Case Study: Was Outsourcing to India the Right Move?

With revenue flattening, David Galbenski needed a bold new plan.

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By almost any measure, David Galbenski's company was a success. Contract Counsel, which Galbenski and a law school buddy, Mark Adams, started in 1993 from Galbenski's parents' basement in Royal Oak, Mich., helps companies find lawyers on a temporary contract basis. The growth over the past five years had been furious. Revenue went from less than $200,000 to some $6.5 million at the end of 2003, and the company was placing thousands of lawyers a year.

And then the revenue growth began to flatten--the company grew just 8% in 2004--despite a robust market for legal services estimated at about $250 billion in the United States alone. Frustrated and concerned, Galbenski stepped back and began taking a hard look at his business. Could he get it back on the fast track? "Most business books say that the hardest threshold to cross is that $10 million sales mark," he says. "I knew we couldn't afford to grow only 10% a year. We needed to blow right through that number."

For that to happen, Galbenski knew he had to expand his customer base beyond the Midwest into large legal supermarkets such as Boston, New York, and Washington, D.C. He also knew that in doing so, he'd run into stiff competition from larger publicly traded rivals. Contract Counsel's edge had always been its low price. Clients called when dealing with large-scale litigation or complicated merger-and-acquisition deals, either of which can require as many as 100 lawyers to manage the discovery process and the piles of documents associated with it. Contract Counsel's temps cost about $75 an hour, roughly half of what a law firm would charge, which allowed the company to be competitive despite its relatively small size. Galbenski was counting on using the same strategy as he expanded into new cities. But would that be enough to spur the hypergrowth that he craved?

At the time, Galbenski had been reading quite a bit about the growing use of offshore employees. He knew companies like General Electric, Microsoft, and Cisco were saving bundles by setting up call and data centers in India. But it was an article in the November 2004 American Lawyer--titled "Briefed in Bangalore: Will India's Lawyers Help Re-shape the U.S. Legal Market?"--that really opened his eyes. Law firms could offshore their work? Galbenski's mind raced with possibilities. He imagined tapping into an army of discount-priced legal minds that would mesh with his existing talent pool in the U.S. The two work forces could collaborate over the Web and be productive on a 24-7 basis. And the cost savings could be massive.

Of course, there were big questions. Could he count on the quality of the work that came from overseas? Would language and cultural differences be a problem when it came to reviewing and coding documents for an upcoming trial? Would licensing be an issue? Using offshore workers was a risk, but the payoff was potentially huge.

It so happened that Galbenski and his eight-person management team were preparing to meet for their semiannual strategic review meeting. The purpose of the two-day event was to decide the company's goals for the coming year. The meeting was being held at the Thomas Edison Inn in Port Huron, about an hour from the company's office. Driving to the meeting, Galbenski struggled to figure out exactly what he was going to say. He was still undecided about whether to pursue an incremental and conservative national expansion or take a big gamble on overseas contractors. Could the company really afford to go global? Could it afford not to?

The Decision

The next morning, Galbenski kicked off the management meeting. Marc Blessing, the company's chief operations officer, had come prepared to talk about his role in expanding Contract Counsel's client roster in the U.S. When he saw the usually easygoing Galbenski pacing back and forth nonstop, he thought something was up. "And that's when he dropped the bomb on us," he says.

Like Blessing, Mark Adams was expecting a discussion about sparking U.S. growth. He and Galbenski had chatted briefly about the prospect of outsourcing to India, but never very seriously. So when Galbenski launched into a passionate talk about his vision for transforming Contract Counsel, and doing so immediately, Adams was stunned. "He changed the agenda on us 180 degrees and it was hard to digest at first," says Adams. "He said we had to pursue bigger things and we couldn't afford to wait."

Galbenski laid out the facts as he saw them. Rather than look at just the next five years of growth, look at the next 20, he said. He cited a Forrester Research prediction that some 79,000 legal jobs, totaling $5.8 billion in wages, would be sent offshore by 2015. He challenged his team to be pioneers in creating a new industry, rather than stragglers racing to catch up. His team applauded.

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