The Legal Process Outsourcing (LPO) industry consists of pure-play and IT-BPO service providers. While pure-plays have and continue to hold the majority market share, companies such as Infosys, Wipro and others have been steadily developing their LPO service capabilities. While they remain a couple of years away from truly competing with the likes of Pangea3, UnitedLex or Mindcrest, IT-BPOs have started looking at LPO as an additional revenue stream to pursue. They have the strategic know-how and the financial capability to threaten the current state of the pure-play LPO industry.

Pure-plays have the advantage of an early head start along with having established themselves globally in the LPO space. IT-BPOs, though recognized internationally as well, cater to client needs mostly relating to backend and middle office functions. However, this can be advantageous as cross selling their legal services to these existing clients should eliminate the need for them to implement a new go-to-market strategy. From a client perspective, having a single vendor handle their entire services portfolio will enable easier management of the entire outsourcing process. Additionally, leveraging existing delivery centers in overseas locations will allow them to compete with those LPO providers with onshore delivery capabilities. With focused in-house teams of engineers and programmers to develop custom software, the aspect of technology, an integral function within the LPO space, is also taken care of.

Lastly and most important having enormous financial resources at their disposal in comparison to the pure-plays also allows them the freedom to acquire smaller LPOs to quickly scale up and enhance their legal service offerings. Moreover, they have the ability to attract employees from the pure-plays on the basis of their brand and higher incentive packages.

What’s left to be seen is how quickly IT-BPO players can manage to attract the right talent to deliver their legal services. Re-thinking their recruitment strategy to attract employees with the relevant qualifications, past experience and domain knowledge will be important to become and stay competitive in this segment. The type of senior management they have on aboard will also dictate the pace at which they can grow in this sector.

With IT-BPOs resources and ability to handle legal and back office functions, the large pure-plays will begin to face competition from them when bidding for contracts for Fortune1000 organizations. As a direct result of this, pure-plays will begin concentrating on building relationships with law firms, with both parties sharing a similar legal mindset. While bigger legal service providers can use their industry specialization and domain knowledge as differentiators, the smaller LPOs who focus on low value – high volume work will be in trouble as their clients begin to transition over to a single vendor being able to handle their entire gamut of outsourced work.

- Vineet Ramachandran, Analyst, ValueNotes Sourcing Practice

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