Overhyped, Underused, Overrated: The Truth About Legal Offshoring

Cheap labor is appealing. But high-quality cheap labor is irresistible.

When the in-house bar caught wind of General Electric's 2001 cost-saving strategy to open legal departments in India for GE Plastics and GE Consumer Finance, a light bulb appeared above the head of every general counsel in corporate America as he asked himself: "How can I make this work for my department?" While the idea of sending work overseas was common in the tech industry at the time, legal departments had never considered it an option. But as countries such as India and New Zealand churned out qualified, English-speaking lawyers trained in the common law, taking advantage of that talent pool seemed a given.

"But a law department isn't going to offshore something purely on the basis of cost," says Ganesh Natarajan, president and CEO of Mindcrest, a Chicago-based legal outsourcing vendor. "If quality and efficiency aren't there, it makes no sense."

Although his company's services are up to 70 percent cheaper than a

For example, Accenture employs an overseeing lawyer in Mauritius to assign work to its five local lawyers. Before sending the work back to the company's Bermuda office, that lawyer reviews it for accuracy.

Many legal departments follow a similar model.

"There is no substitute for being in a location where you just learn, almost by osmosis, how a legal system works," Tauke says. "The informal learning we do vastly improves our ability to help our clients."

In addition, geographical boundaries can impede the development of attorney-client relationships. Law firms can more easily foster close partnerships with their clients when they have the ability to meet in person.

The companies that do offshore legal work have stopped talking about it to the media. Microsoft, which recently hired an Indian company called Intellevate India to handle some of its patent work, declined to participate in this article, but indirectly addressed the issue in a statement it released soon after it announced the partnership.

"We have just begun to have Intellevate India conduct prior art searching for new patent applications and proofreading issued patents," the Redmond, Wash.-based company said in the recent statement. "As a global company, we are constantly working to improve our ability to serve our customers worldwide in the most cost effective, efficient manner. IP protection makes it possible for innovators to invest deeply and build businesses around their resulting innovations, thereby spurring growth and job creation that benefits consumers, industry and the economy."

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