Outsourcing legal work

Yesterday I reported on firms outsourcing call-center-type work to independent contractors who work at home. Today the NYT, linked by Lattman, reports on legal work being outsourced from big law firms to commodity researchers, mostly law professors.

In my article, Ethical Rules, Agency Costs and Law Firm Structure, 84 Virginia Law Review 1707, 1716-17 (1998) I discussed this sort of phenomenon several years ago in trying to explain why we have big, vertically integrated, law firms. Given the ability to outsource, I explained, it’s not just for the ability to handle big cases.  I theorized that the real reason for big firms was that they can post large "reputational bonds."  Here's a piece:

Scale economies in dealing with large litigation or transactions would seem, at first glance, sufficient reason for this integration. This work imposes "peak load" demands on attorney time to do such tasks as research issues, interview witnesses, and review documents. Also, sophisticated work on large transactions or litigation requires non-lawyer experts and technology for document handling and other tasks. Large firms seem better able than smaller ones to handle such jobs because they can amortize the cost of manpower and equipment across a large number of clients and cases. But scale advantages alone do not explain the existence of large firms because firms also could rent equipment and employ temporary lawyers, expert consultants, and other services on a case-by-case basis. . . .Accordingly, reputation, rather than scale alone, is critical in explaining vertical integration.

As described in the NY Times article, the reputational intermediary for the outsourced research is not the law firm but the research firm, say LRN. So, basically, this work is being bundled with the higher-end research the firm is doing, and standing behind.

In any event, just as with the other outsourcing I discussed yesterday, the result of this trend could be smaller, more flexible firms, reduced to their core functions and brands. And with this could come new legal structures and approaches to governance.

The phenomenon discussed in the NYT also has implications for law teaching. Could this become a major source of income for law professors? Of course law professors have always done consulting and expert witnessing. But the increased opportunity “commodity” work would seem to open up the field and regularize the income flow. One wonders whether some of this time for consulting is really time that academia is subsidizing for more intellectual pursuits. In other words, at some point using time for commodity research rather than writing or teaching (or blogging?) may become an agency cost problem. Just wondering.