize in document drafting, document preparation, legal research, patent research, litigation support, incorporation assistance, legal transcription, contract management or negotiation, discovery procedures, and due diligence among several others. These companies provide guides in drafting legal documents for all U.S. jurisdictions so that these documents are drafted in accordance with existing rules and practices. Everything is reviewed by top caliber licensed lawyers who are also savvy users of various online legal research tools such as journals and legal encyclopedias, including Federal systems, and the case law and statues of the 50 states. These legal professionals work under the Model Rules of Professional Conduct and would most often require the hiring firm to first obtain an informed consent from their client. Needless to say, a joint effort would be necessary where involvement and sufficient supervision is provided to ensure a favorable decision for the client.
These essential factors have made the country a very ideal offshore destination for overseas-based businesses, of which about more than a thousand companies are currently outsourcing some of their operations here. In fact, the country has been named three times as the Offshoring Destination in the Years 2007, 2009 and 2010 by the National Outsourcing Association in UK.
The fastest and easiest way to get a hand in law process outsourcing is by going through large firms that already have an established offshore outsourcing businesses such as Pangea3, Integreon Managed Solutions, Mindcrest, Bodhi Global Services, Cobral Legal Solutions, LLC, Clutch Group, and several others. Even so, individuals or small-scale firms can opt to not take this route and establish their own LPO line directly instead.
Although taking this path can yield substantial returns in the future, setting the whole thing up can be quite a grueling task. Here is a quick step-by-step guide for both individuals and small law firms interested in outsourcing in the Philippines:
Step #1: Ensure that the Legal Service Provider has an Established Expertise in the Field
While this is an apparent point, it does not mean that small law firms have to invest hefty amounts of time and money just to have the right people and systems in their rightful places. In addition to hiring a project management team that is committed to providing outsourced legal service, it is also imperative to make sure that all the necessary processes are streamlined in order to deliver an effective service. One of the key elements of success in this business is to ensure that practices of both firms (outsourcing firm and the legal services provider) are aligned not only with each other, but with the benefits of their clients as well. Therefore, their service standards must be competitive with other participating firms in the country.
In addition, the outsourcing firm should not choose an LPO provider based on the price alone. They must evaluate all the potential providers on a number of capabilities. When interviewing prospective external vendors, keep tabs on the quality of previous work, turnaround times, proven track record, as well as flexibility. In detail, observe the following capabilities:
- Business Management Capability – the provider’s ability to deliver the service agreements to the outsourcing firm.
- Program Management – the capacity to turn in a set of inter-related projects by handling and supervising change, transitions, upgrades, as well as new solutions.
- Planning and Contracting – their ability to contrive a “win-win” solution that is responsive and flexible.
- Governance – It is the LPO’s capacity to determine, track, measure, and take responsibility for their performance.
- Account Leadership – The provider is responsible for assigning an account lead who will set strategic counseling with the client lead, adjust incentives, inspire and motivate people, deliver noticeable change, and adapt to necessary changes.
- Behavior/People Management –the ability to hire, train, retain, and encourage their employees.
- Organizational Design –the provider’s capacity to design and implement productive organizational arrangements for relationship management.
- Domain Expertise – their ability to employ professional knowledge for problem analysis, understanding, as well as solutions.
- Technology Exploitation – the provider’s capacity to promptly and effectively set out technologies for business purposes.
- Business Reengineering – their capacity to integrate changes, mainly to their service processes, in order to make way for striking improvements.
- Customer Development – their ability to help clients make an informed decision regarding their service levels, costs, and functionality.
- Sourcing Expertise – the provider’s capacity to access and deploy available resources without going over the budget.
Step #2: Build Trust
Dealing with businesses overseas is risky especially that it is quite difficult to establish trust, more so when such trades involve money. Of course, the outsourcing firm would want their hard-earned investment to become profitable, so they will make certain that their acquired legal service provider is operating as they should. In this kind of enterprise, trust is a vital element. Both parties should trust that each will fulfill their part of the bargain.
