Niche Firms for Legal Process Outsourcing and White Labelling

January 19, 2011

Last week Azrights announced the launch of its trademark registration white labelling solution for law firms.  It is the first comprehensive trademark white labelling service for UK law firms.

UK Regulatory considerations

The impetus behind it was the Solicitors’ Code of Conduct Rules 8 and 9 which prohibit fee sharing with non lawyers, and regulate referral fees.  These rules complicate solicitors’ ability to benefit from trademark registration work which they are often in a position to refer to others.

To run an effective trade mark registration service requires investment in IT, and other resources.  Many law firms offering such services have difficulty doing it cost effectively, and price competitively.  Their high charge out rates, and culture of invoicing larger sums generated from litigation, make it difficult for them to make money from the relatively modest amounts invoiced for trademarks.

Azrights introduced its white labelling service for two types of firm.  The first currently do not do their own registrations.  A virtual department would generate an additional income stream for them without an accompanying increase in overhead costs.

The second type of firm offers trademark registration services and may be looking to outsource the work in order to  focus its resources on more profitable, higher skilled work.  Legal Process Outsourcing is a much bandied about concept nowadays because law firms are under increasing pressures to reduce their costs.  So, it’s worth considering what is the difference between Legal Process Outsourcing (LPO) and White Labelling.

White labelling and Legal Process Outsourcing (LPO)

According to Wikipedia a white label product “….enables a successful brand to offer a service without having to invest in creating the technology and infrastructure itself”.

The FSA defines white labelling as arrangements where a product or service is offered under the brand of one company (the distributor) while a separate company (the producer) actually makes the product or provides the service……. “White labeling allows producers access to a wider market than they would otherwise reach, and allows distributors to offer a wider range of own-branded products or services”.

According to wiki LPO is the practice of a law firm or corporation obtaining legal support services from an outside law firm or legal support services company.  When the outsourced entity is based in another country the practice is sometimes called Offshoring.

So white labelling might be a more complete solution, while LPO may just involve a discrete aspect of legal work being outsourced to the LPO provider.  Taking trade mark registration as an example, white labelling will deal with every aspect of the work, from beginning to end, while LPO may cover just specific aspects of operations, such as renewal of trademarks.

The continuing pressure on legal fees, the scope of SRA regulations, and consequent search by firms to find more cost effective solutions, points to law firms looking at solutions right on their own doorstep.

Why use a niche UK law firm for LPO or white labelling?

It is preferable for UK law firms to look to niche law firms in the UK when searching for the cost reductions that LPO can offer.  Lora Bentley, across the pond, expresses a similar opinion in her post Need to Outsource Legal Work? Try Boutique Firms in U.S. First

For example, by using the Azright white labelled trademark registration service UK law firms benefit from the investment in technology, and expertise that Azrights has built up over a number of years.  They get access to highly skilled help without the concerns that LPO as such entails.

Given they’re outsourcing the work to a regulated law firm in the same jurisdiction, few  concerns about quality and reputation that are usually associated with LPO arise.

Legal work requires a specific education, and training, and is regulated.  So, why send the work to other professionals whose rules are dissimilar to those of solicitors, let alone to overseas lawyers who are not educated in English law?

Often offshore LPO providers use as a selling point the fact that they have highly qualified lawyers whose hourly rates are a fraction – one tenth – that of a solicitor.  However, if paralegals in this country are well managed and supervised, and work in a process supported by effective technology and senior lawyers, they are, in my view, better able to offer the quality required by a UK law firm.

It is a mistake therefore to compare the hourly rate of an attorney in India or other offshore location with that of a UK solicitor in determining the savings that may be made by a successful outsourcing LPO provider.  If the work being outsourced is relatively low level and repetitive, or is administratively intensive, then it does not need highly skilled lawyers.

Indeed is it beneficial to use the services of highly skilled lawyers who may be over qualified for low level tasks?  I would worry they would get bored and prove less efficient.

On many types of work that are outsourced it may therefore be more appropriate to compare rates with paralegals in this country.  A very affordable service can be provided in the UK by a law firm that knows how to use IT, and different skill levels within an efficient process.  Access to IT and use of good management and supervision are key to LPO success.

A niche firm within the same jurisdiction has the specialist skills and experience to run an efficient operation much more cost effectively than non specialist firms or larger law firms.  Being subject to the same regulations it is therefore a safer place to entrust compliance with regulatory obligations by outsourcing law firm.

In the UK we currently have a surplus of well qualified law graduates, motivated to get experience.  Could it be that Richard Susskind’s End of Lawyers? is wrong in its assumption that LPO will go offshore, leaving a dearth of training opportunities for future lawyers in this country?  Perhaps Richard Susskind would have benefited by taking a closer look at smaller law firms, and the quality of personnel available to them due to the oversupply of law graduates seeking to train as solicitors.