Deciding on the Right Outsourcing Destinations (Onshore and / or Offshore)

As the only professional services provider of legal, discovery, research, and business solutions serving clients from four continents, a question I am often asked is “what is Integreon’s global strategy?”

This seems to be a topic of interest for the market recently and has prompted me that it is probably time for a blog post about onshore versus offshore services.

Obvious reasons for a global delivery footprint include cost and availability of talent, language capabilities, disaster planning etc., which I discussed a year ago in my post Choosing the Right Outsourcing Destination in Changing Times.

Each of our locations has a role in our overall strategy. India has a large talent base of high quality, lower cost knowledge workers, especially in areas such as legal, accounting, and research, which is where Integreon originally built those professional services capabilities during our start-up years. The Philippines provides a similar talent and cost base to India, with arguably closer ties to the US, while also allowing clients to mitigate the business continuity risk of being over-concentrated in India. In China, we are able to satisfy increasing demand for knowledge and language skills that could not be gathered without local presence.

In the UK and the US, where we have most of our clients, we have found that nothing builds trust better than being served by experienced staff onshore – or even onsite. Our South Africa operations serve clients who require collaboration with people close to UK time.  We are just about to open an office in Tokyo to serve our Japanese clients and hope to open in Eastern Europe and South America in the future, in response to client requests for language capabilities.

So far, this has been a hugely successful strategy, helping us grow from $19M per year in 2006, the year in which we launched our first onshore operations (we believe thoughtfully anticipating the demand for onshore capability), to over $100M this year. During the first 6 months of 2010, 64% of our revenue has been delivered from onshore operations and 36% from our offshore operations. Compare those numbers to Infosys, which has 53% of its revenue from onshore and 47% from offshore.

You can see that we are a fast growing business that invests for the future, which is the purpose of the more than $80m of equity capital we have raised to date. We believe in a “Built to Last” philosophy. That means we forward invest to meet client needs.  Some of our onshore and offshore departments are still young – we do not expect immediate profitability as we invest in building infrastructure, management, human resources, training, technology, etc.  We do expect, however, that all of our operations will balance out and make similar contributions to profits as they reach steady-state scale.

In Bristol, for example, in the past twelve months we have doubled the number of associates from approximately 80, when we first launched services for Osborne Clarke, to 150, just recently signing an expanded lease. We are also expanding in New York. Fargo has almost reached pre-financial crisis levels of activity and we are actively seeking another location for our next US delivery center. And we look forward to launching and growing our operations in London as part of our recently announced agreement to serve CMS Cameron McKenna.

Interestingly, our most profitable department today is onshore, where our clients have trusted us to re-engineer their processes and deploy proprietary technology. This has driven improvements in quality of services, reduced cost, and we haven’t moved a single process offshore. This kind of transformational capability is at the heart of how we make a business impact for our customers.

In short, the answer to “what is Integreon’s global strategy?” is that we are committed to delivering the highest quality services for our clients and that requires that we offer them global choice – onshore and offshore.

We are pleased that the market has taken such interest in legal outsourcing and we believe this interest is a sign that we are on the right path to help our law firm clients prosper.