Outsourcing pioneer blazes a new trail: bringing work back from India

National Law Journal
ALM Properties, Inc.
Page printed from: http://www.nlj.com


About a decade after it helped pioneer the trend of outsourcing legal work to India, Schwegman Lundberg & Woessner, a patent prosecution boutique, is bringing the work back to U.S. soil.
Sheri Qualters
July 05, 2011

About a decade after it helped pioneer the trend of outsourcing legal work to India, Schwegman Lundberg & Woessner, a patent prosecution boutique, is bringing the work back to U.S. soil.
The Minneapolis-based firm recently announced the move of its docketing support and paralegal support services to Black Hills IP LLC, a Rapid City, S.D., company owned by the firm’s partners.
Although Schwegman Lundberg announced the shift last week, the firm’s managing partner, Steve Lundberg, said the Black Hills company officially launched in early June.
Black Hills’ 13 staff members principally work for Schwegman Lundberg, but the company is also on the lookout for new customers, Lundberg said. "We’ve got a couple of new customers that we’re probably going to bring on pretty soon," he said.
Schwegman Lundberg originally decided to farm out some of its legal tasks to India in 1999, Lundberg said. The economy was roaring, the firm’s staff was overextended and it found itself with a six- to 12-month backlog of patent applications that needed proofreading, Lundberg said.
The firm reached out to former client Pradeep Sinha, who was doing software development in India, Lundberg recalled. The client’s wife, Sonia, whom Lundberg called "the mother of outsourcing in India for IP stuff," set up a proofing operation for the firm. Because the firm had embraced scanning technology, the relevant internal files were online, he said.
The firm sent more tasks to contractors in India for a few years, before setting up its own outsourcing company, Lundberg said. It sent paralegal work related to foreign patent filings, back-office document review and preparation for U.S. patent filings to India, he said.
In 2005, CPA Global bought a controlling stake in the firm’s Indian outsourcing company, Intellevate, but Intellevate maintained a dedicated team for Schwegman.
By this time, cost cutting was the firm’s primary motivation for farming out work to India.
"There’s a very large volume of paralegal work required to support patent prosecution," Lundberg said. "It was working well for us because we were getting substantially lower pricing." Schwegman’s Indian outsourcing peaked at about 15 people doing document or paralegal work for the firm.
The arrangement worked well for several years, but the firm "finally figured out that our productivity in the U.S. was substantially higher," Lundberg said. Meanwhile, costs in India had risen, and automation was more prevalent. "It started to look less and less attractive to be in India," Lundberg said.
The firm originally saved about 50% in labor costs for the outsourced work, assuming that productivity was equal. But shipping work to India also involves many layers of management, supervision and training expenses, plus work culture differences that can affect cost, Lundberg said.
"A U.S. employee would feel a lot more freedom to take action in gray areas than an Indian employee," Lundberg said. "They would ask permission for things a U.S. employee would do without blinking an eye."
The extremely hierarchical nature of work in India is also a factor, he said. If a copier runs out of paper, for example, a paralegal in India would go and find an administrative person to load the paper instead of just doing it, Lundberg said."You get a lot of that type of thing going on that ends up slowing things down if there’s any question about how things are going to work."
Lundberg said the cost savings from shipping work to South Dakota is comparable to the savings from sending it to India–and potentially higher for tasks that involve a high degree of automation.
Black Hills’ location also offers advantages beyond the relatively low cost of labor, he said. Rapid City’s Mountain Time Zone location will be helpful for lawyers making government filings at the end of the business day on the East Coast. "That was one of the big factors," Lundberg said.
Edge International consultant Jordan Furlong said there are starting to be some examples of so-called "in-shoring" of legal work from an overseas vendor to a U.S. vendor.
Last month, Indian legal process outsourcer Pangea3, which was bought by Thomson Reuters last year, opened a suburban Dallas outpost that can hold up to 400 employees.
Furlong emphasized that such moves are "still outsourcing." He also said the key to successful legal process outsourcing is relying on systematization, automation and process management, not low labor costs, which inevitably rise. "Traditionally, a law firm offers a very inefficient method of achieving legal tasks,’ he said.
Sheri Qualters can be contacted at squalters@alm.com.

Advertisements

About this entry