Following the recent announcement that Blake Dawson has signed an agreement with LPO provider Exigent, the LPO company's director David Holmes told Lawyers Weekly yesterday (8 December) that in 2012, while LPO will be the norm for processes like discovery, government bodies will start to "wake up to the idea of LPO".

"It's not a question of LPO replacing law firms. It's supplementing them with doing other tasks, and behind that will be government demand," said Holmes. "One of the reasons [Exigent is] both onshore and offshore, for example, is simply because of government work that has to be done onshore.

"Legal spend from the government is under pressure, and for some firms, it's quite a big part of their [practice]," he said. "I expect that, from the mid-year onwards, [onshore government LPO] will be a significant part of the landscape. Not in absolute terms, but I expect there to be some movement and developments in the area."

Expecting two or three more announcements from law firms using LPO in the first quarter of next year, Holmes said the differentiator in 2012 will be how firms that have embraced LPO actually use it.

"In litigation now I don't think there's going to be a firm in Australia that can realistically say, 'Well, we're just going to do discovery the old way'. Clients now know that they don't have to pay for discovery at $250 an hour. So there's nowhere to go," he said. "That stuff, in a sense, is a bit of a 2010/11 story. The 2012 story is going to be much more about the firms that embrace [LPO] and use it imaginatively."

According to Allens Arthur Robinson chief executive partner Michael Rose, the firm has been using legal process "in-sourcing" for some time.

"We have had legal process in-sourcing [and] have been offering clients a range of alternatives for a long time. And, in addition to that, we have clients like Rio Tinto mandate that firms like us look for opportunities to send a portion of their work to LPO providers," said Rose.

Rio Tinto, one of Allens' major clients, uses LPO provider CPA Global to outsource much of its in-house legal work, bringing an estimated cost saving of around 20 per cent.

"We have, throughout the last couple of years, looked at opportunities to work with some of the core LPO providers in order to develop relationships with them and working processes with them," said Rose. "We're doing two things: investing in in-house capacity and also getting to know external providers better."