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Is Outsourced Document Review the New Frontier?

According to Gina Passarella’s article from Law.com, “the [legal] industry is moving away from a monolithic provider of legal services…to a fragmented service platform” made up of legal process outsourcers (LPOs). The LPOs serve as competition for law firms because, as Passarella notes, they administer services, such as document review support, that law firms will never provide again. She likens this trend to the auto industry stating, “How many years ago did BMW stop making car radios? It’s gone, it’s not coming back.” LPOs are also gaining in popularity as law departments “are slowly starting to realize that quality isn’t lost” when they are employed.

As prevalent as LPOs are becoming, Passarella points out that not all clients and firms are joining the outsourcing bandwagon. Roy Hibberd, general counsel of Dollar Financial Corporation attempted an outsourcing pilot program. After realizing that “nuances weren’t being picked up,” Hibberd hired contract attorneys in place of the LPO. Others simply aren’t concerned with the competition LPOs provide. K&L Gates chairman, Peter Kalis, “finds it difficult to ever consider a company that does not provide the same attorney-client privilege guarantees as law firms a threat.”

Though some firms are reluctant to join the growing trend, Passarella notes a particular LPO, Pangea3, which focuses on document review, as proof the future success of LPOs. Pangea3’s slowest reported year of growth saw a 60% increase and purported profits in 2008 were around the $8 million mark. As a number of law firms and clients look for ways to reduce costs, LPOs are emerging as specialists, fracturing the legal industry and gaining remarkable revenues.

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