In-house legal teams are finally catching on to the benefits of offshoring their bulk legal work. But while BT and HSBC lead the way, many general counsel remain sceptical of such initiatives. Michelle Madsen reports

No-one likes doing the mundane, process-driven bits of office life. But how would you feel if your team were asked to outsource or offshore those mundane tasks? Threatened? Undermined? Liberated? Or maybe even that it is just not worth the hassle?

A select band of in-house teams are currently wrestling with those questions as the employed side of the profession begins to experiment with the kind of offshore projects pioneered by large law firms five years ago.

Two of those pioneers are major UK institutions HSBC and BT; recent launches of projects in Malaysia, India and South America mean that in-house teams could soon see a chunk of their work dealt with by colleagues on the other side of the world.

Last September HSBC opened an offshore arm of its UK legal team to deal with volume work by setting up a team of lawyers in Malaysia.

HSBC's endeavour, led by UK head of corporate banking Keith Ford, is the bank's first attempt to push forward legal cost-savings through so-called offshoring. With a dedicated team of four lawyers based in Kuala Lumpur looking after routine queries from the bank's network of UK branches, Ford said that the bank viewed its Malaysian legal outpost as an extension of its London team.

Although HSBC's project is in its infancy, Ford is optimistic that it could develop and grow to undertake a greater volume of work from the bank's other jurisdictions.

"We have offshored other areas of the business for a number of years and it was natural to see if there was anything we could do with legal," says Ford.

"The facility may prove of interest to HSBC legal functions in other, non-UK, jurisdictions which undertake similar legal work."

The move comes against the backdrop of pressure on costs and a handful of other companies have had similar ideas. Last year telecoms giant BT, which already had an established legal team in New Delhi, announced plans to set up further offices in Sao Paulo and Buenos Aires to provide support for the company's US operations.

BT head of special projects, Evangelos Apostolou, led the initiative and explained how the model had worked for BT and how legal offshore teams had a greater potential to undertake a wider remit of legal work than their counterparts in private practice.

"You do not practise law in quite the same way as you would do in a firm," he says. "You are not a member of the local Bar or governed by its rules. You are in-house and working as part of a company; it is quite different."

So far few have followed the two companies, though it is clear that many large in-house teams have, at the very least, sized up such initiatives. Kevin Sowerbutts, in-house counsel at French banking giant BNP Paribas, says he too had considered investigating legal process outsourcing but was yet to put any solid plans in place.

"It is not something we have undertaken to date," he says. "We have thought about doing it but offshoring takes some time, it is not a quick fix. It is a major commitment."

Likewise, Robin Saphra, general counsel at BT rival Colt Telecom, says that while offshoring is not yet a
viable option for the company, it is something he would consider as an option for the future.

"I would at least think about it. We do have offshore facilities for other departments in Chennai and are in the process of opening another facility in India N it is just a matter of time.

"I can see it working with something like non-disclosure agreements, you could manage that quite easily. However, setting up an offshore capacity would mean that you have to look at your whole staffing model. If I was to add three lawyers offshore, would I get rid of three over here? Probably not. It is certainly an interesting possibility, but one which would come with substantial growing pains."

Saphra also points out that how long low-cost jurisdictions remain low-cost is another important question that general counsel need to ask themselves if they are contemplating launching an offshore project.

"I do not think you can set up something like a legal offshoring division overnight," he adds. "By the time you have something in place, economic growth could have made a serious dent in any savings you might have made."

Such comments illustrate the caution felt by many corporate counsel about the offshore concept. It is acknowledged that the logistic hurdles to successful projects are considerable, bumping up cost and meaning that such projects are probably only viable for the largest companies.

Consultants point out that culture is also important as risk-averse companies tend to do badly with such projects.

But the bigger weakness to the model, as Saphra's comments suggest, is that there is a limited time window for legal teams at western companies in which to offshore. This is because the high economic growth rates in many popular offshore locations mean that their cost advantage is quickly being eroded, especially in India.

For those in-house teams without the resources or critical mass behind them to build up their own offshore teams, it could be that a more viable option is to outsource work to external companies, often operating in India. Office Tiger, Pangea3 and UK outfit NewGalexy Partners are among the companies offering services to both private practice law firms and the in-house teams of their clients.

Recent developments with external providers saw Clifford Chance upscale its offshore activities last summer with the launch of a shared services operation in Delhi as part of a wider cost-cutting drive. Farming out a significant portion of its basic accounting and business functions, as well as a range of its IT services to a lower cost base in India, was predicted to contribute to the firm's £30m four-year cost-saving plan.

However, such eye-catching initiatives from large law firms often involve support functions and back-office work, rather than legal practice.

As such opinion remains strongly divided over whether outsourcing or offshoring of legal services from western countries will ever gain real momentum.

Legal consultant and former ABN Amro legal chief Laurie Adams (pictured above left) says it is not surprising that sending work abroad has yet to gain real popularity among corporate counsel.

He says: "The key issue is that if it is to be done it should be done sensibly. Processing and commodity-style work are the prime candidates for sending offshore and you need to have a large volume of that sort of work to make it worth your while.

"It is not as easy a process for corporates or financial institutions to set up as it is for law firms, although I can see that technology will make it easier."

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