The State of Sourcing

Having done a report earlier on e-discovery and document review, which is by far the most outsourced service in the legal services outsourcing domain, our next stop was most definitely going to be outsourcing of contract management – the next big thing in outsourcing of legal services. As we started speaking with the people who deal with contracts, some of the variations and facts that came out were mind boggling. Here are some examples –

• Contracts may need up to 5-10 drafts by conservative estimates
• Contracts may need up to a year to finalize
• Contract values range from USD 10 – 1,000 million
• Hundreds of types of contracts
• Legal team sizes ranging from 6 – 1000+
• More than 40 countries across which contracts are managed by a single firm

Continue reading ‘Contract outsourcing – outsource to manage better’ »

“TCS eyes slice of legal process outsourcing market” – a new day, another entrant to the LPO market. The recent announcement by the CEO of Tata Consultancy Services (TCS) regarding exploring of opportunities in the LPO segment should come as no surprise to players in the IT-BPO or KPO sector. The LPO market has grown by leaps and bounds since its inception, examples of which are evident through the number of players in the market currently and their growing client base spanning 3 continents.

A primary reason for Thomson Reuters’s acquisition of Pangea3 and UnitedLex’s of Lawscribe in late 2010, in my mind, was to meet growing demands by organizations and law firms alike to cut costs and increase process efficiencies. These acquisitions saw these market heavyweights expand their businesses, core strengths and the ability to offer clients additional solutions. The market is primarily serviced by pure-play providers, like CPA Global, Pangea3, UnitedLex and Mindcrest, who offer legal services as their core focus. The last 2-3 years has seen IT-BPO players entering the market to add to their top line and expand into new service areas. Their only competition is from these large pure-play providers who have established themselves globally because of their head start.

Continue reading ‘Would you like a slice of LPO pie?’ »

At the recent Global LPO conference 2010, held in New Delhi, the idea was to facilitate closer contact between buyers and vendors in the industry. The buyers spoke about their experiences and put forth their concerns. The vendors building upon experiences, offered advice to the potential buyers on how to approach, what to look out for, the value offered, etc. Among many other issues discussed, one that received attention from various speakers was – what do buyers and vendors need to do to facilitate a smooth and mutually beneficial relationship? 

The need to change and develop is something that cannot be stressed enough. For an industry as young as the LPO, and with the potential that it offers, the mantra is going beyond understanding customer needs. LPOs must stay ahead of the articulated needs. With most companies looking at outsourcing as a strategic move, they want it to contribute to their overall business performance. Outsourcing by and large has moved beyond the cost and labor arbitrage, and the same stands true for LPO industry. The idea is to move away from the tag of service providers to partners. Here we discuss just some of the many initiatives that LPOs need to take to start thinking and taking on the role of partners. 

Continue reading ‘LPOs need to think like partners’ »

How do you handle data privacy issues in India? In the absence of data privacy/protection laws, isn’t this a huge risk associated with offshoring? – These were some of the concerns raised by the attendees at a recent conference organized by the India Chapter of New York State Bar Association (NYSBA) in Mumbai.

Clearly, there were apprehensions on the part of most of the attendees with respect to data privacy. The level of confidence was understandably quite low. The reason it is understandable is because data privacy is a valid concern, given the lack of stringent data security and privacy protection laws in India. The Indian legal system does not offer privacy protection similar to other countries.

Continue reading ‘Data privacy: are we addressing this concern?’ »

“Some of the service providers that I have visited have invested a lot of time, effort and money in data security. However, there is still a factor of risk associated with offshoring that will be overcome only with time”, according to a Managing Attorney from a New York based law firm in response to a query on whether buyers have adequate confidence in data security initiatives of offshore service providers.

In spite of the fact that India has enacted legislations such as the Information Technology Act, data may not always be tamper-proof. This is an area of concern for the buyers of outsourcing services as well as for service providers. With significant increase in offshoring, clients as well as service providers are realizing the need for security/privacy around data that is being processed at the offshore location.

Continue reading ‘Is Your Data Safe with the Offshore Service Providers?’ »

Last year, Rio Tinto, a leading international mining group, created news by announcing its plans to offshore legal services to India. Following the footsteps of Rio Tinto, last week Microsoft announced its plan to send routine legal work to CPA Global.

