• Mindcrest received funding in December 2006 from a Chicago based company, Talon Asset Management.
• Pangea3 completed US$7 million in Series C funding by Sequoia Capital India. The company plans to utilize the funds towards recruitments, expanding its service offerings and increasing sales and marketing.
• Jerry Rao, founder of a large multi-service BPO, MphasiS, which is now a part of EDS, invested US$12 million in JurisMatrix.
• SDD Global Solutions entered into a comprehensive funding arrangement with SFP Priority Co., Ltd. The multi-faceted funding arrangement provides for a first round of US$2 million, to be followed by subsequent rounds on an as-needed basis.

So far, Indian outsourcing rode the value proposition of significant labor cost savings. However, media hype and high returns for industry pioneers has led to an explosion of service providers, and those ready to provide funds to them. Infosys BPO has recently announced its entry in the legal services outsourcing space. Apart from lending more credibility to the LPO industry, this is likely to provide additional vigor to the growth plans of several large, mid-size and small companies.

While LPO vendors are fighting challenges such as rising wages, training and depreciating dollar revenues, the US$146 million legal services offshoring industry is on a rapid growth path. Further, the race to acquire capabilities and clients will trigger several inorganic growth actions by ambitious vendors. Over time, we will see more of the large multi service BPOs acquiring capacity and capability, and also international law firms looking for India capacity.

Interview with Mindcrest

Mindcrest is one of the leading players in the legal services outsourcing space. ValueNotes (VN) spoke to Ganesh Natarajan, President and CEO, Mindcrest and Rohan Dalal, Managing Director, Mindcrest about the challenges they face and their future plans.

VN - What were the initial challenges, when you set up Mindcrest in 2001? What are the key challenges now?

Ganesh - Initially, there was a lot of selling India and explaining to clients about "India as a destination" and capabilities, such as, good English skills, manpower availability, legal knowledge, etc. Of course, the IT industry and the growth of BPO industry helped the legal services outsourcing in a big way. Earlier the question was "Why India?" Today, the client, who is now convinced of the India part, needs to be comforted about the capabilities of the vendor in particular.

Rohan - Today, the challenges are different. The client needs to be comforted that the quality of work will not suffer. It is not just about the cost anymore. We have to provide the client with value addition such as a dedicated team, quality work, technology, etc.

VN - Are there any challenges on the marketing front? Are the law firms threatened by outsourcing/offshoring?

Ganesh - Marketing is a challenge in any business. Typically, in a large US based corporation, the top management / board of directors put pressure on the general counsel to cut costs, which in turn pressurizes the law firms to outsource / offshore. While there is backlash when it comes to other BPO services, legal services is still a young and emerging space and to my knowledge offshoring has not displaced anybody's job. When the offshore model is used in a more efficient manner, end of the day, it only benefits the US consumer.

Rohan - Law firms are starting to recognize that by offshoring, they get freed up and can focus on the core services. Today, there is a definite change in perception about offshoring.

VN - How are you funded? What are the future plans with respect to partnership, acquisition deals?

Ganesh - Mindcrest received funding in December 2006 from a Chicago based company, Talon Asset Management. While we have been in the space for a long time, we decided to establish ourselves first before looking for funding.

Rohan - We have not really thought about acquisitions / partnerships at the moment. While partnership (if any) may be on the US front and acquisition will be primarily of talent (by way of recruitments).

VN - Where do you see Mindcrest in the next two years?

Rohan - We plan to scale up to 2,000 in the next two years.

VN - Where do you see the legal services outsourcing industry in the next two years?

Ganesh - The industry will consolidate. Over the next two years newer and larger players from other domains will enter this industry. This will cause a shake up and the less established companies will go away. The larger companies will need to decide whether to go forward alone or become a part of even larger companies from the BPO/IT space.

The above article and interview is an excerpt from the bimonthly edition of the report, "Offshoring Legal Services to India: An Update ".