The legal terrain has undergone a swift shift, driven by the origination of the Global Capability Centers, resulting in the prompt endorsement of legal outsourcing services. As the multinational giants seek to increase their operational efficiency with cost competitiveness, the alliance between GCC and LPO is reshaping how legal services are being delivered.
Understanding Global Capability Centers
Global Capability Centers are referred to as specialized offshore hubs set up by multinational corporations providing a diversified range of services such as IT, staff augmentation, and legal support services. These centers are often located in offshore locations with abundant talent and cost competitiveness, allowing companies to rely upon specialized expertise with operational efficiency.
According to the Deloitte report around 78% of companies have centralized or planning to inherit the integrated service model, depicting the growing trends of the centralization across the service industry. The GCC has been instrumental in reshaping organizations, enabling them to focus on their core activities while outsourcing non-core functions to offshore service providers.
Understanding Legal Process Outsourcing
Legal Process Outsourcing involves allocating legal tasks to external service providers, often located at offshore locations. This includes activities from document review and legal research to complex activities such as litigation support and legal operations. As per Grand View Research, the global legal process industry was valued at USD 13.67 billion in 2022 and is anticipated to grow tremendously from 2023-2030 with a compound annual growth rate of 31.4%.
A key driver of this growth is the increasing complexity of legal requirements in a globalized business environment. As companies expand internationally, the demand for specialized legal knowledge and services has surged, prompting organizations to seek cost-effective solutions through LPO.
The Synergy between GCCs and LPO
The interplay between LPO and GCC is symbiotic. The Global Capability Center offers infrastructure, technology, and a skilled workforce which further facilitates the operations of the LPO. By consolidating and aligning LPO with GCC, organizations can ensure operational efficiency, cost competitiveness, regulation, and compliance with a better turnaround time.
For instance, a Fortune 500 company might set up a GCC in India, relying upon local talent to handle legal research and document review tasks. This arrangement not only reduces operational costs but also allows in-house legal teams to focus on core activities.
Cost Efficiency and Quality Improvement
The most significant reason for the evolution of GCC and LPO is the significant cost advantage study by the International Association for Contract & Commercial Management (IACCM), which revealed that companies can save up to 30-50% on legal costs by outsourcing specific functions to offshore service providers. These savings can further be reallocated into more efficient resources, leading to the overall growth and development of the business.
Moreover, the quality of legal services is often improved when specialized LPO providers handle tasks. These firms employ experts with specific legal knowledge, ensuring that complex legal tasks are executed with precision. As a result, in-house legal teams can benefit from higher-quality outputs without the burden of managing every aspect of legal work.
Challenges and Considerations
Despite these benefits, the integration of LPO with GCC is still very challenging. Concerns regarding data security, confidentiality, and compliance with local regulations can pose significant hurdles. Companies must ensure strict security regulations and compliance to protect confidential information.
Additionally, establishing effective communication and collaboration between in-house legal teams and external LPO providers is crucial for success. Clear guidelines and expectations must be set to ensure that outsourced tasks align with the organization’s objectives.
Future Trends in LPO and GCCs
As the legal landscape continues to evolve, several trends are emerging that will shape the future of LPO and GCCs:
- Increased Use of Technology: The correlation of artificial intelligence and machine learning has revolutionized the legal process outsourcing process. Digitalization can simplify routine tasks, allowing attorneys to focus on core activities. A report by PwC indicates that up to 40% of legal tasks could be automated shortly.
- Focus on Compliance and Risk Management: As regulatory environments become more complex, organizations will increasingly rely on LPO to navigate compliance challenges. GCCs will play a vital role in ensuring that outsourced legal processes meet regulatory standards.
- Expansion of Services: LPO providers are likely to expand their service offerings to include more complex legal tasks, such as litigation management and intellectual property support. This evolution will further enhance the value proposition of LPO within GCCs.
- Globalization of Legal Services: LPO is likely to be accepted more widely as an outcome of increased globalization, as companies appear to take advantage of cost savings across the globe. Legal Industry Trends for 2020 show that clients expect law firms to go above and beyond the traditional offering of services and support. For legal companies to remain advantageous and competitive, many are resorting to legal outsourcing. It was projected that from 2019 to 2025, the global market for legal process outsourcing will develop at a compound annual growth rate of 31.4%. By 2025, the market is expected to grow to $35.9 billion.
Conclusion
The ascend of legal process outsourcing is driven by the evolution of Global Capability Center is revolutionizing the way legal services are delivered. By relying upon a talent pool and centralized operations, companies attain significant cost advantage and enhance the quality of their legal operations. While challenges remain, the future of LPO within GCCs is bright, with technology, compliance, and service expansion paving the way for an innovative legal landscape. As businesses continue to adapt to an ever-changing global environment, the partnership between GCCs and LPOs will be essential for maintaining a competitive edge.
