It is no secret that the growth of the legal process outsourcing market has been growing at break-neck pace for the past several years. The result of a confluence of factors, including the global financial crisis, increased regulatory and compliance demands, and an overall increase in litigation, the outsourcing space has been one of the few bright spots in an otherwise contracting legal market.
According to the Peer Monitor Report on the State of the Legal Market, total legal spending increased by just 2 percent globally over the past year. Meanwhile, the legal process outsourcing market is projected to grow at a rate of 27.8 percent per year through 2022, according to research firm Global Market Insights.
The trend makes a lot of sense. Legal workloads are getting tougher and budgets get tighter, so why not outsource lower-cost, routine tasks, such as document review and translation services to specialized firms who can produce higher output at a lower cost? What many may find surprising, though, is the volume and variety of legal work that’s being outsourced today. It’s no longer just low level administrative activities that are the domain of outsourced legal services. Increasingly, sophisticated, highly-specialized work is being farmed out to outsourced service providers and it’s both in-house corporate counsel and law firms who are driving the trend.
The drive toward increasing degree of sophistication of outsourced legal work is on clear display in the world of outsourced IP services. According to our new survey of 539 IP attorneys representing a cross-section of corporate counsel and law firms around the globe, we have found a widespread and global embrace for the outsourced approach to IP business management.
Moreover, the survey found that while cost and efficiency are indeed major drivers of the growth of the outsourced IP services market, respondents are also looking for specialized expertise and scalable staffing capabilities that will help them manage their IP portfolios more effectively, while avoiding costly mistakes.
All told, 34 percent of survey respondents were located in North America, 32 percent were in Europe, 22 percent were in the Asia Pacific region, and 7 percent were in Latin America. These IP professionals were asked questions on topics ranging from their current use of outsourced legal services to their plans for the future to challenges and pain points they are encountering along the way.
Outsourcing is Here to Stay
The base finding from the survey is that a total of 71 percent of respondents said they are currently outsourcing IP work and 91 percent of respondents said they intend to continue doing so at the same level or increase the amount of work they are outsourcing in the future. Those numbers were slightly higher among law firm respondents, among whom 99 percent said they would continue outsourcing at the same level or increase their level of outsourcing in the future. Among corporate IP departments, the total was to 88 percent (see chart 1 below).
The primary factors driving the trend toward increased use of IP outsourcing are cost pressures, efficiency, and staffing. Among law firm respondents, 32 percent said that cost pressures were the primary challenge their IP departments are facing today, followed by 22 percent who cited the need to do more with less, and 15 percent who said they have had a hard time recruiting and onboarding qualified IP staff. Among corporate legal departments, the breakdown was similar, though the demand for increased efficiency in their operation was on par with cost pressure as the primary motivator (see chart 2 below).
Patent Search Poised to See Largest Outsourcing Growth
When it comes to the type of IP work currently being outsourced, fairly basic tasks such as translations (76 percent), annuity payments (59 percent) and patent review and drafting (47 percent) are the focus among the majority of respondents. When asked about their plans for the future, however, both law firm and corporate respondents pointed to patent search (21 percent) as the largest growth category (see chart 3 below).
The leading recipients of outsourced IP work are still law firms. A total of 49 percent of respondents said they currently outsource IP work to law firms. But they aren’t alone. The second largest target for outsourced work are specialist consulting firms that focus on legal process outsourcing. A combined 27 percent of law firms and 16 percent of corporate IP departments are outsourcing work to these types of specialists (see chart 4 below).
When it comes to selecting an outsourcing partner, expertise is the key differentiator, trumping cost as the primary factor used to evaluate vendors. Among the top factors used to evaluate service providers, both in-house counsel and law firms put technology domain expertise, proven track record, and abilities to scale at the top of the list (see chart 5 below).
When comparing the perceived benefits of lP process outsourcing across functional areas, there are some distinctions in how law firms and corporate IP counsel, IP administrative staff, and law firms define a successful partnership. While law firms seem to prize efficiency, saving money, speed, and staffing as the top benefits of outsourcing, corporate IP departments put efficiency, staffing, expertise, and speed at the top of their list (see chart 6 below).
As the IP outsourcing market continues to mature, the level of service provided and the widespread acceptance for its role in the overall legal services ecosystem is creating huge opportunities for law firms and corporate counsel to do more with less.
While there is still a long way to go before full scale industry-wide adoption of IP process outsourcing, a critical mass of early adopters have blazed a trail toward establishing benchmarks for what to expect from this type of relationship.
Over the next several years, we project that there will be a dramatic increase in the volume of IP work that is handled by outsourced service providers along with a corresponding increase in complexity of that work. Also, unlike the early days of outsourcing in which much of the industry’s growth came at the expense of traditional law firms, the trend toward increased adoption of outsourced IP services among law firms suggests that they are adapting successfully to this disruptive innovation.