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The Rediff Interview/Russell Smith, chairman, SDD Global Solutions
'India is the best in legal offshoring'
September 04, 2007
After the high-profile business process outsourcing units, it is the turn of legal firms from the United States to look at India to outsource legal services.
SDD Global Solutions Pvt Ltd is a legal services KPO (knowledge process offshoring) company, incorporated and headquartered in Mysore.
Russell Smith, president, chairman and founder of SDD Global Solutions, is a Columbia Law School graduate with over 21 years of legal experience. He has represented some of the most high-profile companies in the world -- HBO, Sony Pictures Television, 20th Century Fox Film Corporation, Miramax Films, Penguin Books, et cetera.
One of the recent achievements of SDB Global Solutions is that it has been hired by Sony Pictures to help with the legal work on their next film and by 20th Century Fox and the makers of the Borat, movie. SDD Global Solutions has also clients such as Universal Pictures, HBO, 20th Century Fox, Sony Pictures, and the Clinton Foundation.
In this interview with Contributing Editor Shobha Warrier, Smith discusses the future of LPO, legal process outsourcing.
What prompted your firm to outsource legal work?
We decided to set up a legal offshoring company because we know that the Western legal services industry is sick, and we want to be a part of the cure!
A recent survey of legal department heads at leading US companies revealed that only 30 per cent of those companies would recommend their outside law firm to others, and 53 per cent of them recently fired their outside law firm.
Has it become too expensive to do the work in the United States?
Yes, the price of legal services in the US is way too high, even crippling. Hourly billing rates have increased over 30 per cent in the last few years to as much as $1,000 per hour in the US.
Starting salaries for untrained lawyers, straight out of law school, have climbed to $160,000 per year. In London, rates for big firm lawyers have reached the unprecedented level of �1,000 (nearly $2,000) per hour.
And it is vastly less expensive to have the work done in India. Just as the 'Buy American' bumper stickers were too late and too little to stop Toyota from becoming the world's largest automaker, it is unlikely that anything will stop the legal services offshoring industry in India from stepping into the breach, to ultimately provide most of the legal work that is urgently needed by the West.
All of this bodes very well for the legal services offshoring in India!
Why did you think of India? Was it the cheap labour or the knowledge of English or the image of India as a major destination to outsource work from?
All of the above and more! The enthusiasm of the Indian lawyers who work for us is contagious. Unlike most American lawyers, they like their jobs! On the subject of money, everybody knows about the relatively low cost of living in India, which in turn means lower salaries.
But another tremendous saving is in the price of office space. Many traditional law firms locate their people in expensive offices in the largest cities of the West. This has led to a situation where most of each dollar charged to clients is for office rent.
By contrast, the cost-per-square-foot of SDD Global's office building in Mysore is 1/43rd the cost of inferior space in midtown Manhattan. Our clients pay for legal services, not real estate!
What is your impression of the workforce in India?
We're thrilled with the workforce at our company. We've been very choosy, accepting only one out of every 900 job applicants, and requiring a 3-hour written aptitude test. Luckily there have been many thousands of applicants to choose from. Our employees are smart, enthusiastic, talented, and eager to learn.
Unlike BPOs, legal outsourcing needs people who are knowledgeable about the US legal system. How did you train your Indian workforce?
Training is critical for any legal services provider, whether in India or in the US. Law schools in both countries do not teach students how to practice law. A recent study showed that 75 per cent of junior lawyers in the US lack the essential skills needed to work as a lawyer, and 64 per cent of US lawyers get no organised training.
At legal offshoring companies, like SDD Global Solutions, all the lawyers get constant training, and unlike US law firms, the hours spent on training don't appear on invoices to clients!
Veteran Western practitioners who are at the top of their field train all our Indian attorneys. Our training programme does what Western law schools and law firms don't -- we systematically prepare our lawyers to provide quality legal services.
And, India shares the same, British-based, 'common law' legal system that we have in the US and the United Kingdom, so law graduates in India do not find it too hard to learn Western legal skills.
Like BPO, will LPO also turn out to be a good business model in India?
Yes! The growth and development of the legal offshoring industry in India will bring about a paradigm shift in the way legal services are delivered in the West. This will be a monumental, history-making event. It will help Western economies as well as India's.
