| Pune,
India, 12 November 2009
- Revenues from the legal process outsourcing industry were US$320 million
for 2008; expected to reach $440 million by end 2010
- In 2005, there
were around 40 service providers in the Indian legal services offshoring segment;
the number grew to 100 in 2007; and currently there are more than 140 service
providers in India
- The service provider landscape of the offshore
legal services industry
- Over the last two years, >
20% of the total number of service providers discontinued their operations
With
the legal services industry going through recessionary conditions, the legal process
outsourcing (LPO) industry has not escaped the impact of the crisis. The economic
downturn has no doubt slowed down the industry and is changing the service provider
landscape. The offshore legal services industry grew at a rapid pace until
2007. However, the slow down in the buyer market impacted the offshore industry
resulting in a drop in the growth rate. The industry that was growing at a CAGR
of 40+% over the last four years until 2007, dropped to 28% in 2007-08, and further
reduced to 16% for 2008-09. Revenues from the offshore legal services industry
were US$320 million for 2008 and are expected to reach $440 million by end 2010.
This drop is primarily due to recessionary cost pressures impacting the global
legal services market and the subsequent affect on the number and value of offshoring
contracts. Many existing contracts were exploratory projects (in the form of pilots),
which were not extended / expanded into large engagements. A slowdown in terms
of decision making to offshore from the buyer end also affected the number of
contracts.
According to Neeraja Kandala, lead analyst - Legal Services,
“In the current scenario almost all offshore legal service providers are
battling - while in some cases billing rates have come under pressure, in others
the volume of work has shrunk. As the global legal industry suffers, the offshore
industry has also felt the impact of the crisis. While revenue estimates till
2010 are not very encouraging, we believe that the slowdown is short term. Post
2010, we expect the industry to pick up pace as the global economy recovers.”
The service provider landscape of the legal process outsourcing industry
has changed remarkably in the last 4 years. In 2005, there were around 40 players
in the industry. The number grew to 100 in 2007. Currently there are more than
140 service providers in India in the legal services offshoring segment offering
services ranging from legal transcription to complex contractual analysis and
patent related services.
Ease of entry and over hyped prospects led to
a rapid increase in the number of players in the industry. The huge ‘potential’
opportunity led entrants to believe that getting business would be easy. Few bothered
about the potential risks or the competitive dynamics of the industry. This, coupled
with the uncertain economic conditions, resulted in many weaker players fading
away from the competitive landscape. Over the last two years, more than 20% of
the total number of service providers in the industry discontinued their operations.
Says Suheil Patel, analyst and co-author of the report, “While there are
various reasons for these shut downs, the economic slowdown added to the troubles
of some of the service providers. Fewer contracts over the last one year, made
it difficult for them to survive during the downturn. Moreover, some of the players
failed to pay attention to learning processes and acquiring the required knowledge.”
Post 2010, we will see consolidation in the industry with larger players
acquiring capacity and capability, as well as international law firms looking
for control over India capacity. However, in the medium term numerous smaller
businesses will continue to mushroom, which will, in turn, create a large pool
of acquisition targets as well as potential joint venture partners.
The
ValueNotes report, Legal
Services Outsourcing: Crisis Creates New Opportunities for LPOs, analyses
the offshore legal services industry in India and the changing service provider
landscape. For further information, please contact
Nandita
Harendra, Corporate Communications, ValueNotes
Telephone: +91 20 6623 1700
| Email: nandita@valuenotes.com
Neeta Joshi, Business Development Head - ValueNotes Outsourcing Practice
Telephone: +91 20 6623 1793 | Email: neeta@valuenotes.com
About ValueNotes ValueNotes is a leading provider of business
intelligence and research, with expertise across select domains and types of customer
needs. Working with clients across the globe, we have significant understanding
of international markets. The ValueNotes Outsourcing Practice is one of
the largest information providers on the outsourcing industry. The Practice uses
a comprehensive, analytical framework providing fresh insights into the fast emerging
and yet, complex outsourcing space. We extensively track the space through regular
analysis of news and events, continuous primary research and contact with the
industry. Additional information is available at www.SourcingNotes.com ValueNotes
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