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Risk-averse lawyers move slowly on outsourcing

|Written By Michael McKiernan

Eighteen months ago, Shelby Austin ditched Bay Street to enter the nascent Canadian legal process outsourcing market in a move uncharacteristic of most notoriously risk-averse litigation partners.

Shelby Austin took a risk in leaving Bay Street to start her own outsourcing firm.

“People thought I was a bit crazy,” she says.

What started as an academic interest for a lawyer who “could have used some extra hands on files” in her practice at Davies Ward Phillips & Vineberg LLP transformed into a genuine business opportunity as the entrepreneurial juices began flowing.

“Risk grows on you, and once I’d decided to leave this job that I love, it was then just a matter of growing used to taking risks, one risk after another, and being prepared to fail, being prepared that the Canadian market might not be ready to adopt this new idea. But thankfully they have, which has been great,” Austin says.

But the litigator in her did shine through in the slightly more conservative approach she took to establishing her own firm, ATD Legal Outsourcing. Canadian law societies have been virtually silent on the issue of legal outsourcing, so the firm played it safe as far as regulatory issues go.

“We are a law firm with the same rights and obligations as all other law firms,” she says. “Our particular model is quite traditional, and our culture is quite traditional.”

The firm employs five lawyers full time. It also hires from its bank of trained contract lawyers for specific projects. ATD targets law firms for its services rather than corporate legal departments because it wants lawyers to view it as a complementary service rather than competition, says Austin. “One of the reasons for our success is we are the Ontario bar. We have worked in these firms. These are our colleagues, these are our friends.”

The bulk of ATD’s clients for its services, which include document review, due diligence, legal research, and legal writing, are big Canadian law firms, although Austin also plans to target smaller firms that could turn to outsourcing to level the playing field on larger files.

Sarah Millar, a litigator at Osler Hoskin & Harcourt LLP, has used ATD for document review in large litigation files that need to be done “quickly and inexpensively.” Traditionally, the firm has used junior associates, articling students, and summer staff to do the work. It would even bring in its own contract lawyers.

“We’ve just found that there’s a lot of human resources, administrative, and project-management issues that outsourcers are now capable of handling better than we can do in-house,” Millar says.

She notes she was particularly comfortable making her first leap into the outsourcing game with ATD because local lawyers are doing the work. “The Canadian factor is a huge one. They’re Canadian-trained lawyers, they understand Canadian concepts of privilege and relevancy, and they’re bound by Canadian ethical duties as lawyers.”

According to Gavin Birer, legal outsourcing has been slow to take off because of firms’ entrenched practices. Larger firms in particular have been insulated from the need to increase efficiency by the sheer number of lawyers they have to throw at projects, he says.

“You’re working against a massive status quo in terms of how work is currently being done. Lawyers by nature are extremely risk-averse. They don’t like change, and so the uptake is slower than any other industry would be.”

When Birer started his own business, Legalwise Outsourcing Inc., in 2006, it was one of the first Canadian companies to go down that route. In the meantime, similar businesses had been venturing into the United States and Britain for years. Birer says the much larger legal markets in those countries made them a more natural target for companies but he believes the Canadian marketplace may be approaching a critical mass.

“It’s like a stone that gathers moss as it goes down a hill,” Birer says. “It picks up momentum over time. The more clients use these services, the more people become familiar with it.”

Legalwise uses common-law-trained Indian lawyers based at offices in Bangalore. “All of our clients are lawyers, so you can imagine they have lots of questions around confidentiality, security, quality, and price,” says Birer. “The questions get them over that initial fear, and then it’s a matter of proving to that client that we are a resource that they can rely on and that they can trust.”

According to Birer, corporate legal departments are key to the growth of legal outsourcing as they demand more options for reducing costs. One of them already going down that route is the Royal Bank of Canada. Emily Jelich, associate general counsel at the bank, says her company makes significant use of outsourcers for multi-jurisdictional projects and non-complex document review. She sees outsourcing as an untapped resource in Canada and notes she’s often the one to initiate its use.

“The firms that have most interest in being a partner with us are the most open to it,” she says. “Our goals are to get work done efficiently in a cost-predictable way. Outsourcing firms help us do that, and I think they help law firms figure out how to do that as well.”

This is the second article in Law Times' summer series on innovation in the law. Click here for video related to this story.

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