Law firm cuts rates by outsourcing to India, By Julie Forster, The Saint Paul Pioneer Press, March 3, 2004, Copyright Pioneer Press
How about this deal? Get legal work typically billed at $200 an hour for just $50.
It's an attractive rate that could get better, a Minneapolis-based outsourcing firm said Tuesday. But it's a pitch that comes with controversy attached: the outsourcing of U.S. jobs overseas.
Intellevate, which outsources legal support services, said its India-based operations have received economic incentives from the Indian government.
The incentives include a seven-year "tax holiday" and exemption from India's import and export duties.
The result: Intellevate's costs will get lower, allowing it to pitch even lower prices for legal work to its customers . U.S. law firms and corporations.
"We contract with a law firm to do their work in India for them at a significant cost savings," said Leon Steinberg, Intellevate's CEO.
Offshoring, the term used to describe the outsourcing of work from the United States to foreign countries, has come under fire from politicians and critics as the practice spreads to service industries looking to cut costs and gain a competitive edge.
Intellevate hopes to cash in big. It's majority owned by shareholder attorneys at Schwegman Lundberg Woessner & Kluth, a 55-lawyer patent firm in Minneapolis. Schwegman also uses Intellevate's services.
Right now, Intellevate's reach is limited. The firm . formed last summer . counts a dozen law firms as customers. Schwegman is the lone Minnesota law firm using its bookkeeping, paralegal and technical research services.
Intellevate has two corporate clients, including one in Minnesota. (The client declined to be identified.)
By tapping the discounted outsourced services, law firms like Schwegman pitch services to clients at cut-rate prices. The services range from basic proofreading to specialized technical analysis.
The firm claims that higher-level work, such as assessing the coverage and scope of patents held by clients and their competitors, is performed by scientists with doctorate degrees who are paid much less than their U.S. counterparts.
The law firm doesn't outsource the writing of patents or anything that allows an in-depth knowledge of patent law or communication with clients, said Steve Lundberg, managing partner of Schwegman.
About 20 Intellevate workers in India work on Schwegman projects. Six are patent engineers, the rest are proofreaders and paralegals.
Lundberg said the work being outsourced to New Delhi and Bangalore is difficult to do cost effectively in the United States.
Not many patent firms use scientists because of the high cost and their clients' unwillingness to pay. "Unless the price is low, people don't want to pay for it," Lundberg said.
When Schwegman first started outsourcing patent work a few years ago, the practice was limited to simple tasks like proofreading published patents for errors and inconsistencies.
It was difficult to get anyone to do the often tedious, mind-numbing work.
In India, there were willing workers. "We started feeling our way through it," Lundberg said. "We said, if something works, we keep doing it and, if it doesn't, we stop."
The firm ramped up its outsourcing about a year ago; about $1 million of its $20 million in revenue comes from work outsourced to Intellevate's India operation.
Close to 80 percent of the law firm's services involves writing patent applications and getting them approved. Most of that work is done in the United States.
Lundberg said he doesn't think that there will ever be a time when patent applications will be drafted in India.
Not all law firms are sold on outsourcing.
Merchant & Gould, a Twin Cities patent law firm with more than 100 attorneys, isn't considering outsourcing to India because the firm's clients haven't asked, said Randy King, the firm's CEO.
King said he thought the arrangement could be tough to manage, and quality could be tougher to maintain.
"Quite frankly, it is so politically sensitive," he said. "I don't know that one wants to get out in front of that issue. Until our clients drive us in that direction, it is unlikely that we will look at it seriously."
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