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.

Successful organizations know that being the best is very much determined by who they hire and how they integrate and develop those employees once on board. At Integreon, we pride ourselves on identifying and attracting top talent, and integrating that talent into our workforce to help us deliver high-quality professional services that enable our clients to be more productive.

It is with this in mind that I warmly welcome Bill McClements to Integreon. Bill is a seasoned executive who will serve as our Chief Human Resources Officer as we continue to build our team globally.

Our people are dedicated, enthusiastic, and highly successful professionals who work collaboratively with our clients to impact their businesses. Bill embodies this. In his new role and as part of our senior management team, Bill will have the resources and the mandate to continue our commitment to world class talent management and reinforce our market leadership.

Our success as a company is closely tied to the culture that we create here – a culture of talented and valued people who provide quality client services of which I am very proud. I can say without reservation that the individuals we welcome into our organization are of the highest caliber. Please join me in welcoming Bill to the team. I know he has the expertise to succeed and provide us with the guidance to maintain a world-class workforce – and to ensure that all of us here at Integreon can continue to say that we simply work with the best.

I read with interest Matt Sullivan’s blog post, LPO Industry Consolidation Underway? He offers a useful summary and analysis of recent deal-making among legal process outsourcing (LPO) providers.

Sullivan rightly concludes that legal cost control still looms large for many corporate law departments. We hear this in many conversations we have with both in-house and outside counsel. We also agree that Pillsbury’s publicly announcing an alliance called PEARL (press release, PEARL overview) that includes LPOs is significant. In the UK, that law firms publicize working with an LPO is almost old news; the same cannot be said for the US.

We expect more US law firms to discuss LPO – and many other new ways of doing business – in 2010. The 2008-9 crisis has ended. The end does not mean a return to pre-bust levels of activities. Rather, it means that most firms have taken the necessary emergency measures to cut costs. In our view, that’s the easy part, as painful as those cuts were. Now comes the hard part – prospering in the new normal.

Pre-bust, firms moved in lockstep. I don’t mean just how they compensated associates; few large firms considered any strategy or action not already widespread. Now, just as compensation models are changing, so too are firm strategies and actions. We see some firms hunker down with no clear plan to change. Others, however, such as Pillsbury, are taking active steps to offer clients more value.

My colleague Ron Friedmann wrote last November (at the Integreon blog) that Law Firms Differentiate in a New Era. The Pillsbury announcement is an example of firms differentiating. Not all firms will “do LPO” or form innovative alliances with other legal market players. We think that firms that don’t change both their client value proposition and operational model in significant ways are likely to lag behind their competitors who do innovate.

Our investors, as well as the investors in our competitors, understand this. The smart investors understood this pre-crash. Post-crash, it’s obvious of course. Outside capital will continue to flow to organizations that improve legal outcomes and reduce legal costs. In the UK, with The Legal Services Act, capital will likely soon flow directly to law firms. The combination of client demands, law firms themselves recognizing the need to change, and the availability of outside capital to support better ways of doing legal work will continue to alter the legal landscape.

The Lawyer’s Lyceum Capital injects £25m into LPO start-up and LegalWeek’s Lyceum commits £25m to enter LPO market in Laureate venture articles show continuing investment momentum into LPO, as discussed in my post £400m Acquisition an Indicator of a Maturing KPO Market? This particular investor group has been looking for opportunities to invest in “new business models for delivery of legal services” for some time. I can’t find much about the startup company, Laureate, on the web, but Lyceum’s advisory panel knows a thing or two about the opportunity in the legal market: former Clifford Chance managing partner Tony Williams, visionary legal IT consultant Richard Susskind and Paul Hewitt, who helped develop legal services at the RAC and Cooperative Group. I expect to see some of this private equity money go towards acquiring law firms’ captive, non-core business services operations. It’s certainly a use of capital that Integreon has earmarked.

This headline in the Financial Times grabbed my attention: Lloyds in talks to buy CPA Global for £400m. That’s a lot of money by anyone’s standard and made me think how the KPO market has matured over the last decade.

Many people I talk to are surprised to learn that it’s taken Integreon almost nine years to grow from startup to become a $100m business. Back in 2001, most analysts thought “outsourcing” meant offshore IT or call center services and, in the face of scepticism from the investor community at the time, the Integreon management team scraped together the money to launch a KPO business (before the term “KPO” even existed). We were a pioneer in Document KPO for banks, consulting companies and law firms in those early years. Then we became an early leader in Research KPO for the financial sector.