It will contribute to a better, more equitable world, in which artificial barriers across countries and continents do not hold back the most efficient and enthusiastic people from performing the work that they do best.
Now that you are outsourcing legal work from India, have you achieved savings at your end? If so, how much?
SDD Global's clients are saving at least 50 per cent, and often much more, with no compromise in quality. For example, one of our clients, Sony Pictures, needed massive legal research and a lengthy opinion letter in order to get insurance cover for a proposed movie. The job would have cost as much as $250,000 had one of their usual big US law firms done the work.
Instead SDD Global did the job for $43,000. SDD Global's draft of the 45-page opinion letter, complete with 242 footnotes, led to the green-lighting of a major motion picture, which might otherwise have never been made.
Is there any advantage by way of speed of work or productivity in doing the outsourcing from India?
Yes! On the subject of speed, the advantages are great. The outsourcing teams at SDD Global Solutions add approximately 12 hours to the normal legal services workday.
As law firm attorneys or in-house counsel in the West head home to sleep, a fresh round of legal work on the day shift in India is just beginning, in a time zone that is essentially a day ahead. Our speed is also enhanced by the number of lawyers that our clients now can afford to devote to any given case, thanks to the lower cost.
We can deploy a whole platoon of trained professionals, allowing our clients to 'flood the zone,' if that is needed.
This is virtually the opposite of the practice of many large Western law firms. By necessity they have to promise their clients 'lean staffing,' to address well-founded fears of fees climbing through the roof. Our goal is to obtain the desired result for our clients as quickly as possible, with concentrated legal talent.
Using that, SDD Global and its supervising US attorneys often run circles around the so-called 'lean staffing' of mega-firms.
Have you perceived any difference in the quality of work you get in the US and that from the outsourced work from India?
There is no difference because US lawyers supervise the work at SDD Global Solutions. These very lawyers also train the people who do the job.
Since SDD Global is managed by a respected American law firm means that there is total quality assurance and accountability. Also our Indian employees are top law graduates and experienced lawyers and/or former law professors from some of the best legal offshoring companies, law firms and law schools in India.
How big is the LPO industry and how much of it will come to India?
Four years ago, you could count the number of Indian legal outsourcing providers on one hand. Now there are over 100, with another 200 reportedly in the works.
Revenues recently have more than doubled, to $146 million in 2006. The number of employees has tripled since 2005, to approximately 7,500. Research analysts predict that LPO revenues and employee numbers will reach $640 million and 32,000, respectively, by 2010.
These predictions are actually conservative. The actual potential is much greater. Speaking from experience, I can tell you that the majority of legal services in the West can and should be sent offshore. Brad Hildebrandt, chairman of the prominent legal consulting firm, Hildebrandt International Inc., agrees.
He says, 'Ultimately, there may be little limit to what can go offshore.' And we are talking about services that now fetch a price tag of $250 billion per year and growing.
The majority of the offshored work will go to India, because of 80,000 English-speaking law graduates entering the market each year, the 'common law' system India shares with the US and the UK, and India's reputation as the leader in outsourcing.
Do you expect the LPO industry to grow more globally?
If only because no country has a monopoly in any field, of course legal offshoring companies will spring up in several other countries, at least where English is widely spoken. We are already seeing this in the Philippines, for example.
Would you be looking at any other country for outsourcing, like China?
We still believe India is best when it comes to legal offshoring. But just so we don't have all of our eggs in one basket, we're looking at Ghana, another former British colony, where English is the official language.
What are your future plans for India-based operations?
Regarding our plans, SDD Global Solutions is already the 'go to' firm in India for the television, film, and book publishing worlds.
Next, we are expanding into legal work for IT companies. In the meantime, companies from all kinds of fields, even one of the top three auto companies, are approaching us, so the expansion process is not entirely under our control!
But one thing is clear. We are going to keep ramping up our capabilities, with hopefully 200 employees within the next year, and several thousand in the next few years.
We see no reason why we should not be as big as Infosys [Get Quote], with 50,000 employees or more. What Infosys and TCS [Get Quote] are to IT, we intend to be in relation to the world of Western legal services.