Here's a very informative and useful article from Time Magazine about the outsourcing of legal work to India. (Hat tip to the ABA e-Journal.)
I firmly believe that outsourcing is going to be a big issue in the coming years for two reasons. First, the Bar is already quite protectionist regarding its financial interests, so I foresee a big turf battle looming over this trend.
Second, as the article points out, there are some important legal ethics issues regarding outsourcing. For example, St. John's Dean (and ethics guru) Mary Daly is quoted in the article, noting that Indian lawyers are not subject to the Rules of Professional Conduct. She wonders how they will handle conflicts of interest, the duty of confidentiality, etc.
Personally, I think there are a lot of issues that still need to be resolved, including the ethics issues that Dean Daly references. But I think in our Flat World, we're not going to stop this trend, and we're going to have to solve the ethics issues rather than stop the outsourcing. In fact, in my view, outsourcing will probably have a positive impact on the long-studied and oft-cited problem of making legal services more widely available and affordable. As with other industries, outsourcing can reduce the cost of the product. The challenge, of course, will be ensuring that the product doesn't come along with the legal equivalent of lead paint.