2009 was an incredibly challenging year for most law firms. After years of announcing record profits, many firms had to deal with serious financial management issues in 2009.  Things are improving in 2010 but the optimistic view is cautious at best.  Pressure on fees remains as high as last year and, in this brave new world in which we find ourselves, law firms have been forced to be more flexible on fee structures and imaginative on how to keep costs down.

One way of reducing costs increasingly being adopted by firms is through legal process outsourcing, with certain work being outsourced to countries like India.  In fact Allen & Overy became the first magic circle firm to outsource legal work when it entered into arrangements last year with a legal process outsourcing provider, Intergen. 

Over the coming months, it will be interesting to see whether the overseas legal process outsourcing market develops further.  Recent reports in the legal press suggest that domestic outsourcing will eclipse off-shore outsourcing, mainly as a result of law firms being reluctant to send work overseas.  In light of this, there are indications that existing domestic providers are planning to increase their staff numbers over the next two years and one recent start-up in this sector recently received a £25m investment from private equity house Lyceum.  This is particularly good news for legal professionals who are currently out of work and could provide a way to continue their legal careers.  A recent survey suggested that over two fifths of legal process outsourcing providers expect to employ more domestic lawyers over the coming five years.  Any concerns from junior lawyers that increased use of outsourcing will have the greatest impact on them, leaving them with less work to do, are probably misguided as it is unlikely that not all routine work will be capable of being outsourced.  Indeed, there will be opportunities for junior lawyers to take on much more challenging work earlier on in their career.

It remains to be seen what clients think of all of this particularly if they have concerns about confidentiality.  We shall be looking in more depth at the regulatory issues arising from outsourcing legal work in our next edition of Partnership and LLPs e-news.

For more information on these issues please contact

Miguel Pereira

or your usual Lewis Silkin contact