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Matthew Banks on January 4th, 2010 at 3:34 pm :
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by Matthew Banks, Ron Friedmann, and Mark Ross
Integreon’s LPO experts, Matthew Banks, Ron Friedmann and Mark Ross take a look at what to expect in the LPO world in 2010.
Someone once said that less happens in a year than you might think but more happens in a decade than you might think. That’s the way we feel about the legal profession and LPO. So rather than offer a list of dramatic and sweeping 2010 predictions; we tender below some likely developments consistent with broader trends that will continue to play out over 2010 and beyond, bringing significant growth to the LPO industry. We also break with traditional year-end predictions because our list exceeds the customary ten items.
LPO is part of the bigger picture of evolution of legal services. Legal organizations are now, more than ever, actively trying many new and related approaches: technology, back office restructuring, process improvement, LPO, alternative fee arrangements, and better knowledge management, among others. So, in that context, here is what we think 2010 will see:
1. More organizations will outsource more work to more LPO providers.
2. The third party provider model will dominate. We don’t expect to see many captives in the legal market; it’s too difficult and they fail.
3. In the U.S., expect the ABA to provide more detailed guidance on how to outsource legal services ethically. While in the U.K., the Law Society, to date silent on the subject, will publically comment for the first time.
4. There will be lots of talk about alternative offshore locations to India but none will yet emerge of such scale. Onshore and near shore will be the main alternative and could grow as quickly as offshore.
5. LPOs, which are already good at what they do, will get even better. More experience brings better service.
6. LPOs will expand what they do — more capabilities and services inching a little higher up the value chain but still based around the core services available today: discovery, contracts, compliance, research, and IP. In addition to moving higher up the value chain, LPOs will also expand into consumer related and high volume legal services such as conveyancing, personal injury, wills and probate.
7. Document review however, will retain its #1 spot as the service most often outsourced, at greatest volume, and by far the greatest revenue generator for the LPO industry.
8. Organizations will start to develop multi-functional teams on an FTE basis, rather than single function transactional work. For example, corporations will engage core teams to handle a variety of legal dept work such as contract management, compliance, etc. The underlying economics of a dedicated team is better both for customers and providers.
9. LPO pricing will be stable.
10. Revenue growth for the LPO market will be rapid and some providers could double in size over the next year or two.
11. The biggest LPOs will reach 500+ lawyers working on document review, contract management, and due diligence projects. While concurrently, some smaller providers will exit the market altogether.
12. We will see more Rio Tinto type publicity, but less than you might expect because law departments have no vested interest in making public their private outsourcing arrangements with third party providers. Law firms, in contrast, are more likely to publicize outsourcing because, as service providers in a competitive market, they may see it as a competitive advantage.
13. Generally, law firm activity will be reactively driven by clients. Although a number of major firms will cement “preferred LPO provider” relationships. However, many or most top law firms will have had exposure to LPO one way or the other by end of 2010. That said, the first few firms to do something new are always long in coming; once a handful have acted, the market can tip quite suddenly.
14. U.K. law firms will continue to be more active in offshore outsourcing than US law firms. US law firm activity will more likely be a mix of offshore, near shore or onshore.
15. Recent blog posts have debated whether process is the future of law. In part, yes, but there will be a polarization between what clients are prepared to pay premium rates for and what the market will force into new models. Not all law will be process driven but LPO will help to increase the scope of what can be process driven.
16. Procurement will drive more law department purchase decisions. Their drive to efficiency will push more work to LPO; their drive to systematize purchasing may slow down sales cycles.
17. The biggest LPO single client contract value will exceed $10M annually.
Filed under Captive v. 3rd Party, India Business and Economy, Legal Economics, Legal Outsourcing (LPO), Onshore v. offshore, Outsourcing Tips
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Liam Brown on May 12th, 2009 at 3:09 am :
Comments 000
Outsourcing is back in the news. Come to think of it, when has it not been in the news? Two US national mainstream media had important articles last week.
Outsourcing: Thriving at Home and Abroad (Business Week, 4 May 2009) reports that outsourcing is thriving in the current economy. “Companies looking to cut expenses in the face of soft demand are keener than ever to hand off parts of their operations to lower-cost providers.” That is old news; what’s new is the locations those companies are selecting. Political considerations, internal and external customer perception, availability of talent, currency exchange rates, disaster planning, shrinking cost differentials between domestic and offshore locations, relative inflation rates, now drive companies to consider smaller domestic US cities such as Indianapolis and Boise. The drivers have consistently been, as the article touches on, increasingly sophisticated customers taking “a more nuanced approach” to their operations and sourcing strategy. Core processes are kept captive and non-core processes are outsourced (the so called “hybrid captive/outsourced approach”); some non-core processes are outsourced to multiple providers to mitigate risk (the so called “multi-sourcing approach”); and some processes are sourced offshore while others are sourced onshore (the so called “right-shoring approach”).
