The State of Sourcing

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?’ »

Red Bridge Strategy, Inc. is organizing a Global Legal Process Management Boot Camp during the week of May 17th in Mumbai and Delhi. Attendees will broadly learn about global legal process management and specifically about Legal Process Outsourcing (LPO). Presentations, facilities tours, and personalized discussions are expected to educate and inform general counsels, law firm partners and senior attorneys seeking to understand the industry, its benefits, and its challenges.

The Boot Camp will provide attendees with firsthand exposure to the operating environment in India including local talent, business practices, culture, and infrastructure while simultaneously explaining local measures that address security, ethics, confidentiality, and other topics. Industry authorities from Integreon, Pangea3, UnitedLex, Red Bridge Strategy, Inc., ValueNotes, and others will educate attendees.

Continue reading ‘Global Legal Process Management Boot Camp’ »

“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?’ »

India Chapter of New York State Bar Association (NYSBA) is organizing a conference on “Building Bridges between the United States and India” from 25-27 Mar 2010 at Mumbai.

The conference will focus on contemporary corporate and legal themes. Speakers include Stephen P. Younger (Patterson Belknap Webb & Tyler LLP, NYC), James P Duffy III (Past Chair, NYSBA, NYC), Michael W. Galligan (Immediate Past Chair, NYSBA, NYC), Steven C. Krane (Chair, NYSBA, NYC), Som Mandal (FoxMandal Little, New Delhi), Cyril Shroff (Amarchand Mangaldas Suresh A. Shroff & Co, Mumbai), Nishith Desai (Nishith Desai Associates, Mumbai) and Arun Jethmalani (CEO, ValueNotes) among others.

For more details about the event, please click here.

Hiring contract review attorneys, temp staffing companies, litigation support companies – these are the various options available for procuring LPO services within US.

Over the last one year, the legal market in the US witnessed dramatic changes. A large number of attorneys, associates and support staff from the law firms and corporations lost their jobs. While this has impacted the legal market, it has also increased competition for the offshore LPO industry. Some of the lawyers, associates and paralegals (who lost their jobs) are seeking work as contract attorneys (with reduced billing rates!). A contract review attorney is billed at a much lower rate as compared to a law associate. The average billing rates for contract attorneys range from $35 to $80 per hour and onshore service providers rates range from $50 to $180 per hour.

While billing rates vary depending on the services offered, volume and their complexity level, marginal pressure on billing rates (for certain services) in the offshore industry was visible. Of course, the billing rates of onshore lawyers will not be comparable to rates of the offshore service providers; however the increasing competition for offshore LPO service providers cannot be dismissed.

Continue reading ‘Competition from onshore?’ »

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’ »

“Rio Tinto legal chief quits for a new role at CPA Global”, read today’s headline. This does come as a surprise but surely great news for CPA Global and the LPO industry.

Leah Cooper is the managing attorney at the mining giant Rio Tinto. She is responsible for the overall management of Rio Tinto’s multinational legal department (comprised of over 100 lawyers). Leah was the driving force behind the Rio Tinto-CPA Global deal. In May 2009, Rio Tinto awarded a contract to CPA Global. Rio Tinto offshored contract review and drafting, legal research and document review to CPA Global. When I spoke to Leah two weeks back, she sounded quite upbeat about the LPO industry. Talking about the outsourceability of the services, Leah said “Initially, the work undertaken by CPA Global included contract review and drafting, legal research, and document review. However, the scope of work is expected to expand to cover other routine legal services work.”

Cost control has become a pertinent issue across businesses. Corporate counsels have been worried about managing their external counsels and are building cost effective systems to handle their ad-hoc legal needs. Corporations are increasingly exploring alternatives such as contract attorneys and offshore service providers (LPOs), especially for certain services that require junior associates. Said Leah, “Cost was an issue but not the only issue to consider offshoring. We contracted CPA in May 2009. Since then, we have saved US$13.9 million. However, the main reason to offshore was the increasing work load. There was a point when the in-house lawyers were inundated with work and we thought that contracting an offshore service provider will help them reduce their workload.”

Continue reading ‘Winds of change?’ »

“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.