Over the last few years, we’ve become the largest provider of Legal KPO services to corporations and law firms. Over the decade we have slowly expanded our range of KPO services, built or acquired and integrated operations globally, as well as developed our proprietary automation, collaboration and knowledge management technologies. Along the way we have achieved the scale to generate the internal profitability that supports our ongoing investment in services, products, locations, etc. As we come to the end of 2009, we have become the leading global KPO (perhaps), and I feel fortunate to count many of the world’s leading brands as our customers.

These last twelve months have been tough for smaller, niche KPO providers. I have great sympathy for the entrepreneurs, employees and investors of those companies that have gone out of business or are struggling to stay afloat. I hope that they survive or succeed in selling to a larger, more stable entity.

Some industry analysts have recently commented that we are likely to see the serious entry of the large ITO and BPO players into the KPO market during 2010, through acquisitions. Perhaps. I am not sure how many of those firms have the management bandwidth, strategic inclination or patience to acquire, integrate and grow the available small captive or third party KPO operations to build a KPO business of any reasonable scale, which would be required to move the needle for them. Rather, I expect that the industry consolidators will be the handful of scale KPOs that are focused on growing their consistent cashflow business toward an IPO event.

Industry sentiment is that Q4 08 was very challenging for many EDD vendors as corporations reined in litigation spending. And Q1 09 looks to be the same, if not worse. Tanking Economy Hits E-Discovery Firms (The National Law Journal, January 29, 2009) reveals that some EDD vendors are in financial distress or have simply gone out of business. One can only imagine the consequences of litigation data suddenly becoming unavailable during a lawsuit. Corporations and their legal advisors should now urgently diligence the financial health and capital structures of their EDD vendors and consider those dimensions beyond the usual price, experience, technology, information security and disaster recovery capabilities. It’s not sufficient to be told ”we have big private equity investors with deep pockets” – the wallets of those very investors who were spending their way into the ‘hockey stick’ EDD market growth, e.g. described in the 2008 Socha-Gelbmann Survey (Law Technology News, August 11, 2008) are now superglued shut, despite the pleas for cash from their portfolio companies.

We’re seeing more EDD vendors for sale right now than ever before and we are actively looking to make an acquisition. It’s a good time to be an acquiror of one of these businesses since it fits our overall business strategy, we believe we understand what we are buying (these are very complex, technical businesses), and many of these companies are struggling under a debt burden they cannot service or have investors that want to get out rather than invest more.

Before trusting data to an EDD vendor, we encourage buyers to dig deeper than ever before into the current Q profitability of the vendor, the level of debt, and the management team or investor plans to sell the business.

Update at 01:15 IST, 19:45 GMT, 14:45 EST on Tuesday, 2 December 2008:

In the aftermath of last week’s attacks in Mumbai, our hearts go out to the victims and their loved ones. We are thankful that all of our associates are safe.

Unfortunately, the threat of terrorism has become an international fact of life. In New York and London, our colleagues and customers know firsthand what it means to be the targets of terrorism. Indeed, no major world city is immune. Global firms like ours understand that when international terrorism does occur, it is likely to be “local” for some part of our business or our clientele.

In this environment, contingency planning is vital. Our contingency plans have two priorities: the personal safety of our associates and the continuity of support for our customers. Strategically, we are able to divert work to other locations in our global network if necessary.

Even as we mourn for the victims, we salute the resilience and dedication our Mumbai associates have shown in carrying on with their lives and their work. Like the city they call home, they embody a deep determination to overcome, and no act of terrorism can take that away.

Update at 19:15 IST, 13:15 GMT, 08:45 EST on Friday, 28 November 2008:

Government commando actions against the terrorists are still underway.  All Integreon associates and customers in Mumbai and Delhi are safe.  We have operated six shifts since the attacks began; our associates are reporting to work without any fear and there has been no impact to customer deliveries. Our Emergency Response Teams continuously monitor the status and provide regular updates to associates. We have taken steps to ensure the safety of our personnel and our ability to activate business continuity plans should that become necessary.

This was posted at 10:45 IST, 05:15 GMT, 00:15 EST on Thursday, 27 November 2008:

Integreon expresses our sorrow and grief for the victims of the terrorist attack in Mumbai on Wednesday and for their families.

Thank you to the customers and friends who have checked in with us on the status of our Mumbai associates. We are fortunate to have accounted for all of them and they are all safe. We have been in constant contact with and have also safely accounted for all customers visiting Mumbai.

We have activated business continuity plans for customers who have operations with us in our other centers in Manila, Delhi, Fargo and New York. Our operations in Mumbai are located almost two hours north of the incidents and so have been not directly affected. Almost all associates have arrived at their desks and we continue to operate as normal at full capacity, which is a testament to the true spirit of Mumbai.