Obama’s Plan on Corporate Taxes Unnerves the Indian Outsourcing Industry (New York Times, 6 May 2009) reports on how the Obama Administration’s proposal to tax offshore profits is causing consternation in India. The article suggests the impact of the proposals may not be that great, though they are not yet fully understood. As we read the tax proposal, to the extent it has an impact, it would impact the profits of companies operating offshore captives so it might actually drive demand for third party providers of offshore services such as Integreon. What really caught my attention, though, was the speed at which this tax proposal appeared and at which it has the potential to change the sourcing location landscape - much faster than company operations planners can respond.
The lesson we draw from both articles supports the strategy we have long followed; namely, be flexible about location and have a choice of countries and continents. Companies should select location based on factors such as culture, time zones, cost, business continuity, exchange rates, relative inflation rates, skill availability, turnover, and taxes. Because these factors change over time, sometimes quite rapidly, companies must retain flexibility. For example, the Indian Rupee has had dramatic swings in value versus the US Dollar. And, as the Business Week article points out, the economic downturn has suddenly shrunk the cost arbitrage advantage of India over the US (though it is still large).
For these reasons, we now operate delivery centers in India, the Philippines, US, and UK, with more locations likely in the future. We are not dogmatic about the “best” location.
For onshore locations, we have long been enthusiastic about the types of cities Business Week describes. In 2007, we acquired an existing outsourcing business in Fargo, ND. The location in Fargo was a big factor in our acquisition decision - we recognized that we could hire, and more importantly, retain long-term highly skilled workers there at costs significantly lower than in major US cities.
We have also just opened a delivery center in Bristol, UK. While Bristol is a major city, costs there are up to 30% lower than in London, so it reflects the same thinking - find the right onshore locations that offer a good mix of skill, cost, and cultural compatability.
To drive home the point that location decisions depend on many factors, consider electronic discovery services. For our EDD business, we employ specialized employees, operate server farms, and need to take quick delivery of digital media. For these reasons, we operate delivery centers in “high cost” domestic cities such as New York City and Washington DC.
Global supply chain economics are complex and change rapidly. We encourage those considering outsourcing to think carefully about the right destination(s) for their work and to select a service partner that offers a range of choices, with the location flexibility to accommodate your needs as the evolve. We believe that optimized value chains will operate the right processes, in the right places, with the right people, using the right technology. Each value chain will differ - one size definitely does not fit all.
Filed under Business Process Outsourcing (BPO), Captive v. 3rd Party, Economic Trends, India Business and Economy, Onshore v. offshore, Outsourcing Industry News
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Ron Dappen on April 9th, 2009 at 7:23 pm :
Comments 000
In our constant effort to learn more about the market, we’ve just launched a survey co-sponsored by FreePint. In particular, we want to know more about how outsourcing is viewed by those who use or buy any of the following services:
- Research
- Document preparation (word processing, etc.)
- Legal support
- Pitch support (graphics, presentations, etc.)
If you fit the description above, please consider taking this survey. We will share the survey results with all participants.
To receive a copy of the report, just provide your email address at the end of the survey. The survey is completely anonymous. Your email address will not be associated with your responses in any way; it will only be used to send you the survey results.
To link directly to the survey, click here.
Filed under Business Process Outsourcing (BPO), Captive v. 3rd Party, Economic Trends, India Business and Economy, Knowledge Outsourcing (KPO), Legal Outsourcing (LPO)
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Liam Brown on December 2nd, 2008 at 2:45 pm :
Comments 000
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.
Filed under India Business and Economy, News from Integreon Delivery Centers
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Lokendra Tomar on November 25th, 2008 at 11:19 am :
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How should knowledge process outsourcers (KPOs), their clients, and their employees respond to current crisis in financial markets?
Client Perspective
Choose your vendor carefully - If there was ever any doubt, the current turmoil shows that that service quality and price should not be the only factors customers consider . Long term vendor financial stability is critical as well. Vendors with only a few hundred employers who depend on a handful of clients may find it difficult to survive even a single client loss. Depending on how much business they lose and their financial backing, a key client loss can put at risk continuity of service to remaining clients. Buyers should seek vendors with scale, good financial backing, and a broad customer base.
Outsourcing as a survival tool - Outsourcing is not just about cost savings - it can be a company’s lifeline too. Unless you remain competitive, you may not survive as a business. You may be able to save more jobs (and create new ones) by outsourcing if done smartly and with the right vendor. Choosing the right vendor will help you improve business economics, achieve flexibility, innovation, and help create growth (jobs). The downturn could last quite some time so it is important to consider both your cost basis and operating efficiency, even as your deal with what may be emergency circumstances.
