The Benefits of Legal Process Outsourcing for Small Law Firms

Managing a law firm, similar to any business, requires juggling numerous tasks that can distract core aspects of the legal profession. The landscape of legal functions is also experiencing profound changes driven by several factors. The rise of remote working, digitization, and technological advancements, including artificial intelligence, are playing a significant role in this transformation. Additionally, complex regulatory environments and a renewed focus on cost reduction, driven by economic volatility, also contribute to the transformation of legal processes. This is where legal process outsourcing (LPO) becomes a valuable strategy.

LPO involves outsourcing legal functions or processes to an external, third-party service provider. Delegating process-driven tasks to third-party providers can enable law firms to focus their resources on critical, higher-value priorities. It can save costs for the firm while allowing it to benefit from timely and efficient support for a variety of processes. According to a recent research report from ReaserchandMarkets.com, the global LPO market grew from $11.76 billion in 2022 to $14.81 billion in 2023 at a compound annual growth rate (CAGR) of 26.0%. The market is expected to grow to $38.13 billion in 2027 at a CAGR of 26.7%.

Why LPO is a Game-changer for Small Law Firms

Small firms find it challenging to acquire and retain clients. They face mounting pressure from clients to cut costs without compromising on the quality of representation. With smaller teams, attorneys in small firms may have to handle multiple responsibilities, making time management critical for maintaining efficiency. Small firms may need to balance offering a broad range of legal services to attract clients while also developing expertise in specific practice areas.

Finding and retaining skilled and experienced legal professionals can be difficult for small firms, especially when competing with larger firms. They may miss out on promising business opportunities due to financial constraints and the need to divert time and resources towards recruiting and training new associates. Without dedicated compliance staff, small firms can also find it difficult to comply with ever-changing legal regulations and requirements.

Incorporating new technologies and legal software can be a challenge for smaller firms with limited IT resources and expertise. While growth is a positive sign, small firms must manage expansion carefully to avoid overstretching resources. By outsourcing legal work, they will have access to the expertise, resources and technology they need to expand their capacity for cases or projects, bringing them on par with larger firms.

What Legal Processes can Law Firms Outsource?

A wide array of outsourced legal services is available to help law firms streamline their operations. By utilizing these resources, legal professionals can focus on what they do best.

• Legal research: Outsourcing legal research involves delegating the task of conducting in-depth research on legal issues, cases, statutes, regulations, and other relevant information to specialized service providers. Instead of handling the research internally, law firms or individual lawyers contract with external research professionals, often from legal process outsourcing (LPO) companies, to perform the research on their behalf. The external research team will utilize various legal databases, online resources, and libraries to collect relevant information and analyze legal precedents to meet the law firm’s specific research requirements and questions related to a particular case or legal matter.

• Document review: Attorneys can outsource the time-consuming process of document review, such as reviewing discovery documents, contracts, and other legal documents, to specialized teams or LPO providers. Reviewing a vast number of legal documents, especially in complex litigation or large-scale corporate matters, requires careful attention to detail and can be time-consuming. During the discovery phase of a lawsuit, legal professionals face tight deadlines for document review. Lawyers can ensure accuracy and meet these deadlines by outsourcing the process.

• Document conversion: Legal document conversion services involve transforming legal documents from one format to another. Law firms deal with a wide range of legal documents, including contracts, pleadings, briefs, court orders, and discovery materials, which may be stored in different file formats. Converting these documents from one format to another can be necessary for various reasons such as improved accessibility, redaction of sensitive or confidential information, better document organization and management, and more.

• Data extraction: Data extraction support for law firms involves extracting valuable information from legal documents, such as contracts, agreements, and court filings. This includes key terms, dates, parties involved, obligations, and other critical data points. Data extraction also includes using Optical Character Recognition (OCR) technology to convert scanned documents and images into editable and searchable text, allowing for easier data extraction from non-text documents. For complex cases involving a large volume of data, data extraction services can efficiently process and extract relevant information, saving time and resources for small law firms.

• Legal coding: Legal coding, also known as litigation document coding, is a crucial process that involves systematically indexing and organizing relevant information from legal documents. This process assigns specific codes or tags to different data points within the documents, allowing for easy search, retrieval, and analysis of the information in the context of litigation or e-discovery. By streamlining the review process and eliminating unnecessary document examination, outsourced legal coding services reduce costs associated with legal document management.

• Logical Document Determination (LDD) and e-discovery: LDD support for law firms involves the use of technology and specialized software to categorize, classify, and organize large volumes of legal documents in a structured and efficient manner. Documents are categorized based on their content, type, date, and other metadata, which streamlines document management and retrieval processes. For litigation cases, LDD support is essential for e-discovery processes. The technology can quickly identify and retrieve electronically stored information (ESI) relevant to the case, reducing the time and effort required for electronic document review.

• Legal transcription: Transcribing recorded statements, interviews, depositions, and court proceedings can be outsourced. Expert legal transcriptionists ensure accurate and reliable documentation of legal proceedings and discussions, creating a reliable record for future reference. Transcription support saves time for legal professionals, as they can review and analyze legal content more efficiently in written format than by listening to lengthy audio recordings.

With the valuable support that a legal process outsourcing company can provide, it is hardly surprising that law firms are increasingly seeking external support for these tasks. By outsourcing, small law firms can better manage costs, offer personalized attention to clients, and adapt to changing market demands. When choosing an outsourcing partner, law firms must consider data security and compliance with relevant laws and regulations. In fact, a Morgan Lewis referenced a Wolter Kluwer survey on the growth of legal process outsourcing market found that budget and cost, experience, and security are valued most when it comes to choosing vendors.