While a team of 70 people from CPA Global has been offering services such as intellectual property and patent maintenance to Microsoft since 2005, this is a separate contract for the LPO related work. Microsoft engaged CPA Global for a pilot in October last year. CPA Global will be providing multi-jurisdictional legal support work and legal research to the tech giant out of its Gurgaon office.

Continue reading ‘Microsoft follows Rio Tinto’s footprints’ »

“ICG acquired a minority stake in CPA Global”, read the headline of a news article. Intermediate Capital Group (ICG), an independent investor and fund manager acquired a significant minority stake in a well-known LPO service provider. I was quite excited to read this news piece. Why? Investors taking interest in a segment positively reflects on the “sustainability factor” of the industry.

Most service providers in the LPO industry started off as self-funded companies and a few received funding from angel investors. In order to build marketing presence or significant knowledge base ahead of others, service providers are seeking VCs/PEs/angels. Yes! Investors are getting interested in the LPO segment. Funding from VC/PE firms started flowing in, but of course is limited at the moment as most companies are still quite small.

Continue reading ‘Investors get interested in LPO’ »

Despite the compelling needs of outsourcing, there have been instances in the recent past where some companies (although for different reasons) have shifted work back to their roots (onshore). This has been primarily seen in verticals including banking, financial services, retail, etc.

Bringing back the (offshored) operations in-house is not an attractive option for any company, as it eventually adds to their costs. However, there must be some compelling reason that forced companies to take work back onshore/in-house. The reasons might vary from….not enough cost savings, unsatisfactory results, quality not as expected to not a right choice of vendor.

Last year, we had conducted a survey of US and UK based law firms, which threw an interesting finding – “10% of the survey respondents tried and rejected offshoring”. During our course of research, we found a number of buyers who cited unsatisfactory work quality for abandoning their offshoring initiatives. Could this mean not enough groundwork done before selecting a vendor? Possibly!

Continue reading ‘Vendor selection – How important is it?’ »

The LPO industry has not grown as fast as was had estimated earlier. The industry growth rate (CAGR of 40+% over 2003-07) dropped to 28% in 2007-08, and further slipped to 16% for 2008-09.

As the global legal industry suffered, the offshore industry could not escape the negative impact (although short-term). The slow down in the buyer market impacted the offshore industry resulting in a drop in the growth rate. Revenues from the offshore legal services industry were US$320 million for 2008 and are expected to reach $440 million by end 2010, according to a recent ValueNotes study titled ‘Legal Process Outsourcing: Crisis Creates New Opportunities‘. Consequently, there has been a shakeout in the industry. Over the last two years, >20% of the total number of service providers exited the LPO business. Is this an unusual situation? Textbooks of micro-economic theory talk about firms exiting an industry all the time. This is probably a live and recent example they can update their texts with. As profits diminished, smaller firms that could not take the hit exited. In an uncertain economy, mid-sized and smaller service providers are the worst affected by margin pressures. However, over-hyped prospects and ease of entry in this industry led entrants to believe that getting business would be easy. Few bothered about the potential risks or competitive dynamics, resulting in many weaker players fading away in the current environment.

In the current scenario, almost all offshore legal service providers are in fact, battling. While in some cases billing rates have come under pressure, in others the volume of work has shrunk. A pertinent question is, in this situation, which company is best positioned to sustain the growth? While the smaller businesses battle with survival issues, service providers with multiple service capability will be better positioned to weather the storm. ‘Multi-service capability’ will become critical not just for sustaining growth but also for the very survival of service providers! Incidentally, we have recently released the ValueNotes Sourcing Prism: Legal Outsourcing Edition that presents a list of service providers who are currently best positioned in the industry. Follow this link to find out more about the product.

In one of my previous posts, ‘UK Law Firms: Catching up on offshoring‘, I shared my views about UK based law firms opening up to the idea of offshoring. The growing interest amongst the buyer community was also evident at a recent conference that I attended on ‘Legal Process Outsourcing and Offshoring‘, organized by the Lawyer magazine in London.

The fact that several partners and attorneys participated in the session reflects the high level of interest in the subject. Several law firms indicated that their clients are increasingly suggesting using offshore service providers. The motive behind corporates pressurizing law firms is quite obvious – lower costs.

Continue reading ‘Wake up call to law firms!’ »