Vendor Perspective
Reduce client concentration - While it’s always good to get more business from existing clients, look to balance the client mix. Otherwise, if your biggest client accounts for 40% of revenues and suddenly disappears (which seems to happen very often these days), you may not be able to survive the impact. Diversify into more verticals and geographies. Winning new business in this economy may be hard, but point your sales team in the right direction now.
Enhance capital - Clients will start asking more probing questions about the financial stability of your business and access to capital. Cover your financial bases. Work towards moving to profitability and get an investor who can be there to support you on your long term business plan/strategy
Leverage opportunities to consolidate /buy cheap assets - A major economic downturn is a time to be simultaneously conservative and bold. Be conservative in managing operating costs but be bold in buying good assets (companies, people), especially when many outstanding properties are available at the lowest price in years. Tight operations coupled with strategic acquisitions will pay handsome dividends when the economy eventually turns around.
Employee Perspective (for India-based personnel)
A downturn is not the end of the world. It’s not first time it’s going to happen. The economy will recover and KPOs will grow again at a rapid clip. This is perhaps first time that global events have had a direct impact in India, specifically immediate job losses. Previously, these types of incidents were limited in scope and barely would even be covered in the press. Now, however, the impact has been pronounced, both in captives and third party vendors. KPOs are not the only ones affected by the global turmoil; many other sectors have shared in the turmoil (e.g., consider what has happened with domestic Indian airlines). The pervasive impact of the Western downturn on the Indian job market shows that the Indian economy is now more tightly integrated into a US/global environment. So it is natural that Indian jobs in many industries will rise or fall based on events in US/global markets.
But, there is hope among this bad news. Outsourcing is expected to pick up even more strongly in the months to come and that should drive new job creation.
Filed under Business Process Outsourcing (BPO), Economic Trends, India Business and Economy, Knowledge Outsourcing (KPO), Legal Outsourcing (LPO), Outsourcing Industry News
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Lokendra Tomar on August 5th, 2008 at 2:44 pm :
Comments 000
Business Week ran a story on the Indian Economy in its July 2nd edition “India’s Economy Hits the Wall”. It paints a grim picture of the Indian economy and its prospects. Though the article is certainly accurate, observers of and participants in the Indian economy should not lose sight of the fact that overall growth will likely continue at about 7 or 8%, down from 10% or higher.
The negative macro environment highlighted by Business Week may actually benefit outsourcing companies. In the last two months the Indian rupee has depreciated rapidly against US dollar and is now at 43 rupees to the US dollar, which directly benefits outsourcing companies operating from India (costs being in Indian rupees and revenues being in US dollars). This was a big worry for outsourcing industry in 2007 when the rupee topped out at INR 39 to USD level.
Furthermore, most major India-based outsourcing companies are insulated to some degree from the Indian economy. They have established a global delivery platform, meaning building operations centers in the US and elsewhere. For example, Wipro invested in several US delivery centers (see, e.g., Information Week article, April 2007). And finally, smart outsourcers have taken other steps to insulate their businesses, particularly keeping salary hikes under control by limiting annual salary hikes to an average of 10% despite high inflation and supplementing pay with incentives including professional development leadership training.
Filed under India Business and Economy
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Ron Friedmann on February 23rd, 2008 at 9:32 am :
Comments 000
US and UK law firms are eager to practice law in India but regulations make that impossible for the moment. In the mean time, firms are doing what they can. For example, Allen & Overy signs Indian alliance (TheLawyer.com, 22 Feb 2008) reports that “Allen & Overy (A&O) has signed a referral relationship with Indian law firm Trilegal.”
If big US and UK law firms could operate freely in India, it would create the potential to use their India offices as “insourcing” resources for some substantive law and support at a lower cost than is possible onshore in the US or UK.
Working at a knowledge and legal process outsourcing company, I don’t lose sleep over this possibility. It’s not clear if and when India will liberalize its legal market. Moreover, both US and UK law firms already have an opportunity to take advantage of internal labor arbitrage opportunities. That is, an AmLaw 10 firm in NYC or Magic Circle firm in London could tap resources in lower cost offices (e.g., the US midwest for the NYC, Eastern Europe for the UK).
I have seen occasional press reports of clients asking for this type of arrangement or firms offering it. And there have been a few articles about GC moving work from top firms to smaller firms in lower cost, lower margin locations. But if it happens more than occasionally, firms and clients are not talking about it openly.
So, in the tradition of precedent, it does not seem likely that there would be a rush to move work from onshore locations to law offices in India.
Filed under India Business and Economy
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Ron Friedmann on February 11th, 2008 at 9:18 pm :
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Integreon’s Lokendra Tomar, SVP for Knowledge Services, wrote How to recover from failure, an article published in The Business Standard, 5 Feb 2008.
In it, he discusses the how already fine business schools in India can improve by providing more training on “soft skills” such as the ability to learn from mistakes, leadership, and asking the right questions.
Filed under India Business and Economy
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