Step #3: Discuss the Pricing Mechanism and Contract
In the Philippines, majority of LPO relationships utilize a fixed-fee pricing structure for a particular number of Full Time Equivalents (FTEs). For instance, a single contract includes fixed fees for junior-level lawyers and a higher fixed fee for seasoned attorneys. On the one hand, a contract can also be a fixed fee for the whole team, which means that the hourly or daily rate of junior and senior lawyers are already accounted for.
Of course, the outsourcing firm can opt for other pricing mechanisms such as having unit prices like price per user supported, price per policy, and price per invoice processed. The advantage of this pricing structure is that clients will pay for the volume of output, not for the volume of input, such as the hours worked.
Aside from discussing the pricing mechanism, the outsourcing firm should also discuss with their LPO provider the service levels for quality, client satisfaction assurance, and turnaround time.
Step #4: Oblige LPO Providers to have Annual Productivity Improvements
While clients typically like the predictability and simplicity of the FTE pricing structure, most of them also recognize that input-based pricing deters the provider from carrying out innovations that would cut down the number of FTEs simply because the provider’s income would decrease. In order to get on top of this deterrence, majority of BPO/ITO clients require innovation by mandating productivity improvement requirements in the contract which necessitate the provider to enhance the client’s productivity, say four to five percent per year. Studies show that both the outsourcing firm and the LPO provider in the Philippines have reported positive results from these mandatory productivity targets.
Step #5: Take Time to Invest in Face-to-Face Meetings
Another essential key practice that will help overcome the difficulty in establishing an LPO connection is the Philippines is for both parties to meet face-to-face. One or two representatives from the outsourcing client can visit the LPO provider in the Philippines every six months. Although it adds up on the expense of operation, the trip will turn out worthwhile. In fact, face-to-face meetings have other benefits such as developing a firmer group cohesion. Needless to say, both parties could establish close rapport not only with each other, but with the employees as well. The outsourcing firm can get to know more about the management, and the people working behind the scenes.
Step #6: Strive to Have a Smooth Work Coordination
Outsourcing firms can appoint an individual or a group of people who will be responsible for the transition between the two parties. Naturally, the other party might experience a rockier transition, so it is the duty of the transition manager/s to ensure that both parties are on the same page every step of the way.
When it comes to work coordination, it normally requires the right leadership, proper documentation, communication, as well as processes. Philippines, being one of the best countries in terms of international telecommunications, would not be much of a nuisance in this aspect. Here are some of the recommended practices:
- Hire/Assign a Point Person to Manage the Relationship with the LPO vendor – This person, whose core function is to make certain that the elements needed to be engaged from the client’s side are employed, must have a solid background and experience in client organization and reporting. The point person must coordinate with the outsourcing firm every week for report, and should attend on-site meeting once every three months. Deploying these people is very crucial in making the relationship between the outsourcing firm and the LPO provider successful in the long run.
- Build Playbook to Stipulate Requirements – Playbooks, and other auxiliary documents such as checklists and maps, provide instructions to the LPO. LPO providers in the Philippines are reported to be excellent in developing and updating playbooks. These documents have two chief functions. First, they help Philippine lawyers understand the subtleties and legal requirements of serving clients from other countries, say the United States. Second, playbooks also regulate and systematize service, and lay down clear lines of responsibilities.
Similar to any business undertaking, procuring LPO overseas can have service issues which could disrupt performance. These issues include project delays, service lapses, and simply miscommunication. When planning to establish an LPO relationship with service providers in the Philippines, it is always better if none of the parties will focus on finding or blaming the source of the issue. Instead, both parties should work cohesively together to resolve the problems at hand. In point of fact, these issues are a normal part of learning to work together.
In recent years, legal process outsourcing has found a basin in the Philippines. With the country’s high quality talent and low labor costs, it is certainly a perfect outsourcing destination that will help legal firms across the globe increase their overall operational efficiency. With the current excellent performance of the country in terms of LPO services, the Philippines will remain to be a major contender of such industry for decades to come!